<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 1997
REGISTRATION NO. 333-18065
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CHICAGO BRIDGE & IRON COMPANY N.V.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
THE NETHERLANDS 1798 NONE
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION)
P.O. BOX 74658
1070 BR AMSTERDAM
THE NETHERLANDS
31-20-664-4461
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT H. WOLFE
CHICAGO BRIDGE & IRON COMPANY
1501 NORTH DIVISION STREET
PLAINFIELD, ILLINOIS 60544
(815) 439-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S AGENT FOR SERVICE)
---------------
COPIES TO:
GEOFFREY E. LIEBMANN, ESQ. MORTON A. PIERCE, ESQ.
CAHILL GORDON & REINDEL DEWEY BALLANTINE
EIGHTY PINE STREET 1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10005 NEW YORK, NEW YORK 10019
(212) 701-3000 (212) 259-8000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this registration
statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
AGGREGATE
TITLE OF EACH CLASS OF OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------
<S> <C> <C>
Common Shares, par value NLG .01 per share...... $264,500,000 $80,152(2)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Previously paid.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be used
in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and one to be used in a concurrent offering outside the United
States and Canada (the "International Prospectus"). The two prospectuses are
identical except for the front and back cover pages, the inside front cover
page, the table of contents and the sections entitled "Underwriting" and
"Subscription and Sale." The form of U.S. Prospectus is included herein and is
followed by the alternate pages to be used in the International Prospectus.
Each of the alternate pages for the International Prospectus included herein
is labeled "Alternate International Prospectus Page." Final forms of each
Prospectus will be filed with the Securities and Exchange Commission under
Rule 424(b).
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 20, 1997
10,500,000 Shares
[COMPANY LOGO] CHICAGO BRIDGE & IRON COMPANY N.V.
LOGO (A company incorporated in The Netherlands with its registered seat in
Amsterdam)
Common Shares
(NLG 0.01 par value)
--------
All of the Common Shares, NLG 0.01 par value (the "Common Shares"), of Chicago
Bridge & Iron Company N.V. (the "Issuer") offered hereby are being sold by
Praxair, Inc. (the "Selling Shareholder"). The Issuer will not receive any of
the proceeds from the sale of shares offered hereby. Of the Common Shares
being offered, 8,400,000 shares are initially being offered in the United
States and Canada (the "U.S. Shares") by the U.S. Underwriters (the "U.S.
Offering") and 2,100,000 shares are initially being concurrently offered
outside the United States and Canada (the "International Offering" and,
together with the U.S. Offering, the "Common Share Offering"). Prior to
the Common Share Offering, the Issuer was a wholly owned subsidiary of
Praxair, Inc. Upon consummation of the Common Share Offering, the
Issuer will no longer be a subsidiary of Praxair, Inc., and Praxair,
Inc. will continue to own approximately 8% (and, if the Underwriters
exercise their over-allotment option in full, none) of the then
outstanding Common Shares. The offering price and underwriting
discounts and commissions of the U.S. Offering and the
International Offering are identical.
Prior to the offering, there has been no public market for the Common
Shares. It is anticipated that the initial public offering price
will be between $20 and $23 per share. For information
relating to the factors considered in determining
the initial public offering price to the
public, see "Underwriting."
The Common Shares have been approved for listing on the New York Stock Exchange
under the symbol "CBI," subject to notice of issuance. The Issuer has applied
to list the Common Shares in bearer form on the Official Market of the AEX-
Effectenbeurs nv (the "Amsterdam Stock Exchange") under the symbol "CBI." See
"Share Certificates and Transfer."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON SHARES, SEE "RISK FACTORS" BEGINNING
ON PAGE 12.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Selling
Public Commissions Shareholder(1)
-------- ------------- --------------
<S> <C> <C> <C>
Per Share(2).............................. $ $ $
Total(3).................................. $ $ $
</TABLE>
(1) Before deducting expenses payable by the Issuer and the Selling Shareholder
estimated at $2,000,000 and $ , respectively.
(2) The price per Common Share in Dutch guilders will be the Dutch guilder
equivalent of the U.S. dollar price per Common Share based on the noon
buying rate in New York City for cable transfers into Dutch guilders as
certified for customs purposes by the Federal Reserve Bank of New York on
the pricing date.
(3) The Selling Shareholder has granted the U.S. Underwriters and the Managers
an option, exercisable by Credit Suisse First Boston Corporation for 30
days from the date of this Prospectus, to purchase a maximum of 1,000,000
additional Common Shares to cover over-allotments of shares. If such option
is exercised in full, the total Price to Public will be $ , Underwriting
Discounts and Commissions will be $ and Proceeds to Selling Shareholder
will be $ .
The U.S. Shares are offered by the several U.S. Underwriters when, as and if
delivered to and accepted by the U.S. Underwriters and subject to their right
to reject orders in whole or in part. It is expected that the U.S. Shares will
be ready for delivery on or about , 1997 against payment in immediately
available funds in U.S. dollars through the book-entry facilities of The
Depository Trust Company and against payment therefor in immediately available
funds in Dutch guilders through NECIGEF, Euroclear and Cedel.
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
UBS SECURITIES
Prospectus dated , 1997.
<PAGE>
[DESCRIPTION OF PHOTOS ON INSIDE FRONT COVER]
[COMPANY LOGO]
---------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus. Unless the context
otherwise requires, all references to the "Issuer" herein refer to Chicago
Bridge & Iron Company N.V., a corporation organized under the laws of The
Netherlands, all references to the "Company" or "CB&I" herein refer to the
Issuer, together with its predecessors and subsidiaries, in each case after
giving effect to the Reorganization (as defined below), all references to
"Praxair" herein refer to Praxair, Inc. and its subsidiaries and all references
to the "Selling Shareholder" herein refer to Praxair, Inc. In this Prospectus,
references to "guilders" and "NLG" are to Dutch guilders, and references to
"dollars," "U.S. $" and "$" are to United States dollars. Unless otherwise
indicated, all data in this Prospectus assumes no exercise of the Underwriters'
over-allotment option.
THE COMPANY
CB&I is a global engineering and construction company specializing in the
engineering and design, materials procurement, fabrication, erection, repair
and modification of steel tanks and other steel plate structures and associated
systems such as petroleum terminals, refinery pressure vessels, low temperature
and cryogenic storage facilities and elevated water storage tanks. Based on its
knowledge of and experience in its industry, the Company believes it is the
leading provider of field erected steel tanks and other steel plate structures,
associated systems and related services in North America and one of the leading
providers of these specialized products and services in the world. CB&I seeks
to maintain its leading industry position by focusing on its technological
expertise in design, metallurgy and welding, along with its ability to complete
logistically and technically complex metal plate projects virtually anywhere in
the world. CB&I has been continuously engaged in the engineering and
construction industry since its founding in 1889. In 1996, the Company was
involved in over 500 projects for over 250 customers in 34 countries.
In 1996, the Company generated revenues of $663.7 million, and its project
backlog as of December 31, 1996 was $485.7 million. The Company's operating
income improved to $31.3 million in 1996 from a loss of $30.5 million in 1995.
CB&I primarily serves customers in the petroleum, petrochemical, chemical,
electric and gas utility, pulp and paper, and metals and mining industries,
both directly and through other companies which service these customers.
Approximately 60% of the Company's revenues during 1996 were attributable to
petroleum and petrochemical industry-related projects. The Company operates on
a global basis and has the supporting infrastructure to compete in key
geographic markets worldwide. In 1996, CB&I derived approximately one-half of
its revenues from operations outside of the United States. Demand for the
Company's products and services depends primarily on its clients' capital
expenditures for construction. The Company seeks to benefit from recently
higher levels of current and projected capital expenditures by its primary
customer base in the petroleum and petrochemical industries, which it believes
have resulted from increases in worldwide crude oil prices during 1996.
RECENT DEVELOPMENTS
In the first quarter of 1996, Praxair acquired CBI Industries, Inc.
("Industries"), then the parent company of CB&I, for the purpose of owning its
industrial gas operations. At that time, Praxair announced its intention to
divest those businesses of Industries which were not strategic to Praxair,
including the Company. Praxair undertook to strategically reposition the
Company and, as part of this process, a new management team was assembled for
the Company, headed by Gerald M. Glenn as President and Chief Executive
Officer. Mr. Glenn has over 30 years of combined experience with Fluor
Corporation, the world's largest publicly-owned engineering and construction
company, and Daniel International Corporation, and
3
<PAGE>
from 1986 to 1994 served as Group President of Fluor Corporation's principal
operating subsidiary, Fluor Daniel, Inc. The new management team has focused
its efforts on (i) redirecting and accelerating a restructuring program
designed to increase the Company's base profitability; (ii) implementing a new
compensation program linking management incentives to improvements in
shareholder value; and (iii) developing a business strategy to enhance CB&I's
future growth and profitability.
RESTRUCTURING PROGRAM
The comprehensive restructuring program (the "Restructuring Program")
currently being implemented by the Company's new management team achieved
estimated cost savings of approximately $10 million in 1996, and is expected to
result in estimated annual cost savings of approximately $21 million in 1997
and approximately $23 million in 1998, relative to the Company's 1995 cost
base. The benefits of the Restructuring Program have been an integral component
in the Company's recent improvement in operating income.
The Restructuring Program is based on initiatives begun in 1994, and was
significantly refocused and accelerated in 1996 following the appointment of
the new management team. The program is expected to be fully implemented by the
end of 1997. The Restructuring Program initially focused on consolidating the
Company's organizational structure from six separate, decentralized business
units into a single global business operation. On-going enhancements in
connection with such consolidation include centralization of procurement,
equipment and personnel mobilization, and certain financial functions, as well
as streamlining and consolidating administrative and engineering support. As
part of the program, seven fabrication plants or warehouses have been closed
and three administrative office sites have been downsized or relocated,
including the headquarters of the Company's United States operations. The
Company also has targeted a reduction of approximately 160 salaried positions,
of which approximately 147 had been eliminated as of December 31, 1996.
COMPENSATION PROGRAM
In order to more closely align the interests of the Company's management and
employees with those of its shareholders, CB&I is redesigning its compensation
program to include long-term, equity-based incentives. In addition, Praxair and
the Company have agreed to compensate approximately 40 to 60 officers and key
management employees of the Company for their services in connection with the
further development and implementation of the Restructuring Program and the
Company's initial public offering. As a result, on or immediately before the
consummation of the Common Share Offering, the Company will adopt the CB&I
Management Defined Contribution Plan (the "Management Plan") and upon
consummation of the Common Share Offering, contribute to the Management Plan
approximately 1,017,552 Common Shares (assuming an initial public offering
price of $21.50 per share) (the "Management Plan Shares"), representing
approximately 8% of the total number of Common Shares outstanding upon
consummation of the Common Share Offering. The Management Plan Shares will vest
three years (and with respect to one participant, two years) after the date of
the Common Share Offering.
4
<PAGE>
BUSINESS STRATEGY
The Company is committed to increasing shareholder value by seeking to build
on the success established in 1996 and growing its business in the global
marketplace through a combination of strategic initiatives including the
following:
. FOCUS ON CORE BUSINESS. The Company seeks to leverage its perceived
competitive advantages in design engineering, metallurgy and welding, and
its ability to execute projects virtually anywhere in the world, to
actively pursue growth opportunities in its core business. Prior
management of the Company's parent pursued a diversification strategy
during the 1980s and 1990s, which included acquisitions of significant,
unrelated businesses. Under CB&I's new management team, the Company is
committed to focusing on its core activities of engineering and design,
fabrication, erection, repair and modification of steel tanks and other
steel plate structures.
. CONTINUE COST REDUCTIONS AND PRODUCTIVITY IMPROVEMENTS. CB&I's management
believes that the Company's Restructuring Program represents the
foundation for a long-term strategy of reducing the costs of its products
and services, with the goal of establishing and maintaining a position as
a low cost provider in its markets. All key functions of the
organization--engineering, procurement, construction, project management,
finance and administrative support--will be required to demonstrate
improvements in productivity, and will be provided compensation
incentives for achieving such goals.
. TARGET GLOBAL GROWTH MARKETS. The Company intends to aggressively pursue
business opportunities in selected key growth markets, such as China,
India, Mexico and the former Soviet Union, on which prior management
placed relatively low priority. CB&I intends to leverage its significant
international experience and technological strengths to expand into these
new geographic areas, where it believes that its ability to rapidly
mobilize project management and skilled craft personnel, combined with
its global material supply and equipment logistics capabilities, provides
a key competitive advantage.
. IMPROVE FINANCIAL CONTROLS AND MANAGEMENT. The Company believes it will
improve the management of project profitability through the on-going
implementation of new systems which enhance cost estimating, bidding,
capital utilization and project execution. Under the new systems, project
economics will be evaluated on a centralized basis under various risk and
costing assumptions, using global software systems tailored specifically
for the Company's operations.
. PURSUE PARTNERING AND STRATEGIC ALLIANCES. The Company intends to expand
its use of partnering and strategic alliances with customers and vendors.
These relationships can serve as a vehicle for improvements in quality,
productivity and profitability for both parties. CB&I's existing
partnering relationships include several with major international oil
companies. The Company believes that such customers recognize CB&I's
ability to deliver high quality, on-time projects and select CB&I as a
preferred supplier to achieve significant cost savings in building and
operating tankage and related systems.
CORPORATE STRUCTURE
Prior to the Company's reorganization described below (the "Reorganization"),
the Company's operations were conducted by Chicago Bridge & Iron Company, a
Delaware corporation ("Old CBIC"), and its subsidiaries. After the
Reorganization, the primary holding company for the Company's U.S. operating
subsidiaries will be a wholly owned Delaware subsidiary of the Issuer ("New
CBIC") formed by a wholly owned subsidiary of the Selling Shareholder ("Bridge
Holdings") and which will become a wholly owned subsidiary of the Issuer in the
Reorganization, and the Company's primary holding company for non-United States
subsidiaries will be Chicago Bridge & Iron Company B.V. ("CBICBV"), a
5
<PAGE>
wholly owned subsidiary of the Issuer organized under the laws of The
Netherlands with its registered seat in Amsterdam. In the Reorganization (i)
the shares of substantially all of Old CBIC's non-U.S. subsidiaries will be
transferred by dividend to its parent corporation, Bridge Holdings, and
contributed to CBICBV in exchange for newly issued common shares of CBICBV;
(ii) the shares of substantially all of Old CBIC's U.S. subsidiaries will be
transferred by dividend to Bridge Holdings and contributed to New CBIC in
exchange for newly issued common stock of New CBIC; (iii) Bridge Holdings will
contribute the shares held by it of each of New CBIC and CBICBV to the Issuer
in exchange for additional Common Shares of the Issuer; and (iv) New CBIC will
assume any remaining assets and liabilities of Old CBIC. After the
Reorganization and prior to the consummation of the Common Share Offering,
Bridge Holdings will be merged into the Selling Shareholder such that the
Selling Shareholder will then directly own all of the then outstanding Common
Shares of the Issuer. Upon consummation of the Reorganization, both New CBIC
and CBICBV will be wholly owned direct subsidiaries of the Issuer, as set out
in the diagram below.
POST-REORGANIZATION AND POST-OFFERING STRUCTURE(1)
Praxair, Inc. Public Shareholders Management Plan
8% 84% 8%
Chicago Bridge & Iron Company N.V.
(the "Issuer")
Delaware Subsidiary Chicago Bridge & Iron Company B.V.
("The CBIC") ("CBICBV")
Substantially All U.S. Substantially All Non-U.S.
Operations Operations
- --------
(1) If the Underwriters' over-allotment option is exercised in full, the
Selling Shareholder will own no Common Shares, Public Shareholders will own
92% of the outstanding Common Shares and the Management Plan will hold 8%
of the outstanding Common Shares.
The Issuer, with its corporate seat in Amsterdam, The Netherlands, maintains
its registered office and the principal office of CBICBV at Koningslaan 32-36,
1075 AD Amsterdam, The Netherlands, and their mailing address is P.O. Box
74658, 1070 BR Amsterdam, The Netherlands, and their telephone number at such
address is 31-20-664-4461. The executive office of New CBIC is located at 1501
North Division Street, Plainfield, Illinois 60544, and its telephone number at
that address is (815) 439-6000.
6
<PAGE>
THE OFFERING
<TABLE>
<C> <C> <S>
U.S. Offering..................... 8,400,000 Shares
International Offering............ 2,100,000 Shares
----------
Total........................... 10,500,000 Shares
==========
Common Shares to be Outstanding
After the Common Share
Offering(1)...................... 12,517,552 Shares
</TABLE>
Use of Proceeds.............. The Company will not receive any of the proceeds
from the sale of shares offered hereby.
Listing of Shares............ The Common Shares of New York Registry ("New
York Shares") have been approved for listing on
the New York Stock Exchange (the "NYSE"),
subject to notice of issuance. The Issuer has
applied to list the Common Shares in bearer form
(the "Bearer Shares") on the Amsterdam Stock
Exchange.
Proposed New York Stock
Exchange Symbol............. CBI
Proposed Amsterdam Stock
Exchange Symbol............. CBI
Payment and Delivery......... Delivery of New York Shares will be made to
purchasers' book-entry accounts at The
Depository Trust Company ("DTC"), against
payment in U.S. dollars in same-day funds.
Bearer Shares will also be delivered to
purchasers' book entry accounts at Nederlands
Centraal Instituut voor Giraal Effectenverkeer
B.V. ("NECIGEF"), Morgan Guaranty Trust Company
of New York, Brussels office, as operator of the
Euroclear System ("Euroclear") and Cedel Bank,
societe anonyme ("Cedel") against payment in
Dutch guilders in same-day funds. Thereafter,
trading of New York Shares effected at the NYSE
will be settled in dollars and trading of Bearer
Shares effected on the Amsterdam Stock Exchange
generally will be settled in guilders, in each
case in accordance with the normal settlement
practices of those markets. A fee of $0.05 per
share will be charged to shareholders for the
exchange of New York Shares for Bearer Shares
(and for the reverse). See "Share Certificates
and Transfer."
Dividend Policy.............. Subject to restrictions contained in the
agreements governing the Company's indebtedness,
the Issuer currently expects to initially pay a
quarterly dividend of $0.06 per share. The
Issuer's first dividend is expected to be
payable on June 30, 1997 to shareholders of
record at the close of business on June 20,
1997. The declaration of any dividend, including
the amount thereof, generally will be at the
discretion of the Issuer's supervisory and
management boards and, in the
7
<PAGE>
case of annual dividends, the general
shareholders meeting, and will depend on the
Issuer's then financial condition, results of
operations and capital requirements, and such
other factors as such boards or the general
shareholders meeting deem relevant. See
"Dividend Policy."
- --------
(1) Includes 1,017,552 Common Shares (assuming an initial public offering price
of $21.50 per share (the mid-point of the price range as set forth on the
cover page of this Prospectus)) to be contributed to the Management Plan
which vest no earlier than the third anniversary (and with respect to one
participant, the second anniversary) of the award date, but does not
include 1,251,755 Common Shares reserved for issuance under the Incentive
Plan (as defined), of which 500,702 shares will be subject to options to be
granted at or prior to consummation of the Common Share Offering at an
exercise price equal to the initial offering price. See "Management--
Compensation and Benefits--Executive Compensation--Long-Term Compensation"
and "Management--Compensation and Benefits--Special Stock-Based, Long-Term
Compensation Related to the Common Share Offering."
RISK FACTORS
Prospective purchasers of the Common Shares should consider carefully all of
the information set forth in this Prospectus and, in particular, should
evaluate the specific factors set forth under the caption "Risk Factors"
beginning on page 12, which provides a discussion of the risks involved in an
investment in the Common Shares.
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA
CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The summary historical and pro forma consolidated financial and other data
set forth below should be read in conjunction with, and are qualified by
reference to, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Consolidated Financial Statements of the Company
and accompanying notes thereto (including without limitation "Operations by
Geographic Segment" found on pages F-19 and F-38 hereof and "Quarterly
Operating Results (unaudited)" found on pages F-21 and F-41 hereof) and other
financial information included elsewhere in this Prospectus.
The unaudited pro forma consolidated financial and other data set forth below
for the year ended December 31, 1996 give effect to the Common Share Offering
and the Reorganization as if each had occurred at the beginning of the period
indicated. Such unaudited pro forma consolidated financial and other data are
based on the historical financial statements of the Company and the assumptions
and adjustments described in the accompanying notes and under "Unaudited Pro
Forma Consolidated Income Statement." The unaudited pro forma data are not
designed to represent and do not represent what the Company's results of
operations actually would have been had the Common Share Offering and the
Reorganization been completed as of the beginning of the period indicated, or
to project the Company's results of operations at any future date or for any
future period.
9
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL INFORMATION (1) PRO FORMA (2)
------------------------------------------------------------- -------------
POST-PRAXAIR
PRE-PRAXAIR ACQUISITION ACQUISITION
-------------------------------------------- ------------
YEAR ENDED DECEMBER 31, YEAR ENDED
------------------------------------------------------------- DECEMBER 31,
1992 1993 1994 1995 1996 1996
-------- -------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................ $799,196 $680,541 $762,803 $621,938 $663,721 $663,721
Cost of revenues........ 678,129 630,978 692,266 614,230 590,030 590,030
-------- -------- -------- -------- -------- ----------
Gross profit........... 121,067 49,563 70,537 7,708 73,691 73,691
Selling and
administrative
expenses............... 44,006 44,193 45,503 43,023 42,921 44,821
Special charges......... -- 22,900 (3) 16,990 (4) 5,230 (5) -- --
Gain on the sale of
assets(6).............. (1,062) (118) (11,360) (10,030) (493) (493)
-------- -------- -------- -------- -------- ----------
Income (loss) from
operations............ 78,123 (17,412) 19,404 (30,515) 31,263 29,363
Interest expense........ (1,275) (298) (180) (799) (5,002) (5,002)
Other income............ 4,405 3,056 1,652 1,191 990 990
-------- -------- -------- -------- -------- ----------
Income (loss) before
taxes and minority
interest.............. 81,253 (14,654) 20,876 (30,123) 27,251 25,351
Income tax expense
(benefit).............. 21,882 (6,080) 3,074 (8,093) 7,789 7,037
-------- -------- -------- -------- -------- ----------
Income (loss) before
minority interest..... 59,371 (8,574) 17,802 (22,030) 19,462 18,314
Minority interest in
income................. (2,041) (1,247) (1,359) (3,576) (2,900) (2,900)
-------- -------- -------- -------- -------- ----------
Net income (loss)...... $ 57,330 $ (9,821) $ 16,443 $(25,606) $ 16,562 $ 15,414
======== ======== ======== ======== ======== ==========
Income (loss) per common
share(2)............... N/A N/A N/A N/A N/A $ 1.23
==========
Weighted average number
of common shares
outstanding............ N/A N/A N/A N/A N/A 12,517,552
==========
BALANCE SHEET DATA:
Total assets............ $410,492 $408,936 $359,912 $356,125 $351,496 N/A
Total long-term debt.... 1,000 -- -- -- 53,907 N/A
Total shareholder's
equity................. 222,027 217,231 183,101 186,507 90,746 N/A
CASH FLOW DATA:
Cash flow from operating
activities............. $ 37,571 $ (357) $ 38,447 $(39,151) $ 25,159 N/A
Cash flow from investing
activities............. (37,438) (11,764) 14,051 3,899 (11,348) N/A
Cash flow from financing
activities............. 1,030 2,662 (49,742) 32,012 (14,797) N/A
OTHER FINANCIAL DATA:
Depreciation and
amortization........... $ 12,821 $ 16,178 $ 15,569 $ 16,077 $ 17,281 $ 17,281
EBITDA(7)............... 89,882 21,548 40,603 (19,238) 48,051 46,151
Capital expenditures.... 44,465 19,232 18,772 14,880 20,425 20,425
OTHER DATA:
Number of employees:
Salaried............... 2,036 1,861 1,800 1,663 1,516 1,516
Hourly and craft....... 5,227 4,408 4,852 3,483 4,432 4,432
New business taken(8)... $732,415 $782,606 $648,082 $782,878 $687,227 $687,227
Backlog(8).............. 364,326 449,303 323,343 470,174 485,704 485,704
</TABLE>
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- --------
(1) Prior to the first quarter of 1996, the Company was a subsidiary of
Industries. During the first quarter of 1996, pursuant to a merger
agreement dated December 22, 1995, Industries became a subsidiary of
Praxair. This merger transaction was reflected in the consolidated
financial statements of the Company as a purchase effective January 1,
1996. The application of purchase accounting resulted in changes to the
historical basis of various assets. Accordingly, the information provided
for periods prior to January 1, 1996 is not comparable to subsequent
financial information.
(2) Pro forma information gives effect to the Common Share Offering and the
Reorganization as if each had occurred on the first day of the period
indicated. See "Unaudited Pro Forma Consolidated Income Statement."
(3) In 1993, a special charge of $22.9 million was recorded to recognize the
expense of two major legal claims totalling $15.0 million as well as a $7.9
million write-down of non-performing assets.
(4) In 1994, the Company recorded a special charge of $17.0 million to
recognize the expenses of a major litigation settlement. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Results of Operations."
(5) In 1995, the Company recorded a special charge of $5.2 million comprised of
$0.8 million for work force reduction and $4.4 million for write-down of an
idle facility and other related costs.
(6) Gain on the sale of assets primarily represents gains on the sale of
property, plant and equipment. The gain recorded in 1995 primarily relates
to the sale of certain underutilized facilities sold as a result of the
Restructuring Program. The gain recorded in 1994 includes gains from
affiliated entity transactions primarily from the sale of the Company's
minority interest in a terminal and the sale of the Company's interest in a
fabrication facility.
(7) EBITDA is defined as income (loss) from operations less gains on the sale
of assets, plus special charges, plus depreciation and amortization
expenses. While EBITDA should not be construed as a substitute for
operating income (loss) or a better measure of liquidity than cash flow
from operating activities, which are determined in accordance with United
States GAAP, it is included herein to provide additional information
regarding the ability of the Company to meet its capital expenditures,
working capital requirements and any future debt service. EBITDA is not
necessarily a measure of the Company's ability to fund its cash needs,
particularly because it does not include capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
(8) New business taken represents the value of new project commitments received
by the Company during a given period. Such commitments are included in
backlog until work is performed and revenue recognized or until
cancellation. Backlog may also fluctuate with currency movements.
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<PAGE>
RISK FACTORS
Prior to making an investment in the Common Shares, prospective purchasers
should consider all of the information set forth in this Prospectus and, in
particular, should evaluate the following risk factors:
OPERATING RISKS
Construction and heavy equipment involve a high degree of operational risk.
Natural disasters, adverse weather conditions and operator error can cause
personal injury or loss of life, severe damage to and destruction of property,
equipment and the environment and suspension of operations. The occurrence of
any such event could result in revenue and casualty loss, increased costs and
significant liability to third parties. Litigation arising from such an
occurrence may result in the Company being named as a defendant in lawsuits
asserting substantial claims.
Although the Company maintains risk management, insurance and safety
programs intended to mitigate the effects of loss or damage, there can be no
assurance that any such programs will be sufficient or effective under all
circumstances or against all hazards to which the Company may be subject. An
enforceable claim for which the Company is not fully insured could have a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, no assurance can be given that the Company
will be able to maintain adequate insurance in the future at rates that it
considers reasonable. See "Business--Legal Proceedings and Insurance."
RISK ASSOCIATED WITH FIXED PRICE CONTRACTS
A substantial portion of the Company's projects are currently performed on a
fixed price or lump sum basis, although some projects are performed on a cost
reimbursable or day rate basis or some combination of the foregoing. The
Company attempts to cover increased costs of changes in labor, material and
service costs of its long term contracts (which typically extend from one to
three years) either through an estimation of such changes, which is reflected
in the original price, or through price adjustment clauses. Despite these
attempts, however, the revenue, cost and gross profit realized on a fixed
price or lump sum contract will often vary from the estimated amounts because
of unforeseen conditions or changes in job conditions and variations in labor
and equipment productivity over the term of the contract. These variations and
the risks generally inherent in construction may result in gross profits
realized by the Company being different from those originally estimated and
may result in the Company experiencing reduced profitability or losses on
projects. Depending on the size of a project, these variations from estimated
contract performance could have a material adverse effect on the Company's
business, financial condition and results of operations for any period. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview--Contracts" and "Business--Contracting Methods."
RISK ASSOCIATED WITH PERCENTAGE OF COMPLETION ACCOUNTING
The Company's contract revenues are recognized using the percentage of
completion method. Under this method, estimated contract revenues are accrued
based generally on the percentage that costs to date bear to total estimated
costs. Estimated contract losses are recognized in full when determined.
Accordingly, contract revenues and total cost estimates are reviewed and
revised periodically as the work progresses and as change orders are approved,
and adjustments based upon the percentage of completion are reflected in
contract revenues in the period when such estimates are revised. Such
estimates are based on management's reasonable assumptions and experience, and
are only estimates. Variation of actual results from such assumptions or the
Company's historical experience could be material. To the extent that these
adjustments result in a reduction or an elimination of previously reported
contract revenues, the Company would recognize a charge against current
earnings, which could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview--Revenue Recognition."
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<PAGE>
FLUCTUATING REVENUES AND CASH FLOW
The Company is dependent upon major construction projects in cyclical
industries, including the petroleum, petrochemical, chemical, pulp and paper,
electric and gas utility, and water and wastewater industries, for its
revenues and cash flow. In the petroleum and petrochemical industry, which in
recent years has accounted for the largest component of the Company's
revenues, numerous factors influence capital expenditure decisions, including
current and projected oil and gas prices; exploration, extraction, production
and transportation costs; the discovery rate of new oil and gas reserves; the
sale and expiration dates of leases and concessions; local and international
political and economic conditions; technological advances; and the abilities
of oil and gas companies to generate capital. These factors are beyond the
control of the Company. The selection of, timing of or failure to obtain
projects, the delay in awards of projects, the cancellation of projects or
delays in completion of contracts could result in the under-utilization of the
Company's resources which could have a material adverse impact on the
Company's business, financial condition, results of operations and cash flows.
In addition, construction projects for which the Company's services are
contracted may require significant expenditures by the Company prior to
receipt of relevant payments by a customer. Such expenditures could have a
material adverse impact on the Company's cash flows. In addition, quarterly
results may fluctuate depending on factors including those described above
which may affect the realization by the Company of its backlog. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
SUBSTANTIAL LIQUIDITY REQUIREMENTS
The Company's operations require significant amounts of working capital for
acquisitions of and improvements to heavy-duty equipment and for the
procurement of materials for contracts to be performed over relatively long
periods of time. Capital expenditures for the acquisitions of and improvements
to heavy-duty equipment are generally part of the Company's normal annual
capital expenditure program. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources." In addition, the Company's contract arrangements with customers
frequently require the Company to provide bid and performance bonds or letters
of credit to partially secure the Company's obligations under its bids and/or
contracts as well as requiring significant expenditures prior to receipt of
payments. Furthermore, the Company's customers will often retain a portion
(generally about 10%) of amounts otherwise payable to the Company during the
course of a project as a guarantee of completion of such project. See "--
Fluctuating Revenues and Cash Flow."
RISKS ASSOCIATED WITH HOLDING COMPANY STRUCTURE
The Issuer is a holding company and conducts no business operations of its
own. The principal asset of the Issuer is the outstanding stock of its
subsidiaries. The Company conducts all of its operations through subsidiaries
of the Issuer and joint ventures between such subsidiaries and third parties.
Accordingly, a substantial amount of the Issuer's consolidated assets are held
by, and a substantial part of the Issuer's consolidated earnings and cash
flows are attributable to, such subsidiaries and joint ventures. As a result,
the Issuer's liquidity, and its ability to pay its expenses and meet its
obligations and to pay cash dividends on the Common Shares, are substantially
dependent upon its ability to obtain a flow of funds from such subsidiaries
and joint ventures. There can be no assurance that such subsidiaries and joint
ventures will generate sufficient earnings and cash flows to pay dividends or
otherwise distribute funds to the Issuer to enable the Issuer to meet its
obligations and pay its expenses and dividends. Certain subsidiaries and joint
ventures may incur substantial indebtedness to third parties, the terms of
which may restrict the ability of the Issuer to obtain funds from the
applicable subsidiaries and/or joint ventures. In addition, the arrangements
governing certain of the Company's joint ventures require approval of the
other parties to those joint ventures before distribution can be made to the
parties. These restrictions, along with restrictions imposed by the terms of
the New Revolving Credit Facility (as defined under the caption "Description
of New Revolving Credit Facility") and other credit arrangements entered into
by the Company, could constrain the Issuer's liquidity and, as a result, the
Issuer's ability to pay dividends or the Company's ability to secure future
financings and could have a material adverse effect on the Company's business,
financial condition and results of operations.
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<PAGE>
RISKS OF INTERNATIONAL OPERATIONS
The Company is a global contractor, with approximately 63% of its new
business taken in 1996 relating to projects outside the United States,
including in regions which may experience political instability. Since the
operations of the Company are carried out internationally, they are subject to
certain political, economic and other uncertainties, including, among others,
risks of war, expropriation or nationalization of assets, renegotiation or
nullification of existing contracts, changing political conditions, changing
laws and policies affecting trade and investment, overlap of different tax
structures, and the general hazards associated with the assertion of
sovereignty over certain areas in which operations are conducted.
Additionally, various jurisdictions have laws limiting the right and ability
of subsidiaries and joint ventures to pay dividends and remit earnings to
affiliated companies, unless specified conditions precedent are met.
Many aspects of the Company's operations are subject to governmental
regulations in the countries in which the Company operates, including those
relating to currency conversion and repatriation, taxation of its earnings and
earnings of its personnel, and its use of local employees and suppliers. The
Company's operations are also subject to the risk of changes in laws and
policies in the various jurisdictions in which the Company operates which may
impose restrictions on the Company, including trade restrictions, that could
have a material adverse effect on the Company's business, financial condition
and results of operations. Other types of government regulation which could,
if enacted or implemented, materially and adversely affect the Company's
operations include expropriation or nationalization decrees, confiscatory tax
systems, primary or secondary boycotts directed at specific countries or
companies, embargoes, import restrictions or other trade barriers, mandatory
sourcing rules, high labor rates and fuel price regulation. The Company cannot
determine to what extent future operations and earnings of the Company may be
affected by new legislation, new regulations or changes in or new
interpretations of existing regulations. See "Business--Governmental
Regulations--General."
CURRENCY RISKS
As the Company's functional currency is the United States dollar, its non-
U.S. operations sometimes face the additional risks of fluctuating currency
values and exchange rates, hard currency shortages and controls on currency
exchange. Through its contracts with its customers, the Company attempts to
limit its exposure to currency and exchange rate fluctuations by attempting to
match anticipated non-U.S. currency contract receipts with anticipated like
non-U.S. currency disbursements. To the extent that it is unable to match the
anticipated non-U.S. currency receipts and disbursements related to its
contracts, the Company may enter, if the Company believes it is warranted
under the circumstances, into forward exchange contracts, to the extent
available, to hedge non-U.S. currency transactions on a continuing basis for
periods consistent with its committed exposures. Because the Company generally
does not hedge beyond its contract exposure, the Company believes this
practice minimizes the impact of non-U.S. exchange rate movements on the
Company's results of operations. There can be no assurance, however, that the
attempted matching of non-U.S. currency receipts with disbursements or hedging
activity will adequately moderate the risk of currency or exchange rate
fluctuations which could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, since
the Company generates revenues in countries around the world, there can be no
assurance that forward exchange contracts will be available with respect to
any given currency in which the Company generates revenues. See "Business--
Geographic Markets."
POTENTIAL ENVIRONMENTAL LIABILITY
The Company's operations and properties are affected by numerous national,
federal, state and local environmental protection laws and regulations, such
as those governing discharges to air and water, as well as the handling and
disposal of solid and hazardous wastes in each of the countries where the
Company operates. The requirements of these laws and regulations have tended
to become increasingly stringent, complex and costly to comply with. This is
true for the Company's United States operations and
14
<PAGE>
for its non-U.S. operations, which operations historically have been conducted
generally pursuant to less stringent environmental laws and regulations than
exist in the United States. While the Company has an environmental compliance
program in place, it cannot guarantee that any non-compliance, if it exists,
would not have a material adverse effect on the Company. There also can be no
assurance that environmental laws and regulations or their interpretation will
not change in the future in a manner that could materially and adversely
affect the Company. In addition, the Company may be subject to claims alleging
personal injury or property damage as a result of alleged exposure to toxic
and hazardous substances.
Certain environmental laws, such as the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA" or "Superfund") in the
United States, provide for strict and joint and several liability for
investigation and remediation of spills and other releases of toxic and
hazardous substances. Such laws may apply to conditions at properties
currently or formerly owned or operated by an entity or its predecessors, as
well as to conditions at properties at which wastes or other contamination
attributable to an entity or its predecessors come to be located. The Company
can give no assurance that it, or entities for which it may be responsible,
will not incur such liability in connection with the investigation and
remediation of facilities it currently owns or operates (or formerly owned or
operated) or other locations in a manner that could materially and adversely
affect the Company.
The Company's business sometimes involves working around and with volatile,
toxic and hazardous substances, which exposes it to risks of liability for
personal injury or property damage caused by any release, spill, or other
accident involving such substances that occurs as a result of the conduct of
its business. The Company has been (and may continue to be) unable to obtain
adequate environmental damage or pollution insurance at a reasonable cost.
Although the Company maintains general liability insurance, this insurance is
subject to coverage limitations, deductibles and exclusions and may exclude
coverage for losses or liabilities relating to pollution damage. Therefore,
there can be no assurance that liabilities that may be incurred by the Company
will be covered by its insurance policies, or, if covered, that the dollar
amount of such liabilities will not exceed the Company's policy limits. Even a
partially uninsured claim, if successful and of significant magnitude, could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business--Governmental Regulations--
Environmental," "Business--Legal Proceedings and Insurance" and "Certain
Transactions; Relationship with Praxair."
DEPENDENCE ON PETROLEUM AND PETROCHEMICAL INDUSTRY
In recent years, demand from the worldwide petroleum and petrochemical
industry has been the largest component of the Company's revenues, and
accounted for approximately 60% of revenues in 1996. Therefore, no assurance
can be given that the Company's business, financial condition and results of
operations will not be materially adversely affected because of reduced
activity in the oil and gas industry. In addition, the Company may be
materially adversely affected by changing taxes, price controls and laws and
regulations relating to the petroleum and petrochemical industries generally.
See "--Fluctuating Revenues and Cash Flow" and "Business--Customers."
COMPETITION
Several large companies offer metal plate products and services that compete
with some, but not all, of those of the Company. Local and regional companies
offer competition in one or more geographical areas and in certain product
lines. Although the Company believes customers consider, among other things,
the availability and technical capabilities of equipment and personnel,
efficiency, condition of equipment, safety record and reputation, price
competition is currently a principal factor in determining which qualified
contractor is awarded a contract.
In recent years, competition has resulted in substantial pressure on pricing
and operating margins. The Company expects overcapacity and other competitive
pressures in the industry to continue for the
15
<PAGE>
foreseeable future. Several of the Company's competitors may have
substantially greater capital resources, experience, sales and marketing
capabilities and broader product and service offerings than the Company and
are well established in their respective markets. The Company's competitors,
either alone or together with competitors having sufficient resources, could
engage in a variety of actions, including aggressive price competition,
increased commitment of resources to compete, offering a higher level of
customer service and efforts to recruit the Company's customers, which may
have the effect of delaying or preventing the implementation of the Company's
business strategy or adversely affecting the Company's ability to compete
profitably. Given the nature of the construction industry, certain of the
Company's costs, including construction equipment and personnel, are
essentially fixed over the short term. In order to avoid additional expenses
associated with temporarily idling equipment and personnel, the Company may
from time to time choose to bid its, and its competitors may bid their,
services out for hire at less than attractive rates, depending on the
prevailing contractual rates in a given region. See "Business--Competition."
RELIANCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon the performance
of its key employees, the loss of one or more of whom could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company carries no key-man life insurance. The Company
believes that its future success will also depend in large part on its ability
to attract and retain highly skilled managerial, supervisory, technical, sales
and marketing personnel, who are in great demand. There can be no assurance
that the Company will be successful in attracting or retaining such personnel,
and the failure to attract or retain such personnel could have a material
adverse effect on the Company's business, financial condition and results of
operations.
UNCERTAINTY IN ENFORCING UNITED STATES JUDGMENTS AGAINST NETHERLANDS
CORPORATIONS,DIRECTORS AND OTHERS
The Issuer is a Netherlands company and a substantial portion of its assets
are located outside the United States. In addition, certain members of the
Issuer's management and supervisory boards may be residents of countries other
than the United States. As a result, judgments of United States courts,
including judgments against the Issuer or members of its management or
supervisory boards predicated on the civil liability provisions of the federal
or state securities laws of the United States, may be difficult to enforce in
The Netherlands. See "Service of Process and Enforcement of Civil
Liabilities."
POSSIBLE ANTITAKEOVER EFFECTS
The Issuer's Articles of Association and the applicable law of The
Netherlands contain provisions that may be deemed to have anti-takeover
effects. Among other things, these provisions provide for a staggered board of
supervisory directors and a binding nomination process. Such provisions may
delay, defer or prevent a takeover attempt that a shareholder might consider
in the best interest of the Company's shareholders. See "Description of Share
Capital." In addition, certain United States tax laws may discourage third
parties from accumulating significant blocks of the Common Shares. See
"Taxation--United States Federal Income Taxes--Foreign Personal Holding
Company Classification" and "Taxation--United States Federal Income Taxes--
Controlled Foreign Corporation Classification."
OTHER MATTERS RELATED TO COMPANIES INCORPORATED IN THE NETHERLANDS
As a Netherlands "naamloze vennootschap" (N.V.), the Issuer will be subject
to certain requirements not generally applicable to corporations organized in
United States jurisdictions. Among other things, the issuance of shares by an
N.V. must be submitted for resolution of the general meeting of shareholders,
except to the extent such authority to issue shares has been delegated by the
general meeting of shareholders to another corporate body. The Issuer's
shareholders are expected to authorize, prior to the Common Share Offering,
the Issuer's Supervisory Board (as defined below under "Management") to issue
16
<PAGE>
such additional authorized but unissued Common Shares as the Supervisory Board
shall determine. Under the law of The Netherlands, such authorization can only
be granted for a maximum period of five years and the above-mentioned
authorization is expected to expire on or about the date that is five years
from the date of this Prospectus, subject to future extension(s).
In addition, the issuance of the shares is generally subject to shareholder
preemptive rights, except to the extent that such preemptive rights have been
excluded or limited by the general meeting of shareholders (subject to a
qualified majority of two-thirds of the votes if less than 50% of the
outstanding share capital is present or represented) or by the corporate body
empowered to do so by the general meeting of shareholders or the articles of
association. Shareholders do not have preemptive rights with respect to, inter
alia, Common Shares which are issued against payment other than in cash nor
with respect to shares issued to employees of the Issuer and its subsidiaries.
Prior to the consummation of the Common Share Offering, the Issuer's
shareholders are also expected to adopt a resolution providing the Supervisory
Board with an irrevocable five-year authorization to exclude or limit
shareholder preemptive rights. See "Description of Share Capital--Summary of
Certain Provisions of the Articles of Association and Other Matters--Issue of
Shares; Preemptive Rights."
NEW STATUS AS INDEPENDENT ENTITY
Prior to the Common Share Offering, the Issuer was a wholly owned subsidiary
of Praxair, and prior thereto a wholly owned subsidiary of Industries, and the
Company has depended upon Praxair and Industries for certain financial and
administrative support. Upon completion of the Common Share Offering, the
Company will be responsible for its own financing and administering its own
treasury, cash management, accounting, legal, tax, insurance, human resources
and other services (after an interim transition period during which Praxair
may continue to provide certain credit guarantees which are already
outstanding and will provide certain pension-related services for specified
fees). Praxair may continue to provide certain benefits-related services to
the Company in the future. The Company is expected to incur additional general
and administrative expenses estimated to be approximately $1.9 million
annually in connection with the Company's status as an independent publicly
traded company. In addition, prior to the consummation of the Common Share
Offering, both Industries and Praxair provided credit support under
arrangements providing for performance bonds and letters of credit issued on
behalf of the Company. Such credit support will not extend to new utilization
under such arrangements and may not continue with respect to outstanding
obligations, which totalled approximately $72.7 million of contingent letters
of credit or bank guarantees and $212.3 million of performance bonds as of
December 31, 1996. To the extent the Company cannot obtain new utilization
under such arrangements, the Company may be required to utilize letters of
credit under the New Revolving Credit Facility, if available. Prior to the
consummation of the Common Share Offering, certain stand-by letters of credit
required in connection with the Company's insurance requirements were provided
by or on behalf of Praxair. As of December 31, 1996, such letters of credit
totalled approximately $22 million. The Company will be required to obtain new
letters of credit and indemnify and compensate Praxair with respect to letters
of credit and guarantees provided by Praxair which are not replaced by those
obtained by the Company. Furthermore, the Company has generated significant
revenue from services provided to Praxair, Industries and their affiliates.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources" and "Certain Transactions;
Relationship with Praxair."
RISKS OF JOINT VENTURES AND LESS THAN 100% OWNED OPERATIONS
The Company conducts a significant portion of its operations through joint
ventures and less than 100% owned affiliates, all of which the Company
manages. In 1996, the Company recorded $0.9 million in income from
unconsolidated affiliates, and $112.6 million in revenues from consolidated
entities less than 100% owned by the Company, which represented approximately
18% of the Company's total consolidated revenues in 1996. At any given time,
the revenues or new business taken of a particular joint venture or less than
100% owned affiliate could be significant. The Company's joint venture
partners and
17
<PAGE>
the minority owners of such affiliates may from time to time have economic or
business interests or goals which are inconsistent with the business interests
or goals of the Company. The Company may not have control over the operations
or assets of a joint venture or affiliate if the joint venture, other
agreements or governing law so provide. Although the Company generally manages
the operations of its joint ventures and less than 100% owned affiliates in
the same manner as it manages the operations of its wholly owned affiliates,
the Company may be required to consider the interests of its joint venture
partners and the minority owners of such affiliates in connection with
decisions concerning the operations of the joint ventures and affiliates. The
expenses of managing the operation of each joint venture and affiliate are
allocated to such joint venture or affiliate. All such joint ventures and
affiliates are organized as corporate entities, and the equity holders of such
entities, as shareholders, generally are not subject to liability with respect
to the activities of the joint ventures and affiliates. The Company generally
is not liable to any joint venture or affiliate for activities undertaken on
behalf of such joint venture or affiliate in accordance with authority granted
by the joint venture or affiliate. Although each joint venture and affiliate
also maintains insurance coverages required by law as well as additional
coverages, there can be no assurance that such coverage will be adequate. The
Company also faces the risk that a joint venture partner or minority owner of
an affiliate may be unable to meet its economic or other obligations and that
the Company may be required or choose to fulfill those obligations. See also
"--Risks Associated with Holding Company Structure."
SELLING SHAREHOLDER INFLUENCE OVER THE COMPANY
Upon consummation of the merger of Bridge Holdings into the Selling
Shareholder, the Selling Shareholder will own directly 100% of the outstanding
Common Shares. Upon completion of the Common Share Offering and the
contribution to the Management Plan, the Selling Shareholder will own
approximately 8% (and, if the Underwriters' over-allotment option is exercised
in full, none) of the then outstanding Common Shares. In addition, under the
Issuer's Articles of Association, the Selling Shareholder will have the right
to appoint, remove and replace two members of the Supervisory Board so long as
the Selling Shareholder owns at least 20% of the outstanding Common Shares,
and the right to appoint, remove and replace one member of the Supervisory
Board so long as the Selling Shareholder owns at least 10% but less than 20%
of the outstanding Common Shares. As a result, the Selling Shareholder may be
in a position to influence the management and affairs of the Company,
including with respect to the election and removal of directors, amendments to
the Issuer's Articles of Association and with respect to transactions which
could cause a change of control of the Issuer. Furthermore, the Company and
Praxair have entered into various agreements in connection with the
Reorganization and the Common Share Offering. The Registration Rights
Agreement (as defined) provides that in certain instances the Selling
Shareholder's consent is required prior to the Issuer's registering additional
Common Shares (or similar securities) under the Securities Act. See
"Management--Supervisory Board," "Certain Transactions; Relationship with
Praxair" and "Description of Share Capital."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Upon completion of the Common Share Offering and the contribution to the
Management Plan, the Issuer will have 12,517,552 outstanding Common Shares,
including 1,000,000 Common Shares owned by the Selling Shareholder (none if
the Underwriters' over-allotment option is exercised in full) and including
the 1,017,552 Management Plan Shares as described under "Management--
Compensation and Benefits--Special Stock-Based, Long-Term Compensation Related
to the Common Share Offering" (assuming an initial public offering price of
$21.50 per share (the mid-point of the price range as set forth on the cover
page of this Prospectus)). The 10,500,000 Common Shares (11,500,000 if the
Underwriters' over-allotment option is exercised in full) offered hereby will
be eligible for sale in the public market after the completion of the Common
Share Offering, except for any shares purchased by an "affiliate" of the
Issuer, which will be subject to the resale limitations of Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"). In the underwriting
agreements among the Issuer, the Selling Shareholder and the U.S. Underwriters
and Managers, respectively, the Issuer and the Selling Shareholder, as well as
certain
18
<PAGE>
directors and executive officers of the Company, will agree (subject to
certain exceptions) not to sell any Common Shares for a period of 180 days
after the date of this Prospectus without the prior consent of Credit Suisse
First Boston Corporation. Upon the expiration, or waiver, of the restrictions
contained in such underwriting agreements, the remaining outstanding Common
Shares will be "restricted securities" for purposes of Rule 144, and may not
be resold unless registered under the Securities Act or sold pursuant to an
exemption from registration thereunder. Praxair has certain rights to require
the Issuer to register Common Shares held by the Selling Shareholder (or its
transferees) for sale under the Securities Act to permit the public sale of
such shares. Significant sales of Common Shares (whether such shares are
currently outstanding or subsequently issued) under a registration statement,
pursuant to Rule 144 or otherwise in the future, or the prospect of such
sales, may depress the price of the Common Shares or any market that may
develop, and may also render difficult the sale of the Common Shares purchased
by investors hereunder. See "Certain Transactions; Relationship with Praxair--
Registration Rights Agreement" and "Shares Eligible for Future Sale."
ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF SHARE PRICE
Prior to the Common Share Offering, there has been no public market for the
Common Shares and there can be no assurance that an active trading market will
develop or be sustained in the future. The initial public offering price of
the Common Shares will be determined solely by negotiations among the Issuer,
the Selling Shareholder and the representatives of the Underwriters and will
not necessarily reflect the market price of the Common Shares after completion
of the Common Share Offering or the price at which Common Shares may be sold
in the public market after the Common Share Offering. The initial public
offering price of the Common Shares will be determined by negotiations among
the Company, the Selling Shareholder and the representatives of the
Underwriters based on various factors. The market price of the Common Shares
after the Common Share Offering could be subject to significant fluctuations
in response to various factors, including variations in quarterly operating
results, future announcements concerning the Company or its competitors,
interest rates, foreign exchange rates, the depth and liquidity of the market
for the Common Shares, investor perceptions of the Company and general
economic, market and other conditions.
DILUTION
The initial public offering price per share of Common Shares will exceed the
net tangible book value per Common Share. Accordingly, the purchasers of the
Common Shares offered hereby will experience immediate and substantial
dilution of $15.23 in their investment (assuming an initial public offering
price of $21.50 per share, the mid-point of the price range as set forth on
the cover page of this Prospectus). Additional dilution may occur following
the exercise by directors, management and other employees of options to
purchase Common Shares granted in the future under the Company's option plans
and agreements or purchases of shares under employee share purchase plans. See
"Dilution" and "Management--Compensation and Benefits--Executive
Compensation--Long-Term Compensation" and "Management--Employee Share Purchase
Plan."
RISK OF U.S. TAXATION OF FOREIGN OPERATIONS
The Issuer and its non-U.S. subsidiaries will carry out their activities in
a manner which the Company believes will not constitute the conduct of a trade
or business in the United States. Accordingly, although the Company reports
taxable income and pays taxes in the countries where it operates, the Company
believes that income earned by the Issuer and its non-U.S. subsidiaries from
operations outside the United States is not reportable in the United States
for tax purposes and is not subject to U.S. income tax. If income earned by
the Issuer or its non-U.S. subsidiaries from operations outside the United
States is determined to be income effectively connected to a United States
trade or business and as a result becomes taxable in the United States, the
Company could be subject to U.S. taxes on a basis significantly more adverse
than generally would apply to such business operations. If the Company were to
be deemed to be subject to such taxes, there can be no assurance that the
Company's business, financial condition and results of operations will not be
materially and adversely affected.
19
<PAGE>
RISK OF BEING CLASSIFIED AS A FOREIGN PERSONAL HOLDING COMPANY
If certain events occur, the Issuer or any of its non-U.S. subsidiaries may
be classified, for U.S. tax purposes, as a foreign personal holding company
("FPHC"). The events which would trigger the classification as an FPHC are, in
part, beyond the control of the Company. The Issuer would be classified as an
FPHC if in any taxable year (i) five or fewer individuals who are U.S.
citizens or residents own (directly or constructively through certain
attribution rules) more than 50% of the voting power or the value of the
outstanding Common Shares and (ii) at least 60% of its gross income is
"foreign personal holding company income," which is defined under Section 553
of the Internal Revenue Code of 1986, as amended (the "Code"), to include,
among other things, dividends, interest, rent and royalties. If the Issuer
were to be classified as an FPHC, this would generally require each U.S.
shareholder who held Common Shares on the last day of the Company's taxable
year to include in such shareholder's gross income as a dividend that
shareholder's pro rata portion of undistributed income of the Issuer and of
any non-U.S. subsidiaries that are also FPHCs. The Issuer believes that it
will not be an FPHC at the time of the Common Share Offering made by this
Prospectus but undertakes no obligation to determine if it is an FPHC at any
time. There can be no assurance that the Issuer or any of its non-U.S.
subsidiaries will not be classified as FPHCs in the future. See "Taxation --
United States Federal Income Taxes--Foreign Personal Holding Company
Classification."
RISK OF BEING CLASSIFIED AS A CONTROLLED FOREIGN CORPORATION
The Issuer is incorporated in The Netherlands and is not expected to be a
"controlled foreign corporation" for purposes of U.S. tax law after the Common
Share Offering. However, the Company would be classified as a controlled
foreign corporation if any United States person acquires 10% or more of the
shares of the Issuer (including ownership through the attribution rules of
Section 958 of the Code) and the sum of the percentage ownership by all such
persons exceeds 50% (by voting power or value) of the Issuer's stock. There is
no assurance that the Issuer will not be determined to be a controlled foreign
corporation in the future. In the event that such a determination were made,
all U.S. holders of 10% or more of the shares of the Issuer will be subject to
taxation under Subpart F of the Code. The ultimate consequences of this
determination are fact-specific to each 10% or greater (including ownership
through the attribution rules of Section 958 of the Code) U.S. shareholder but
could include possible taxation of such U.S. shareholder on income of the
Issuer even in the absence of distribution by the Issuer of such income. See
"Taxation--United States Federal Income Taxes--Controlled Foreign Corporation
Classification."
20
<PAGE>
THE COMPANY
CB&I is a global engineering and construction company specializing in the
engineering and design, materials procurement, fabrication, erection, repair
and modification of steel tanks and other steel plate structures and
associated systems such as petroleum terminals, refinery pressure vessels, low
temperature and cryogenic storage facilities and elevated water storage tanks.
Based on its knowledge of and experience in its industry, the Company believes
it is the leading provider of field erected steel tanks and other steel plate
structures, associated systems and related services in North America and one
of the leading providers of these specialized products and services in the
world. CB&I seeks to maintain its leading industry position by focusing on its
technological expertise in design, metallurgy and welding, along with its
ability to complete logistically and technically complex metal plate projects
virtually anywhere in the world. CB&I has been continuously engaged in the
engineering and construction industry since its founding in 1889. In 1996, the
Company was involved in over 500 projects for over 250 customers in 34
countries.
The Issuer, with its corporate seat at Amsterdam, The Netherlands, is a
corporation organized under the laws of The Netherlands, was incorporated in
November 1996 and maintains its registered office and the principal office of
CBICBV at P.O. Box 74658, 1070BR Amsterdam, The Netherlands. The Issuer's
telephone number at such address is 31-20-664-4461. The executive office of
New CBIC is located at 1501 North Division Street, Plainfield, Illinois 60544,
and its telephone number at that address is (815) 439-6000. The Issuer is
registered in the trade register of the Chamber of Commerce of Amsterdam under
No. 286.441.
The Issuer's objects clause as contained in its Articles of Association is
formulated in a broad manner, enabling the Issuer to do all such things as may
be in the broadest sense in furtherance of the business of the Company as
described herein (see "Business"), including, among other things, to:
incorporate, own, participate in, manage and promote businesses; perform
industrial, financial and commercial activities; design, develop, manufacture,
market, sell and service products of any nature; and to borrow, lend and raise
funds and render guarantees.
21
<PAGE>
DIVIDEND POLICY
It is anticipated that following the consummation of the Common Share
Offering, the Issuer will initially pay quarterly cash dividends which, on an
annual basis, will aggregate $0.24 per Common Share and which may be changed
over time as its earnings and prospects warrant. However, no such dividend has
been declared and the declaration and payment of dividends will be a business
decision to be made by the Management Board (as defined below under
"Management") and the Supervisory Board of the Issuer from time to time,
subject to, in the case of annual dividends, the determination by shareholders
at a general meeting and subject to applicable mandatory provisions of Dutch
law, and based on a variety of factors including, among others, the Company's
earnings, financial position, capital needs and such other considerations as
such boards or the general meeting of shareholders deem relevant as well as
any restrictions under the Issuer's debt instruments. See "Description of
Share Capital--Summary of Certain Provisions of the Articles of Association
and Other Matters--Dividends." The Issuer's first dividend is expected to be
payable on June 30, 1997 to shareholders of record at the close of business on
June 20, 1997. Although under Dutch law dividends generally are paid annually
after being approved at a general meeting of shareholders, quarterly dividends
in anticipation of an annual dividend may be distributed by a company's
management board, in the case of the Issuer, with the approval of its
Supervisory Board. See "Description of Share Capital--Summary of Certain
Provisions of the Articles of Association and Other Matters--Dividends."
It is expected that cash dividends, if any, will be declared in dollars. For
a description of the basis on which dividends may be converted into Dutch
guilders, see "Description of Share Capital--Summary of Certain Provisions of
the Articles of Association and Other Matters--Dividends." As regards cash
payments, the rights to dividends and distributions shall lapse if such
dividends or distributions are not claimed within five years following the day
after the date on which they were made available.
There are no legislative or other legal provisions currently in force in The
Netherlands or arising under the Issuer's Articles of Association restricting
dividends to holders of the Common Shares not resident in The Netherlands.
Insofar as the law of The Netherlands is concerned, cash dividends paid in any
currency may be transferred from The Netherlands and converted into any other
convertible currency. Dividends payable by the Issuer are subject to Dutch
withholding tax at the current rate of 25%. The withholding tax on dividends
paid to holders of Common Shares who are not residents of The Netherlands may
be reduced by virtue of an applicable income tax convention in effect between
The Netherlands and the country of residence of the recipient of the
dividends. See "Taxation--Netherlands Taxes--Netherlands Dividend Withholding
Tax."
The Issuer is a newly formed corporation with no accumulated earnings and
profits for U.S. federal income tax purposes. If the Issuer declares dividends
in the Issuer's first taxable year after the Common Share Offering in excess
of the Issuer's current earnings and profits for such year, the excess of the
dividend paid with respect to a particular class of the Issuer's shares over
the earnings and profits allocable to such class of shares shall be treated
for United States federal income tax purposes as a return of capital to the
extent of the shareholder's basis in the shares, and a capital gain to the
extent of any amount of such excess distributed to the shareholder in excess
of such basis.
The Issuer is a holding company that derives all of its cash flow from its
subsidiaries. Consequently, the Issuer's ability to pay dividends is dependent
on the earnings of its subsidiaries and the receipt by the Issuer of
distributions from such subsidiaries. In addition, the New Revolving Credit
Facility limits, and any other credit arrangements which the Company may enter
into may limit, the Issuer's ability to pay dividends. See "Risk Factors--
Substantial Liquidity Requirements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Description of New Revolving Credit Facility."
22
<PAGE>
DILUTION
Dilution is the reduction in the value of a purchaser's investment in Common
Shares measured by the difference between the purchase price per share and the
net tangible book value per Common Share after the purchase. Giving effect to
the Reorganization, the consolidated net tangible book value of the Issuer as
of December 31, 1996 was $71.8 million or $6.24 per share and, after giving
effect to the Common Share Offering (at assumed initial public offering price
of $21.50 per share, the mid-point of the price range as set forth on the
cover page of this Prospectus and including the deduction of estimated
offering expenses payable by the Issuer and the contribution of Common Shares
to the Management Plan), was $78.4 million or $6.27 per share. The net
tangible book value per share is determined by dividing the consolidated net
tangible book value of the Issuer by the number of Common Shares outstanding
at that date. The consolidated net tangible book value of the Issuer
represents its total assets less its total liabilities and intangible assets
(consisting of goodwill). Without taking into account any other changes in
such consolidated net tangible book value after December 31, 1996, other than
to give effect to the sale of the Common Shares offered hereby (at assumed
initial public offering price of $21.50 per share), purchasers of Common
Shares in the Common Share Offering would experience immediate dilution of
$15.23 per share, which is equal to the difference between the assumed initial
public offering price and the net tangible book value per Common Share as of
September 30, 1996. The following table illustrates this per share dilution:
<TABLE>
<S> <C>
Assumed initial public offering price per share..................... $21.50
Net tangible book value per share as of December 31, 1996 after
giving effect to the Common Share Offering......................... 6.27
------
Dilution per share to purchasers in the Common Share Offering(1).... $15.23
======
</TABLE>
- --------
(1) Includes 1,017,552 Common Shares (assuming an initial public offering
price of $21.50 per share (the mid-point of the price range as set forth
on the cover page of this Prospectus)) to be contributed to the Management
Plan which vest no earlier than the third anniversary (and with respect to
one participant, the second anniversary) of the award date, and excludes
1,251,755 Common Shares reserved for issuance under the Incentive Plan, of
which 500,702 shares will be subject to options to be granted at or prior
to consummation of the Common Share Offering at an exercise price equal to
the initial offering price.
USE OF PROCEEDS
The net proceeds to the Selling Shareholder from the sale of the Common
Shares in the Common Share Offering are estimated to be approximately $214
million, after deducting estimated underwriting discounts and commissions but
before estimated offering expenses payable by the Selling Shareholder. The
Company will not receive any of the proceeds from the sale of Common Shares in
the Common Share Offering.
23
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The following table sets forth the cash, consolidated short-term debt and
capitalization of the Company at December 31, 1996 (after giving effect to the
Reorganization) and as adjusted to give effect to the Common Share Offering,
the contribution of Common Shares to the Management Plan and the
Reorganization. This table should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
--------------------------
ACTUAL (1) AS ADJUSTED (2)
---------- ---------------
<S> <C> <C>
Cash and cash equivalents........................... $ 11,923 $ 9,923 (3)
======== ========
Short-term notes payable............................ $ 3,114 $ 3,114
-------- --------
Long-term debt to Praxair........................... 53,907 53,907 (4)
-------- --------
Shareholders' Equity:
Common stock, NLG .01 par value, 50,000,000
authorized, 11,500,000 actual shares issued and
outstanding;
12,517,552 as adjusted shares issued and
outstanding (5).................................. 65 74
Additional paid-in capital........................ 79,953 99,821 (3)
Retained earnings................................. 11,562 (1,652)
Cumulative translation adjustment................. (775) (775)
-------- --------
Total shareholders' equity...................... 90,805 97,468 (6)
-------- --------
Total capitalization.......................... $147,826 $154,489
======== ========
</TABLE>
- --------
(1) Reflects amounts after giving effect to the Reorganization.
(2) Reflects amounts after giving effect to the Reorganization, the Common
Share Offering and the contribution of 1,017,552 Common Shares to the
Management Plan valued at $21.9 million (which would result in an increase
to Common Stock and Additional paid-in capital) and a related pre-tax
charge of $21.9 million (which would result in a $13.2 million reduction
in Retained earnings, net of tax effect) assuming an initial offering
price of $21.50 per share.
(3) The Issuer will not receive any proceeds from the Common Share Offering
but will pay a portion of the offering costs, which portion will not
exceed $2.0 million.
(4) The Company intends to refinance its long-term debt to Praxair with
indebtedness incurred under the New Revolving Credit Facility. As of
February 27, 1997, the aggregate amount of such indebtedness outstanding
to Praxair was approximately $73 million.
(5) Excludes Common Shares issuable upon exercise of options to be granted
under the Company's stock option plan.
(6) The $6.7 million net increase in Total shareholders' equity and Total
capitalization reflects the $8.7 million increase resulting from the tax
benefit associated with the contribution to the Management Plan, offset by
the $2.0 million of offering costs to be paid by the Issuer, as described
in footnotes 2 and 3 above.
24
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
The following table sets forth Selected Consolidated Financial and Other
Data for the periods and as of the dates indicated. The selected consolidated
income statement data for each of the years in the three-year period ended
December 31, 1996 and the selected consolidated balance sheet data as of
December 31, 1996, 1995 and 1994 have been derived from, and are qualified by
reference to, the Audited Consolidated Financial Statements of the Company
included elsewhere in this Prospectus. The selected consolidated income
statement data for the year ended December 31, 1993 have been derived from the
Company's audited financial statements. The selected consolidated income
statement data for the year ended December 31, 1992 and the selected
consolidated balance sheet data as of December 31, 1993 and 1992 have been
derived from the Company's unaudited financial statements.
The selected consolidated financial and other data set forth below should be
read in conjunction with, and are qualified by reference to, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements of the Company and accompanying notes
thereto (including without limitation "Operations by Geographic Segment" found
on pages F-19 and F-38 hereof and "Quarterly Operating Results (unaudited)"
found on pages F-21 and F-41 hereof) and other financial information included
elsewhere in this Prospectus.
25
<PAGE>
<TABLE>
<CAPTION>
POST-PRAXAIR
PRE-PRAXAIR ACQUISITION (1) ACQUISITION
-------------------------------------------- ------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................ $799,196 $680,541 $762,803 $621,938 $663,721
Cost of revenues........ 678,129 630,978 692,266 614,230 590,030
-------- -------- -------- -------- --------
Gross profit........... 121,067 49,563 70,537 7,708 73,691
Selling and
administrative
expenses............... 44,006 44,193 45,503 43,023 42,921
Special charges......... -- 22,900 (2) 16,990 (3) 5,230 (4) --
Gain on the sale of
assets(5).............. (1,062) (118) (11,360) (10,030) (493)
-------- -------- -------- -------- --------
Income (loss) from
operations............ 78,123 (17,412) 19,404 (30,515) 31,263
Interest expense........ (1,275) (298) (180) (799) (5,002)
Other income............ 4,405 3,056 1,652 1,191 990
-------- -------- -------- -------- --------
Income (loss) before
taxes and minority
interest.............. 81,253 (14,654) 20,876 (30,123) 27,251
Income tax expense
(benefit).............. 21,882 (6,080) 3,074 (8,093) 7,789
-------- -------- -------- -------- --------
Income (loss) before
minority interest..... 59,371 (8,574) 17,802 (22,030) 19,462
Minority interest in
income................. (2,041) (1,247) (1,359) (3,576) (2,900)
-------- -------- -------- -------- --------
Net income (loss)...... $ 57,330 $ (9,821) $ 16,443 $(25,606) $ 16,562
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Total assets............ $410,492 $408,936 $359,912 $356,125 $351,496
Total long-term debt.... 1,000 -- -- -- 53,907
Total shareholder's
equity................. 222,027 217,231 183,101 186,507 90,746
CASH FLOW DATA:
Cash flow from operating
activities............. $ 37,571 $ (357) $ 38,447 $(39,151) $ 25,159
Cash flow from investing
activities............. (37,438) (11,764) 14,051 3,899 (11,348)
Cash flow from financing
activities............. 1,030 2,662 (49,742) 32,012 (14,797)
OTHER FINANCIAL DATA:
Depreciation and
amortization........... $ 12,821 $ 16,178 $ 15,569 $ 16,077 $ 17,281
EBITDA(6)............... 89,882 21,548 40,603 (19,238) 48,051
Capital expenditures.... 44,465 19,232 18,772 14,880 20,425
OTHER DATA:
Number of employees:
Salaried............... 2,036 1,861 1,800 1,663 1,516
Hourly and craft....... 5,227 4,408 4,852 3,483 4,432
New business taken(7)... $732,415 $782,606 $648,082 $782,878 $687,227
Backlog(7).............. 364,326 449,303 323,343 470,174 485,704
</TABLE>
26
<PAGE>
- --------
(1) Prior to the first quarter of 1996, the Company was a subsidiary of
Industries. During the first quarter of 1996, pursuant to a merger
agreement dated December 22, 1995, Industries became a subsidiary of
Praxair. This merger transaction was reflected in the consolidated
financial statements of the Company as a purchase effective January 1,
1996. The application of purchase accounting resulted in changes to the
historical basis of various assets. Accordingly, the information provided
for periods prior to January 1, 1996 is not comparable to subsequent
financial information.
(2) In 1993, a special charge of $22.9 million was recorded to recognize the
expense of two major legal claims totalling $15.0 million as well as a
$7.9 million write-down of non-performing assets.
(3) In 1994, the Company recorded a special charge of $17.0 million to
recognize the expenses of a major litigation settlement. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Results of Operations."
(4) In 1995, the Company recorded a special charge of $5.2 million comprised
of $0.8 million for work force reduction and $4.4 million for write-down
of an idle facility and other related costs.
(5) Gain on the sale of assets primarily represents gains on the sale of
property, plant and equipment. The gain recorded in 1995 primarily relates
to the sale of certain underutilized facilities sold as a result of the
Restructuring Program. The gain recorded in 1994 includes gains from
affiliated entity transactions primarily from the sale of the Company's
minority interest in a terminal and the sale of the Company's interest in
a fabrication facility.
(6) EBITDA is defined as income (loss) from operations less gains on the sale
of assets, plus special charges, plus depreciation and amortization
expenses. While EBITDA should not be construed as a substitute for
operating income (loss) or a better measure of liquidity than cash flow
from operating activities, which are determined in accordance with United
States GAAP, it is included herein to provide additional information
regarding the ability of the Company to meet its capital expenditures,
working capital requirements and any future debt service. EBITDA is not
necessarily a measure of the Company's ability to fund its cash needs,
particularly because it does not include capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
(7) New business taken represents the value of new project commitments
received by the Company during a given period. Such commitments are
included in backlog until work is performed and revenue recognized or
until cancellation. Backlog may also fluctuate with currency movements.
27
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The following Unaudited Pro Forma Consolidated Income Statement for the year
ended December 31, 1996 gives effect to the Common Share Offering and the
Reorganization as if each had occurred at the beginning of the period
indicated. The Unaudited Pro Forma Consolidated Income Statement is based on
the historical financial statements of the Company and the assumptions and
adjustments described in the accompanying notes.
As described under the captions "Management--Compensation and Benefits--
Special Stock-Based, Long-Term Compensation Related to the Common Share
Offering" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview--Management Plan," upon consummation of the
Common Share Offering, the Company will make a contribution to the Management
Plan in the form of Common Shares having a value of approximately $21.9
million (assuming an initial public offering price of $21.50 per share (the
mid-point of the price range as set forth on the cover page of this
Prospectus)). Accordingly, the Company will record a pretax charge of
approximately $21.9 million (assuming an initial public offering price of
$21.50 per share (the mid-point of the price range as set forth on the cover
page of this Prospectus)) at the time of the contribution to the Management
Plan. As this represents a non-recurring 1997 charge to income, it has not
been reflected in the Unaudited Pro Forma Consolidated Income Statement for
the year ended December 31, 1996.
The Unaudited Pro Forma Consolidated Income Statement is based upon
assumptions that the Company believes are reasonable and should be read in
conjunction with the Consolidated Financial Statements of the Company and the
accompanying notes thereto included elsewhere in this Prospectus. The
unaudited pro forma data are not designed to represent and do not represent
what the Company's results of operations actually would have been had the
Common Share Offering and the Reorganization been completed as of the
beginning of the period indicated, or to project the Company's results of
operations at any future date or for any future period. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
28
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------
PRO FORMA AS
HISTORICAL ADJUSTMENTS ADJUSTED(3)
---------- ----------- -----------
<S> <C> <C> <C>
Revenues............................... $663,721 $ -- $663,721
Cost of revenues....................... 590,030 -- 590,030
-------- ------- ----------
Gross profit......................... 73,691 -- 73,691
Selling and administrative expenses.... 42,921 1,900 (1) 44,821
Gain on sale of assets................. (493) -- (493)
-------- ------- ----------
Income from operations............... 31,263 (1,900) 29,363
Interest expense....................... (5,002) -- (5,002)
Other income........................... 990 -- 990
-------- ------- ----------
Income before taxes and minority
interest............................ 27,251 (1,900) 25,351
Income tax expense (benefit)........... 7,789 (752)(2) 7,037
-------- ------- ----------
Income before minority interest...... 19,462 (1,148) 18,314
Minority interest in income............ (2,900) -- (2,900)
-------- ------- ----------
Net income........................... $ 16,562 $(1,148) $ 15,414
======== ======= ==========
Pro forma net income per common share.. $ 1.23
==========
Pro forma weighted average number of
common shares outstanding............. 12,517,552(4)
==========
</TABLE>
- --------
(1) Reflects an increase of $1.9 million for administrative expenses expected
to be incurred in connection with being a public corporation. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources" for a discussion of such
additional administrative expenses and of a decrease in benefit costs
during 1996 of approximately $4 million as compared to 1995 as the result
of the transition from the Industries benefit plans to the new benefit
plans being established by the Company. The Company's new benefit plans
are expected to be in place for 1997 and the level of 1997 benefit costs
(excluding one-time costs related to the Management Plan) is expected to
be consistent with the 1995 benefit costs.
(2) Represents an adjustment to reflect the income tax effect of the pro forma
adjustment.
(3) The Company will not receive any of the proceeds from the Common Shares
Offering. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
(4) Includes 1,017,552 Common Shares which will be contributed to the
Management Plan which vest no earlier than the third anniversary (and with
respect to one participant, the second anniversary) of the award date, but
does not include 1,251,755 Common Shares reserved for issuance under the
Incentive Plan (as defined), of which 500,702 shares will be subject to
options to be granted at or prior to consummation of the Common Share
Offering at an exercise price equal to the initial offering price. See
"Management--Compensation and Benefits--Executive Compensation--Long-Term
Compensation" and "Management--Compensation and Benefits--Special Stock-
Based, Long-Term Compensation Related to the Common Share Offering."
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and accompanying notes.
OVERVIEW
Background. In the first quarter of 1996, Praxair acquired all of the
outstanding common stock of Industries, which was then the parent company of
Old CBIC. At that time, Praxair announced its intention to divest the
businesses of Industries that were not strategic to Praxair, including the
Company. The acquisition of Industries by Praxair was reflected in the
Company's consolidated financial statements as a purchase effective January 1,
1996 and resulted in changes to the capitalization and historical basis of
various assets of the Company. Accordingly, the historical information
provided herein, for periods prior to January 1, 1996, is not comparable to
subsequent financial information.
Restructuring Program. Following the Praxair acquisition, a new management
team was assembled for the Company which has concentrated its initial efforts
on redirecting and accelerating the Restructuring Program. The Restructuring
Program initially focused on consolidating the Company's organizational
structure from six separate, decentralized business units into a single global
business operation. On-going enhancements in connection with such
consolidation include centralization of procurement, equipment and personnel
mobilization, and certain financial functions, as well as streamlining and
consolidating administrative and engineering support. As part of the program,
seven fabrication plants or warehouses have been closed and three
administrative office sites have been downsized or relocated, including the
headquarters of the Company's U.S. operations. The Company also has targeted a
reduction of approximately 160 salaried positions, of which approximately 147
had been eliminated as of December 31, 1996. The Company believes that the
benefits of the Restructuring Program have contributed significantly to the
improvement in operating profitability in 1996 relative to 1995.
Management Plan. Praxair and the Company have agreed to compensate certain
members of the Company's management for their services in connection with the
further development and implementation of the Restructuring Program and the
Company's initial public offering. Upon consummation of the Common Share
Offering, the Company has agreed to contribute to the Management Plan in the
form of Common Shares having a value of approximately $21.9 million
(approximately 1,017,552 Common Shares, assuming an initial public offering
price of $21.50 per share, representing approximately 8% of the total number
of Common Shares outstanding upon consummation of the Common Share Offering).
This initial contribution of Management Plan Shares will vest three years (and
with respect to one participant, two years) after the date of the Common Share
Offering. Accordingly, the Company will record a pretax charge of
approximately $21.9 million (assuming an initial public offering price of
$21.50 per share) at the time of the contribution to the Management Plan. See
"Management--Compensation and Benefits--Special Stock-Based, Long-Term
Compensation Related to the Common Share Offering."
Operations. Historically, changing market conditions have dictated that the
Company shift product mix and geographic revenue mix in order to maximize
operating results. The Company has also reduced its fixed costs from time to
time to reflect changes in demand for its products and services. Due to a
significant reduction in new business obtained by the Company outside the U.S.
and decreases in government and nuclear repair work in the U.S., revenues in
1993 were sharply lower than the level in 1992. While revenues and operating
results improved somewhat in 1994, they remained below targeted levels.
Actions by the Company to adjust its support infrastructure were generally
insufficient to offset the declining revenue trend. During the period of
declining performance from 1992 through 1995, the Company became increasingly
internally focused. Experienced employees were assigned full-time to the
Restructuring Program (during 1996, most of these employees returned to
operating duties). In 1995, Industries had also
30
<PAGE>
become involved in defending itself against the ultimately successful takeover
by Praxair. These factors along with contract execution issues (such as
maintaining costs in line with initial estimates, and equipment and personnel
mobilization difficulties) and unabsorbed overhead costs contributed to a
significant operating loss in 1995.
Although the Company believes that continued implementation of the
Restructuring Program has already resulted in and will continue to result in
savings, there can be no assurance that the Company's estimates of results
already achieved accurately reflect cost savings associated with the
Restructuring Program, that targeted reductions and goals can be achieved or
will continue and that part or all of the Restructuring Program can
successfully be implemented.
Contracts. The Company obtains contracts primarily through competitive
bidding, negotiations or partnering agreements with long-standing customers.
Project duration typically lasts from a few weeks to several years. Typically,
over 75% of the Company's work is performed on a fixed price or lump sum
basis. The balance of projects primarily are performed on variations of cost
reimbursable and target fixed or lump sum price approaches.
New Business Taken/Backlog. New business taken represents the value of new
project commitments received by the Company during a given period. Such
commitments are included in backlog until work is performed and revenue
recognized or until cancellation. The variability of the timing of new project
commitments, the size of the project and other factors beyond the Company's
control can cause significant fluctuation in the new business taken in any
given period or backlog outstanding at any given date. Backlog may also
fluctuate with currency movements.
Revenue Recognition. Revenues are recognized using the percentage of
completion method. Contract revenues are accrued based generally on the
percentage that costs to date bear to total estimated costs. The cumulative
impact of revisions in total cost estimates during the progress of work is
reflected in the period in which these changes become known.
RESULTS OF OPERATIONS
The following table summarizes the consolidated results of operations and
the related percentages of revenues for the years ended December 31, 1994,
1995 and 1996:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1994 1995 1996
-------------- -------------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................ $762.8 100.0% $621.9 100.0% $663.7 100.0%
Cost of revenues........ 692.3 90.8% 614.2 98.8% 590.0 88.9%
------ ------ ------ ------ ------ ------
Gross profit........... 70.5 9.2% 7.7 1.2% 73.7 11.1%
Selling and
administrative
expenses............... 45.5 6.0% 43.0 6.9% 42.9 6.5%
Special charges......... 17.0 2.2% 5.2 0.8% -- --
Gain on sale of assets.. (11.4) (1.5%) (10.0) (1.6%) (0.5) (0.1%)
------ ------ ------ ------ ------ ------
Income (loss) from
operations............ 19.4 2.5% (30.5) (4.9%) 31.3 4.7%
Interest expense........ (0.2) (0.0%) (0.8) (0.1%) (5.0) (0.8%)
Other income............ 1.7 0.2% 1.2 0.2% 1.0 0.2%
------ ------ ------ ------ ------ ------
Income (loss) before
taxes and minority
interest.............. 20.9 2.7% (30.1) (4.8%) 27.3 4.1%
Income tax expense
(benefit).............. 3.1 0.4% (8.1) (1.3%) 7.8 1.2%
------ ------ ------ ------ ------ ------
Income (loss) before
minority interest..... 17.8 2.3% (22.0) (3.5%) 19.5 2.9%
Minority interest in
income................. (1.4) (0.2%) (3.6) (0.6%) (2.9) (0.4%)
------ ------ ------ ------ ------ ------
Net income (loss)...... $ 16.4 2.1% $(25.6) (4.1%) $ 16.6 2.5%
====== ====== ====== ====== ====== ======
Backlog at period end... $323.3 $470.2 $485.7
====== ====== ======
</TABLE>
31
<PAGE>
The following tables indicate revenues and new business taken by product
line for the years ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
REVENUES BY PRODUCT LINE
Flat Bottom Tanks...................................... $ 303 $ 253 $ 248
Pressure Vessels....................................... 83 85 82
Low Temperature/Cryogenic Tanks and Systems............ 23 28 60
Elevated Tanks......................................... 55 60 42
Specialty and Other Structures......................... 133 73 117
Repairs and Modifications.............................. 82 68 70
Turnarounds............................................ 84 55 45
------- ------- -------
Total................................................ $ 763 $ 622 $ 664
======= ======= =======
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
NEW BUSINESS TAKEN BY PRODUCT LINE
Flat Bottom Tanks...................................... $ 207 $ 196 $ 278
Pressure Vessels....................................... 80 86 67
Low Temperature/Cryogenic Tanks and Systems............ 62 204 91
Elevated Tanks......................................... 38 44 46
Specialty and Other Structures......................... 88 122 107
Repairs and Modifications.............................. 76 63 57
Turnarounds............................................ 97 68 41
------- ------- -------
Total................................................ $ 648 $ 783 $ 687
======= ======= =======
</TABLE>
1996 versus 1995
Revenues. Revenues increased $41.8 million, or 6.7%, to $663.7 million in
1996 from $621.9 million in 1995. This increase reflects improvement in
contract activity, primarily in the United States and Central and South
America. Revenues for low temperature and specialty product lines increased,
reflecting contracts for several liquid natural gas ("LNG") storage facilities
and other significant contracts for a wastewater project and a government
research facility. To improve profitability of the Company, during 1996
management focused on improving contract execution and cost reductions. As a
result, management was more selective in pursuing contract opportunities,
which is reflected in the level of new business taken and in the moderate
revenue growth in 1996, and is expected to be reflected in the Company's 1997
results. However, the Company expects to more actively pursue new business
prospects in its principal markets as its Restructuring Program nears
completion.
Backlog at December 31, 1996 increased by approximately $15.5 million to
$485.7 million compared to the backlog at December 31, 1995 of $470.2 million.
New business taken during 1996 decreased by 12.2% to $687.2 million compared
to $782.9 million in 1995 which included approximately $150 million for three
LNG storage facility contracts. During 1996, new contract awards increased
significantly internationally in Asia, the Middle East and South America while
awards decreased in the U.S.
Gross Profit. Gross profit increased $66.0 million to $73.7 million during
1996 from $7.7 million in 1995. Gross profit as a percentage of revenues
("gross margin") increased to 11.1% for 1996 from 1.2% in 1995. The
improvement in gross profit and gross margin in 1996 reflects the results of
the Restructuring Program initiatives which have achieved cost savings of
approximately $10 million, reduced unabsorbed
32
<PAGE>
overhead costs by $11.3 million, improved contract estimation and associated
construction performance and reduced benefit costs, as discussed below.
Prospectively, the Restructuring Program is expected to result in estimated
annual cost savings of approximately $21 million in 1997 and approximately $23
million in 1998, relative to the Company's 1995 cost base. In addition, gross
profit increased with higher revenues. Gross profit for 1995 was negatively
impacted by approximately $19 million due to the effect of significant losses
on a few contracts, as discussed below.
Income from Operations. Income from operations was $31.3 million in 1996, or
4.7% of revenues, versus a loss of $30.5 million in 1995. The improvement in
income from operations was primarily attributable to the improvement in gross
profit and gross margin described above. Selling and administrative expenses
decreased slightly to $42.9 million from $43.0 million in 1995. Selling and
administrative expenses included higher expenses relating to the Company's
upgrading of its information technology systems and increased incentive
compensation due to improved results, offset by a reduction in benefit costs
and other cost savings. Benefit cost reductions of approximately $4 million
and pension curtailment gains of approximately $1.9 million reduced 1996 cost
of revenues sold and selling and administrative expenses by $4.9 million and
$1.0 million, respectively. The decrease in the Company's benefit costs during
1996 as compared to 1995 is the result of the transition from the Industries'
benefit plans to new benefit plans being established by the Company. The
Company's new benefit plans are expected to be in place for 1997, and the
level of 1997 benefit costs (excluding one-time costs related to the
Management Plan) is expected to be consistent with the 1995 benefit costs.
Income from operations in 1995 was also impacted by gains from the sale of
assets of $10.0 million and a special charge of $5.2 million.
Interest expense increased $4.2 million, to $5.0 million during 1996 from
$0.8 million in 1995. The increase is primarily a result of $55.0 million of
long-term debt assumed by the Company on January 1, 1996 as part of the
Praxair acquisition.
Income tax expense increased $15.9 million to $7.8 million during 1996 from
an income tax benefit of $8.1 million during 1995. This increase results from
the return to profitable operations in the U.S. and increased profitability in
non-U.S. jurisdictions.
Net income for 1996 was $16.6 million compared to a net loss of $25.6
million in 1995.
1995 versus 1994
Revenues. Revenues decreased $140.9 million, or 18.5%, to $621.9 million in
1995 from $762.8 million in 1994. Decreased revenues reflect the lower level
of new business awarded to the Company in 1994 and the relatively low backlog
at December 31, 1994. As a result of the completion of a large contract in
late 1994, revenues from construction of flat bottom tanks declined by
approximately $50 million to $253 million in 1995 from $303 million in 1994.
Revenues from specialty contracts also declined during 1995.
Backlog at December 31, 1995 increased by $146.9 million to $470.2 million
compared to backlog of $323.3 million at December 31, 1994. New business taken
during 1995 increased by 20.8% to $782.9 million compared to 1994. The
increase in new business was primarily attributable to the award of three LNG
storage facility contracts in the U.S. and a significant contract to supply
components to a government research facility.
Gross Profit. Gross profit decreased by $62.8 million to $7.7 million in
1995 from $70.5 million in 1994. Gross margin decreased to 1.2% in 1995 from
9.2% in 1994. Gross profit was reduced by approximately $17 million due to
lower revenues and was adversely impacted by $24.0 million of underabsorbed
overhead. In addition, gross profit in 1995 was negatively impacted by
approximately $19 million due to significant losses on a few contracts. These
contract losses were a result of inaccurate estimates related to the scope of
work to be performed and contract specifications and unforeseen weather and
logistical considerations.
33
<PAGE>
Income from Operations. The Company incurred a loss from operations of $30.5
million in 1995 compared to income from operations of $19.4 million in 1994.
The decline was primarily attributable to the significant decrease in gross
profit described above. Selling and administrative expenses decreased $2.5
million, or 5.5%, to $43.0 million in 1995 from $45.5 million in 1994. The
decrease in selling and administrative expense resulted from cost reductions
initiated in early 1995.
In the fourth quarter of 1995, the Company recorded a special charge of $5.2
million comprised of $0.8 million for workforce reduction and $4.4 million for
the write-down of an idle facility. The Company recorded a gain on sale of
assets in 1995 of $10.0 million, which included gains of $5.9 million from the
sale of two facilities and $4.1 million from the sale of other excess
property, plant and equipment.
Interest expense increased $0.6 million, to $0.8 million during 1995 from
$0.2 million during 1994. The increase resulted from interest on a portion of
the litigation settlement which was included in the 1994 special charge
described below and higher international debt.
Income tax expense decreased by $11.2 million in 1995 to a net tax benefit
of $8.1 million primarily as a result of an operating loss in the U.S., which
was utilized in the Industries consolidated return.
The Company reported a net loss of $25.6 million in 1995 compared to $16.4
million of net income in 1994.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1996, the Company generated cash from
operations of $25.2 million. The Company's operations used cash of $39.2
million for the year ended December 31, 1995. In 1996, cash generated was
primarily the result of increased net income and reduced working capital
requirements. Lower working capital requirements were due to decreases in
accounts receivable during such period, partly offset by increased cash
requirements of contracts in progress resulting from the timing of contract
billings. In 1995, cash requirements of the operations were largely
attributable to a net loss and increased working capital requirements caused
by a major litigation settlement and satisfaction of income tax liabilities.
For the year ended December 31, 1994, the Company generated cash from
operations of $38.4 million which includes a reduction in accounts receivable
due to a large payment received in 1994.
During the period from 1993 through 1995, the Company had annual capital
spending of approximately one times annual depreciation expense to maintain
its competitive position. Capital expenditures for the year ended December 31,
1996 were $20.4 million. Such capital expenditures were used primarily for
field equipment (approximately $11 million), information technology and
systems development (approximately $4 million), shop and other equipment
(approximately $2 million) and the remainder for environmental and other
capital expenditures. The Company anticipates that capital expenditures in the
near future will remain at approximately the level of depreciation, except for
certain one time incremental additions related to the Restructuring Program,
although there can be no assurance that such levels will not increase.
The Company was a subsidiary of Industries when Industries was acquired by
Praxair during the first quarter of 1996. On December 19, 1996, Industries
merged into Praxair. As a subsidiary of both Industries and Praxair, the
Company has participated in corporate cash management systems. Liquidity
required for or generated from the business was handled through this system.
The resultant cash generated or used by the Company was netted against the
advances to parent company account. In 1996, the Company transferred $16.1
million net cash to Praxair. In 1995, the Company received $31.0 million net
cash from Industries. Upon consummation of the Common Share Offering, the
Company will not participate in Praxair's cash management system.
As part of the Praxair acquisition, $55.0 million of acquisition related
indebtedness was assumed by the Company. Since then, Praxair has advanced
additional funds to the Company to fund its working
34
<PAGE>
capital and capital expenditure requirements. As of February 27, 1997, the
aggregate amount of such indebtedness outstanding to Praxair was approximately
$73 million. Such indebtedness bears interest at a rate of 7% per annum, which
rate will increase to 7.5% per annum when Praxair ceases to own a majority of
the Company's outstanding shares, and is payable on demand by Praxair on or
after January 1, 1998. The Company has entered into a revolving credit
facility with a syndicate of banks which has a maximum availability of $100.0
million for three years, to be reduced to $50.0 million for two years
thereafter (including up to $35.0 million for letters of credit). The Company
intends to use a substantial portion of the credit availability of such
facility to refinance its long-term debt to Praxair. The terms of the facility
include various covenants, including financial covenants that require the
Company to maintain minimum levels of tangible net worth, establish interest
coverage and debt coverage ratios and limit capital expenditures. See
"Description of New Revolving Credit Facility."
Furthermore, in the ordinary course of business, the Company obtains
performance bonds and letters of credit from insurance companies and banks,
which support the Company's performance obligations under contracts to
customers. As of December 31, 1996, approximately $72.7 million of contingent
letters of credit or bank guarantees, and $212.3 million of performance bonds
were outstanding. Prior to the Common Share Offering these obligations were
guaranteed by Industries or Praxair. After the Common Share Offering, it is
expected that the Company will obtain such instruments without credit support
from Praxair. In addition, approximately $22 million of letters of credit were
outstanding on behalf of Praxair at December 31, 1996 relating to the
Company's insurance program. It is expected that the Company will replace
these letters of credit with new ones issued on its own behalf. To the extent
Praxair continues to be obligated to financial institutions under the letters
of credit and guarantees of performance bonds, the Company will indemnify
Praxair and compensate it in the form of a guarantee fee. See "Certain
Transactions; Relationship with Praxair."
In addition to liquidity generated through the New Revolving Credit
Facility, the Company intends to focus on improving its working capital
position through aggressive management of the individual components of working
capital, including programs to reduce excess cash, accounts receivable and
unbilled contracts in progress and to maximize available terms from trade
suppliers. The Company is also actively marketing the properties which
comprise assets held for sale in an amount equal to $10.5 million as of
December 31, 1996.
Management anticipates that by utilizing cash generated from operations and
funds provided under the New Revolving Credit Facility, the Company will be
able to meet its working capital and capital expenditure needs for at least
the next 24 months.
The Company is expected to incur additional general and administrative
expenses estimated to be $1.9 million annually in connection with the
Company's status as an independent publicly traded company. In addition, the
Company estimates that its expenses related to employee benefit costs in 1997
will exceed those incurred in 1996 by approximately $4 million (excluding
costs relating to the Management Plan). The decrease in the Company's benefit
costs during 1996 as compared to 1995 is the result of the transition from the
Industries benefit plans to the new benefit plans being established by the
Company. The Company's new benefit plans are expected to be in place for 1997
and the level of 1997 benefit costs is expected to be consistent with the 1995
benefit costs.
Other than as disclosed herein, there has been no material adverse change in
the financial position or results of operations of the Company since December
31, 1996. Statements in this discussion and analysis contain forward-looking
information and involve known and unknown risks and uncertainties which may
cause the Company's actual results in future periods to be materially
different from any future performance suggested herein.
35
<PAGE>
BUSINESS
GENERAL
CB&I is a global engineering and construction company specializing in the
engineering and design, materials procurement, fabrication, erection, repair
and modification of steel tanks and other steel plate structures and
associated systems such as petroleum terminals, refinery pressure vessels, low
temperature and cryogenic storage facilities and elevated water storage tanks.
Based on its knowledge of and experience in its industry, the Company believes
it is the leading provider of field erected steel tanks and other steel plate
structures, associated systems and related services in North America and one
of the leading providers of these specialized products and services in the
world. CB&I seeks to maintain its leading industry position by focusing on its
technological expertise in design, metallurgy and welding, along with its
ability to complete logistically and technically complex metal plate projects
virtually anywhere in the world. CB&I has been continuously engaged in the
engineering and construction industry since its founding in 1889.
RESTRUCTURING PROGRAM
The Restructuring Program is based on initiatives begun in 1994 and was
significantly refocused and accelerated in 1996 following the assembly of the
Company's new management team. The Restructuring Program was established to
clarify the Company's vision, streamline processes and workflow, establish
meaningful performance measures and develop a more appropriate infrastructure,
including significantly reducing the Company's fixed costs. A central theme of
the Restructuring Program is to apply the Company's core competencies across
all of the Company's operations, to operate as a single global business and to
establish a consistent interface with global customers and improve marketing
of product lines across all geographic areas where the Company offers its
products and services. In the past, the Company had operated as six separate,
decentralized and relatively self-contained business units. The Restructuring
Program is aimed at, among other things, significantly reducing the Company's
fixed costs from levels incurred in 1995 and 1994 and improving operating
results.
During 1996, implementation of the Restructuring Program resulted in several
organizational changes, including the centralization of key functions such as
procurement, equipment and personnel mobilization, and certain financial
functions, while maintaining the ability to perform field construction using
the labor approach best suited for each project. Moreover, several of the
Company's offices and facilities were closed and the number of employees was
reduced. Equipment supply and warehousing costs also have been reduced and
administrative and engineering support have been streamlined and consolidated.
The Company has set a target to reduce salaried workforce by approximately 160
positions and as of December 31, 1996 approximately 147 positions had been
eliminated.
The Restructuring Program has achieved estimated cost savings of
approximately $10 million in 1996, and is expected to result in estimated
annual cost savings of approximately $21 million in 1997 and approximately $23
million in 1998, relative to the Company's 1995 cost base. The benefits of the
Restructuring Program have been an integral component in the Company's recent
improvement in operating income.
36
<PAGE>
The following table outlines actions taken in connection with the
Restructuring Program with respect to various facilities:
<TABLE>
<CAPTION>
LOCATION FACILITY ACTION TAKEN
-------- -------- ------------
<S> <C> <C>
Fort Erie, Canada....... Fabrication plant and warehouse Closed
Kankakee, Illinois...... Fabrication plant and office (1)
Blacktown, Australia.... Fabrication plant Closed
Cordova, Alabama........ Fabrication plant Closed
Fontana, California..... Fabrication plant Closed
New Castle, Delaware.... Warehouse Closed
Fremont, California..... Warehouse Closed
Singapore............... Warehouse Closed
London, England......... Area office Downsized
Singapore............... Area office Downsized
Oak Brook, Illinois..... Old CBIC headquarters Closed and moved
to Plainfield, Illinois
</TABLE>
- --------
(1) The Company plans to discontinue fabrication operations at the Kankakee
facility during the first half of 1997. Kankakee office functions are
expected to be relocated to a leased facility in the Kankakee area. The
benefits of this discontinuance are included as part of the Restructuring
Program.
Although the Company believes that continued implementation of the
Restructuring Program has already resulted in and will continue to result in
savings, there can be no assurance that the Company's estimates of results
already achieved accurately reflect cost savings associated with the
Restructuring Program, that targeted reductions and goals can be achieved or
will continue and that part or all of the Restructuring Program can
successfully be implemented.
BUSINESS STRATEGY
The Company is committed to increasing shareholder value by seeking to build
on the success established in 1996 and growing its business in the global
marketplace through a combination of strategic initiatives including the
following:
Focus on Core Business
The Company seeks to leverage its perceived competitive advantages in design
engineering, metallurgy and welding, and its ability to execute projects
virtually anywhere in the world, to actively pursue growth opportunities in
its core business. Prior management of the Company's parent pursued a
diversification strategy during the 1980s and 1990s, which included
acquisitions of significant, unrelated businesses. CB&I's new management team
is committed to focusing on its core activities of engineering and design,
fabrication, erection, repair and modification of steel tanks and other steel
plate structures. The Company believes that its ongoing Restructuring Program
already has made it more competitive and will allow it to bid successfully on
a broader scope of projects.
For more than 65 years, the Company has been able to complete logistically
and technically complex metal plate projects in some of the most remote areas
of the world. This ability to mobilize a technically capable team of
engineers, supervisors and craftsmen and to apply the Company's extensive
know-how anywhere in the world differentiates the Company from its competitors
and illustrates the depth and quality of the Company's technical resources
which support its global operations.
Continue Cost Reductions and Productivity Improvements
CB&I's management believes that the Restructuring Program represents the
foundation for a long-term strategy of reducing the costs of its products and
services, with the goal of establishing and
37
<PAGE>
maintaining a position as a low cost provider in its markets. All functions of
the organization--engineering, procurement, construction, project management,
finance and administrative support--will be required to demonstrate
improvements in productivity, and will be provided compensation incentives for
achieving such goals. The Company is focusing on initiatives such as:
--the reorganization of the Company's multiple procurement departments into
a single function, focusing the Company's considerable worldwide expertise
in pursuing economies of scale in purchasing raw materials and in
leveraging supplier relationships;
--the redesign of the Company's employee compensation and benefit packages
to reward productivity improvements and provide incentives which align
employee interests with those of shareholders;
--the implementation of interactive computer aided design ("ICAD")
technology, aimed at improving design, procurement and fabrication
efficiency; and
--the centralized management of the Company's worldwide equipment fleet,
aimed at both operating cost reductions and capital savings for the
Company.
Target Global Growth Markets
The Company intends to aggressively pursue business opportunities in
selected key growth markets, such as China, India, Mexico and the former
Soviet Union, on which prior management placed relatively low priority. CB&I
intends to leverage its significant international experience and technological
strengths to expand into these new geographic areas, where it believes that
its ability to rapidly mobilize project management and skilled craft
personnel, combined with its global material supply and equipment logistics
capabilities, provides a key competitive advantage. The developing world is
expected to have growing demand for the type of products and services offered
by the Company as energy development, refining and storage become increasingly
important to their economic progress. The Company is implementing strategic
initiatives to seek to take advantage of these opportunities and aggressively
pursue business in both existing and new geographic markets. The Company
believes that its ability to provide consistent products and services on a
timely basis in a global marketplace will continue to provide it with a
competitive advantage.
Improve Financial Controls and Management
Optimizing the Company's resources will require superior controls and
systems, including those which support cost estimating, bidding and project
execution, all of which are key factors in the financial performance of the
Company. The Company believes that implementation of new systems, which are
part of the Restructuring Program, will improve the management of project
profitability. The new systems will allow for project economics to be
evaluated on a centralized basis and under various risk and costing
assumptions using global software systems tailored specifically for the
Company's operations. Management intends for nearly all fixed costs to be
allocated to projects and believes that the new systems provide the
capabilities to achieve this goal.
In addition, the Company believes that the development of new financial
controls will improve cash management, return on invested capital, and its
ability to assess risk and returns on contract opportunities.
Pursue Partnering and Strategic Alliances
The Company intends to expand its use of partnering and strategic alliances
with customers and vendors. These relationships can serve as a vehicle for
improvements in quality, productivity and profitability for both parties, and
the Company believes such relationships enhance the predictability of the
Company's revenues. CB&I's existing partnering relationships include several
with major international oil companies. The Company believes that such
customers select CB&I as a preferred supplier to achieve significant cost
savings in building and operating tankage and related systems. The Company
seeks to develop those key strategic alliances in the global marketplace where
both parties will benefit as a result of the alliance.
38
<PAGE>
INDUSTRY OVERVIEW
The Company competes in the field erected steel plate structures and related
services industry. The primary industries served by the Company and its
competitors are petroleum, petrochemical, chemical, electric and gas
utilities, pulp and paper, and metals and mining, and the major customers
include private owners in these industries as well as governmental entities;
engineering, materials procurement and construction companies servicing these
owners and entities; and other service companies operating in these
industries. The Company's level of activity, as well as the industry's as a
whole, depends primarily on the capital expenditures of its customers for
construction. These capital expenditures are influenced by a variety of
factors outside the control of construction industry participants. For
example, in the petroleum and petrochemical industry, influential factors
include current and projected oil and gas prices; exploration, extraction,
production and transportation costs; the discovery rate of new oil and gas
reserves; the sale and expiration dates of leases and concessions; and local
and international political and economic conditions. The Company believes that
the following trends, among others, will influence the industry in the near
and long term:
--the continued industrialization of developing countries is creating
demand for storage facilities for crude oil, refined products and
petrochemicals. Accordingly, many significant terminal and refinery
projects, together with ancillary construction and other associated
projects, are being undertaken in developing countries or regions with
growing energy infrastructure requirements;
--refineries and petrochemical plants built prior to 1985 typically require
more frequent maintenance and modification, and certain of them are
expected to be replaced; and
--recently, relatively high crude oil prices have resulted in
correspondingly strong levels of current and projected capital
expenditures by petroleum and petrochemical companies to explore for,
produce, transport and refine oil and related products.
The Company believes that certain of these trends will result in projects
that meet its bidding criteria and that the Company's global experience places
it in an advantageous position to compete for such projects.
CORE COMPETENCIES
The Company's core competencies are technological expertise, project
management, global field erection, global procurement relationships and safety
performance. The Company believes that these core competencies enable CB&I to
compete effectively on a global basis.
Technological Expertise
The Company has a history of leadership in technological development and
continues its technology focus in the following areas:
Design Engineering. The Company's design engineers have thorough knowledge
of a broad range of technical standards involving the design, forming and
joining of metal plate structures and their related systems, including
standards established by the American Petroleum Institute, the American
National Standards Institute, the American Society of Testing and Materials,
the American Water Works Association and British Standards. Senior engineers
of the Company serve on numerous code committees where industry standards are
developed. Such engineers have extensive knowledge of and expertise in
materials evaluation, emissions control from storage tanks, fracture
mechanics, buckling and fatigue analysis, product testing and the design of
stable structures that can be safely erected. For its low temperature and
cryogenic and flat bottom tank turnkey terminal projects, the Company uses
sophisticated computerized design packages to optimize plant layouts and
process flows. These packages deal with integrated plant modeling, three-
dimensional computer-aided design, pipe network flow, interactive piping
stress and structural analysis, site works and scheduling.
39
<PAGE>
In 1996, the Company implemented an ICAD rules-based design system which has
brought significant cost benefits to the engineering of and procurement for
elevated tanks and is also expected to bring significant corresponding cost
benefits to flat bottom tanks, the Company's largest product line. The Rules
Based Product Definition System is a tool which produces designs and technical
documents for the Company's storage tank and elevated water tank products. It
is based on industry and Company-established proprietary rules programmed into
the system by the Company's senior estimating, product and technical experts.
Construction. Inherent in the Company's competency in field erection is its
longtime experience in constructability of steel plate structures. Sequences
of erection to maintain structural stability, welding sequences to minimize
stresses and distortion and techniques to optimize crew efficiency are all key
to safe and quality construction of the Company's product lines. Rigging and
heavy lifting are also skill-based activities that enable the Company to
perform complex, heavy work in congested work areas.
In many of its projects, the Company utilizes specially designed custom
erection equipment, such as the S-70 derrick, for constructing the Company's
various products. The Company has extensive knowledge of and expertise in
heavy lift planning and rigging, a core skill in performing refinery
turnarounds and in the construction of field erected pressure vessels.
Metallurgy. The Company has actively participated in the development of low
carbon and alloy steels for metal plate applications throughout its history.
Working with steel suppliers and customer technical groups, steel plate
specifications have been developed, tested and implemented for specific
applications which include: fracture toughness for low temperature storage,
hydrogen cracking resistance for refinery pressure vessels, low hardness
corrosion resistance for storage of petroleum products with sulfur content and
improved weldability under field conditions.
Welding and Quality Assurance. The Company operates an advanced welding
laboratory whose mission has been to insure that welding procedures and
materials provide the proper fusion and hardness for the structures it
constructs. Laboratory studies also enable the Company to design structures
using the latest high-strength and corrosion resistant steels that are
suitable for use in the Company's product lines. The Company is also involved
in welding material evaluation and testing, welding procedure qualification,
welding process evaluation and testing, non-destructive examination, post-weld
heat treatment of both shop constructed and field erected structures, and
welding supervisor training.
A corporate quality assurance group oversees internal and external audits,
industry authorizations, ISO 9001 programs, welder certification to the
American Society of Mechanical Engineers ("ASME") Section IX, Non-Destructive
Examination Inspector Certification to Society Non-Destructive Testing TC-IA
Standards, and development of project-specific as well as Company-wide quality
assurance and quality control programs.
Project Management
A key factor in the Company's success has been its ability to rapidly
mobilize project management and craft personnel, materials, supplies and
equipment virtually anywhere in the world. The Company's strategically located
subsidiaries and regional offices enable it to effectively manage the
logistics of getting equipment, materials, and skilled personnel to a project.
Generally, a high percentage of the Company's skilled craft personnel is local
to the project. The Company manages its work with advanced scheduling tools
and is currently implementing new project management software on a worldwide
basis for further improvement of project cost management and controls.
Global Field Erection
Based on its knowledge of and experience in its industry, the Company
believes it is a leader in global field erection of steel tanks and other
steel plate structures because of its project management and
40
<PAGE>
technological expertise. In addition, the Company believes that its success in
this area is enhanced by its experienced field supervision. The Company
recruits, develops and maintains ongoing training programs for field
supervision personnel of many nationalities around the world. Supervisory
personnel generally travel to the Company's project locations around the world
and are kept regularly employed, thus aiding the Company in achieving its goal
of consistent and high quality performance on all of its projects.
Additionally, a high percentage of the Company's skilled craft personnel are
local to the project location and the Company seeks to draw its pool of future
supervisory personnel from its local pools.
Global Procurement Relationships
The Company has established relationships with suppliers throughout the
world. The Company's operating units engage in the global sourcing and
management of job site delivery of the key components in its products,
including fabricated steel plate, piping and valves, welding materials and
rotating equipment.
Safety
The Company's senior management places a high priority on safety, with
numerous accident prevention programs designed and managed by its corporate
safety group. For each of the last seven years, the Company has improved its
total recordable incident rate from the previous year, as measured by
standards established by the Occupation Safety and Health Administration.
These records have been achieved through prevention based programs, risk
evaluation, job specific safety training, employee behavior management,
incident investigation and job site safety audits, and supervisory incentive
programs which include accident prevention goals.
PRODUCT LINES
The Company offers various product lines within its geographic regions.
These product lines are:
Flat Bottom Tanks. The Company has been designing and constructing flat
bottom tanks since the late 1890s. During 1996, flat bottom tanks accounted
for approximately 37% of the Company's revenues. Some of the Company's first
tanks were built of riveted carbon steel ranging in size from 20 feet to 100
feet in diameter. Today, welded tanks have been constructed by the Company up
to 410 feet in diameter, with a capacity of 1.5 million barrels. These above-
ground storage tanks continue to be sold primarily to customers operating in
the petroleum, petrochemical and chemical industries around the world. This
industrial customer group includes nearly all the major oil and chemical
companies on every continent. In addition, depending on the industry and
application, flat bottom tanks can be used for storage of crude oil, refined
products such as gasoline, raw water, potable water, chemicals and a large
variety of feedstocks for the manufacturing industry.
The international, industrial marketplace for flat bottom tanks provides a
continued source of sales opportunities for the Company in areas such as the
Middle East, Southeast Asia, the Pacific Rim and Central and South America.
The worldwide storage tank market was estimated by the Company, based upon a
recent report by Hydrocarbon Processing Magazine (the "Hydrocarbon Report"),
to be approximately $1.5 billion per year. The Company believes that
additional market opportunities exist for products of such nature in China,
India, Mexico and the former Soviet Union and other developing nations
throughout the world.
Pressure Vessels. The Company has constructed over 3,500 spheres including
the world's largest sphere at 225 feet in diameter. During 1996, pressure
vessels accounted for approximately 12% of the Company's revenues. Pressure
vessels are built primarily from high strength carbon steel plates which have
been shaped and formed in a fabrication shop to be welded together at a job
site. Pressure vessels, other than spheres, come in a variety of cylindrical,
hemispherical and conical shapes and sizes, some
41
<PAGE>
weighing in excess of 700 tons, with thicknesses in excess of six inches. A
number of technological issues such as design, analysis, welding capabilities,
metallurgy, complex fabrication and specialty erection methods all figure
prominently into the marketing of this product line. Existing customers
represent a cross-section of the petroleum, petrochemical and chemical
industries, where process applications of high pressure and/or temperature are
required. Pressure vessels are used in refineries as storage containers
(spheres) as well as process vessels used to transform crude oil and its
various components. They are also used in the production of synthetic oil from
methane gas. The Company has built and tested vessels in North and South
America, Africa, Asia, the Middle East and the Pacific Rim, and the Company
believes that opportunity for growth remains in the Middle East, Southeast
Asia, Central/South America and the Pacific Rim.
Low Temperature and Cryogenic Structures and Systems. The Company is
recognized as a highly capable designer and contractor of low temperature
cryogenic structures and systems. During 1996, low temperature and cryogenic
structures and systems accounted for approximately 9% of the Company's
revenues. These structures are used primarily for the storage of refrigerated
gas. The Company specializes in providing turnkey tanks and systems built from
alloy steel or aluminum with special characteristics to withstand cold
temperatures. Applications extend from low temperature (+30(degrees) F to -
100(degrees) F) to cryogenic (-100(degrees) F to -423(degrees) F). Customers
in the petroleum, chemical, petrochemical, natural gas, power generation and
agricultural industries use these systems to store and handle liquid petroleum
gas ("LPG"), propane, propylene, butane, butadiene, anhydrous ammonia, LNG,
methane, ethylene, ethane, oxygen, nitrogen and hydrogen.
Although data on the global market is difficult to obtain, the Company
believes, based on the Hydrocarbon Report, that projects around the world will
provide growth opportunities for sales of low temperature and cryogenic
structures and systems and related products in 1997. The report indicates that
growth in the chemical, petrochemical and gas processing projects should
continue with development especially active in areas such as the Asia/Pacific
region.
Elevated Tanks. The Company has been constructing elevated water storage
tanks since 1894. During 1996, elevated tanks accounted for approximately 6%
of the Company's revenues. Elevated water storage tanks are constructed
primarily of bent, formed and shaped carbon steel plates welded together on
site. They range in size from 25 thousand gallons to three million gallons in
capacity. The Company's estimated share of the U.S. municipal potable water
utilities market, over the three-year period ended December 31, 1996, was an
aggregate of approximately 33%, and the market size is estimated by the
Company to have been approximately $120 million in each of such years.
The Company's improved designs and automatic welding capabilities present
additional opportunities for this product line's growth. Shifting population
centers throughout the U.S. as well as increases in global population present
additional growth opportunities for the Company with this product line. See
"--Research and Development."
Specialty and Other Structures. Since the Company's inception, it has been
designing and fabricating special plate structures. During 1996, specialty and
other structures accounted for approximately 18% of the Company's revenues.
Examples of these special plate structures include research and test
facilities for testing prototype spacecraft and rocket engines and vacuum
testing satellites before launch; hydro-electric structures such as penstocks;
spiral cases and draft tubes; ship components; and offshore oil storage
structures. These structures are typically made from bent and formed plate
materials (carbon steel, stainless and exotic steel and aluminum) and are
shipped as fabricated components to their final location for field welding and
assembly. The Company has performed design, constructability analysis, complex
fabrication, welding and specialized erection in supplying these special
projects for industrial, utility and governmental customers throughout the
world, including customers in the United States, South Africa and Saudi
Arabia.
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<PAGE>
Repairs and Modifications. Repair, maintenance and modification services are
performed primarily on flat bottom tanks and pressure vessels. During 1996,
repairs and modifications accounted for approximately 11% of the Company's
revenues. Demand for repair, maintenance and modification services is driven
primarily by the natural aging of tanks and the need to comply with
environmental regulations. Pressure vessels and their associated systems
function in conditions and environments where they must be serviced on a more
routine basis. This work is often performed as part of a turnaround and is
handled as a different product/service line due to its unique requirements.
Other product lines occasionally require this type of work as well. The
Company has focused on providing these services primarily in the U.S. As other
structures throughout the world age and require repair services, the Company
believes it will have additional growth opportunities in areas that have a
large concentration of steel storage tanks and pressure vessels, such as South
America, the Middle East, Australia, and Asia Pacific.
Customers in the petroleum, chemical, petrochemical and water industries
generally require these types of services. Since the Company has built a large
number of the original structures requiring standard service/repair, the
Company believes it has an advantage over its competitors to obtain this
service and repair work when it becomes available.
Turnarounds. The Company has provided this service since the early 1950s.
During 1996, turnarounds accounted for approximately 7% of the Company's
revenues. A turnaround is a logistically planned shut down of a refinery or
other process unit for repair and maintenance of its equipment and associated
systems. The work is usually scheduled on a multi-shift, seven day per work
week basis. Personnel, materials, and equipment must come together at
precisely the right time to accomplish this manpower intensive operation. The
product line depends upon low cycle time and unique construction procedures.
The Company currently offers this service to its customers in the petroleum,
petrochemical and chemical industries located in North and South America and
the Caribbean.
In the international marketplace, areas of growth for this product line have
been identified in South America, Southeast Asia, Africa and the Middle East.
GEOGRAPHIC MARKETS
The Company operates in diverse global markets. Approximately 49% and 53% of
its revenues for 1995 and 1996, respectively, and 37% and 63% of new business
taken for the same periods, were derived from operations outside of the United
States. The Company's operations are conducted through regional sales and
operations offices, fabrication facilities, and warehouses. The Company also
owns and leases a number of field construction offices and equipment
maintenance centers located throughout the world. The Company believes that it
is viewed as a local contractor in a number of the regions it services by
virtue of its long-term presence and participation in those markets, including
Venezuela, Canada, Saudi Arabia, South Africa and Indonesia. Historical
revenue contributions from the four major geographic regions where the Company
operates have been as follows:
<TABLE>
<CAPTION>
REVENUES 1994 1995 1996
-------- ---- ---- ----
(DOLLARS
IN MILLIONS)
<S> <C> <C> <C>
North America................................................... $416 $318 $329
Central and South America....................................... 119 54 91
Europe, Africa, Middle East..................................... 113 111 110
Asia Pacific Area............................................... 115 139 134
---- ---- ----
$763 $622 $664
==== ==== ====
</TABLE>
For a discussion of certain risks associated with international operations
and with currency fluctuations, see "Risk Factors--Risks of International
Operations."
43
<PAGE>
CUSTOMERS
The Company serves a wide range of industries where product and service
needs match well with the Company's core competencies in metal plate forming
and joining. The Company believes that its metallurgy and welding expertise,
field erection capability and highly-skilled mobile work force differentiate
the Company from its competitors. These industries include petroleum,
petrochemical, chemical, electric and gas utilities, pulp and paper, and
metals and mining. The Company's customers include private industrial owners
as well as governmental entities; engineering, procurement and construction
companies servicing these owners and entities; and other service companies
operating in these industries. New business taken by industry category for the
year ended December 31, 1996 was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY NEW BUSINESS TAKEN TOTAL
-------- --------------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Petroleum................................... $362.7 52.8%
Petrochemical............................... 108.3 15.8%
Governmental entities....................... 65.1 9.5%
Chemical.................................... 51.1 7.4%
Metals and mining........................... 49.6 7.2%
Electric and gas utilities.................. 9.6 1.4%
Pulp and paper.............................. 3.4 0.5%
Other....................................... 37.4 5.4%
------ -----
Total..................................... $687.2 100.0%
====== =====
</TABLE>
The Company is not dependent on any single customer on an ongoing basis and
the loss of any single customer would not have a material adverse effect on
the business; however, from time to time a particular contract or customer may
account for a significant portion of the Company's backlog.
CONTRACTING METHODS
The Company generally uses one of three types of contracting approaches
depending upon the type of work, the degree of workscope definition and the
degree of risk in the project. These methods may be used for competitive
situations or negotiated contracts.
Fixed or Lump Sum Pricing. The Company's expertise in performing its design
and construction services enables it to typically contract over 75% of its
work on a fixed price or lump sum basis, using price adjustment clauses and
where appropriate, cost escalation and contingency factors in its pricing.
Cost Reimbursable Pricing. In instances where the degree of definition of
the workscope, schedule requirements or the evaluation of risk does not allow
for the use of fixed or lump sum pricing, the Company may choose to contract
only on a cost reimbursable basis. Contracts of this nature may have cost
incentive provisions.
Target Fixed or Lump Sum Pricing. This approach is often used in connection
with partnering arrangements. The Company and the customer establish a target,
based on the parties' estimate of the total installed cost of a project. Cost
savings or overruns are then shared by the Company and the customer, thereby
encouraging total alignment of both parties with respect to cost-effective
completion of the project.
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<PAGE>
BACKLOG
New business taken represents the value of new project commitments received
by the Company during a given period. Such commitments are included in backlog
until work is performed and revenue recognized or until cancellation. Backlog
may also fluctuate with currency movements. The Company's backlog was
approximately $485.7 million at December 31, 1996, approximately $470.2
million at December 31, 1995 and approximately $323.3 million at December 31,
1994. Approximately 70% of the backlog as of December 31, 1995 was forecasted
to be completed during 1996. Approximately 78% of the backlog as of December
31, 1996 currently is forecasted to be completed during 1997.
COMPETITION
Management believes the Company can compete effectively for new construction
projects around the world and that it is a leading competitor in its markets.
Competition is based primarily on performance and the ability to provide the
design, engineering, fabrication, project management and construction
capabilities required to complete projects in a timely and cost-efficient
manner. Contracts are usually awarded on a competitive bid basis. Price,
quality, reputation and timeliness of completion are the principal competitive
factors within the industry, with price being one of the most important
factors. In addition, the Company believes that it is viewed as a local
contractor in a number of the regions it services by virtue of its long-term
presence and participation in those markets, including Venezuela, Canada,
Saudi Arabia, South Africa and Indonesia. This may translate into a
competitive advantage through knowledge of local vendors and suppliers, as
well as of local labor markets and supervisory personnel. Several large
companies offer metal plate products which compete with some, but not all, of
those offered by the Company. Some companies compete with some of the
Company's product lines while also offering other product lines. Local and
regional companies offer competition in one or more geographical areas but not
in other areas where the Company operates. The Company generally does not
compete with major providers of general engineering, procurement and
construction services, such as Fluor Corporation and Bechtel Corporation.
Because reliable market share data are not available, it is difficult to
estimate the Company's exact position in the industry, although the Company
believes it ranks among the leaders in the field.
RESEARCH AND DEVELOPMENT
Throughout its history, the Company has conducted extensive research
programs in a wide variety of areas. The Company has studied stability and
buckling of shell structures, emission control methods for aboveground storage
tanks, advanced automated techniques for the application of polyurethane foam
insulation to storage tanks, and extensive testing of the physical properties
of the non-metallic insulating materials used on low temperature and cyrogenic
storage tanks. In addition, the Company has studied water and wastewater
treatment systems and advanced mixing systems for waste treatment digesters.
The Company's physical research activities have led to patented systems for
the removal of carbon dioxide during liquefaction of liquefied natural gas and
also for unique freeze processes for juice concentration, wastewater
treatment, air-conditioning load management, and desalinization.
The Company continues to develop an in-depth knowledge of the many materials
it uses. The Company has acquired knowledge and expertise about the effects
that manufacturing processes, such as forming, welding, heat treating and
machining, have on the properties of metals. This activity has helped to
enhance the Company's ability to design, manufacture and provide field
construction of steel plate structures and related process facilities. The
Company has an ongoing program to develop and improve technically advanced
metal plate welding and erection equipment. This specialized equipment and
systems improves product quality and construction efficiencies.
Expenditures for research and development activities amounted to
approximately $0.7 million, $2.5 million and $3.6 million in 1996, 1995 and
1994, respectively.
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<PAGE>
RAW MATERIALS
The principal raw materials used by the Company are metal plate and
structural steel. These materials are available from numerous U.S. and
international suppliers. The Company does not anticipate having difficulty in
obtaining adequate amounts of raw materials in the forseeable future.
EMPLOYEES
As of December 31, 1996, the Company employed approximately 5,950 people.
Approximately 50% of the Company's employees are not U.S. citizens, reflecting
the global nature of the Company's business. The Company believes that as of
December 31, 1996, approximately 430 of its employees were union members. The
total number of employees of the Company (and the number of union members in
such group) varies significantly based on the scope, nature and volume of the
work flow at any given time. Included in this group are approximately 1,500
salaried personnel located around the world who are primarily engaged in
sales, engineering, construction and administrative activities. Also included
are approximately 800 skilled craftsmen in the U.S. who, while engaged on a
job by job basis, tend to build a career with CB&I by moving from project to
project. The remainder of the Company's workforce consists of hourly
personnel, whose number fluctuates directly in relation to the amount of
business performed by the Company.
FACILITIES
The Company owns or leases the properties used to conduct its business. The
capacities of these facilities depend upon the composition of products being
fabricated and constructed. As the product composition is constantly changing,
the extent of utilization of these facilities cannot be accurately stated. The
Company believes these facilities are adequate to meet its current
requirements. The following list summarizes the principal properties:
<TABLE>
<CAPTION>
LOCATION TYPE OF FACILITY INTEREST
-------- ---------------- --------
<S> <C> <C>
Houston, Texas................ Fabrication plant, warehouse,
engineering, operations and
administrative office Owned
Plainfield, Illinois.......... Engineering, operations and
administrative office Owned
Kankakee, Illinois (1)........ Fabrication plant, warehouse and
office Owned
Fort Saskatchewan, Canada..... Warehouse and operations and
administrative office Owned
Dubai, United Arab Emirates... Engineering, operations and
administrative office Leased
Puerto Ordaz, Venezuela....... Fabrication facility and warehouse Leased
Kwinana, Australia............ Fabrication facility, warehouse, and
office Leased
Ao Udom, Thailand............. Fabrication facility Leased
Batangas, Philippines......... Fabrication facility and warehouse Leased
Cilegon, Indonesia............ Fabrication plant and warehouse Leased
Al Aujam, Saudi Arabia........ Fabrication plant and warehouse Leased
Jebel Ali, United Arab
Emirates..................... Warehouse Leased
Secunda, South Africa......... Fabrication plant and warehouse Leased
</TABLE>
- --------
(1) The Company plans to discontinue fabrication operations at the Kankakee
facility during the first half of 1997. Kankakee office functions are
expected to be relocated to a leased facility in the Kankakee area. The
benefits of this discontinuance are included as part of the Restructuring
Program.
The Company also owns or leases a number of sales, administrative and field
construction offices, warehouses and equipment maintenance centers
strategically located throughout the world.
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<PAGE>
HISTORY
The Company was founded in 1889 as a midwestern bridge building company. The
Company followed the paths of the railroads as new communities required
special structures such as elevated steel water storage tanks.
During the early 1920s, the Company quickly established itself as a leading
supplier to the petroleum industry, building large storage tanks and special
purpose structures. The first floating roof tank, designed to conserve vapors
and to eliminate fire hazards, was successfully tested and introduced by the
Company to the oil industry in 1923. Since 1923, the Company has constructed
over 20,000 floating roof tanks throughout the world. The Company promoted the
use of larger tanks, wider plates, and better joint designs. The Company's
Hortonspheres, designed for the storage of volatile liquids under high
pressure, were first built by the Company during 1923 and were patented in
1924.
By the early 1930s, the Company had begun to focus on the design and
engineering of formed, steel plate structures and on innovative construction
equipment and procedures. Field welding of large tanks was successfully
pioneered by the Company and the Company extended its expertise to other steel
plate products such as penstocks, stacks and pressure vessels. In 1930, the
Company's first fractionating columns were built. The first all-welded steel
penstock in the U.S. was constructed by the Company in 1935.
In the 1940s the Company constructed its first Watersphere, an elevated tank
that stored 100,000 gallons of water. Structures for the aluminum and chemical
industries, for blast furnaces and for high octane gasoline and synthetic
rubber plants were being built by the Company. The Company's welding lab,
founded in 1945, has worked closely with Company engineers to ensure that the
Company maintains its technical performance levels.
Internationally, the Company began operations shortly after World War I.
Contracts were taken in Canada and Japan in 1919; China in 1921; Venezuela,
Indonesia and Australia in 1927; and in multiple European locations throughout
the 1920s. By the late 1940s, the Company was operating throughout Europe, the
Middle East, Asia and Latin America.
By the mid 1950s, the Company had built the world's largest Hortonsphere, a
vessel weighing seven million pounds with a diameter of 225 feet. The Company
built its first double-walled liquid natural gas tank. The Company also
announced a technological breakthrough with its development of the Hortonclad,
a composite metal having an integral and continuous bond as a result of
research and development in the field of vacuum metallurgy. It was also in the
early 1950s that the Company developed its first automatic girth welding
equipment.
By 1960, the Company had established a process engineering capability for
the design and installation of systems associated with turnkey refrigeration
and storage of ammonia, liquid petroleum gas, liquid natural gas, and other
products requiring storage at low or cyrogenic temperatures. Techniques
developed by the Company in field automatic welding, field stress relieving,
field machining and ultrasonic testing, as applied to the onsite assembly of
heavy wall petroleum processing vessels and nuclear reactors, allowed the
Company's customers to avoid shipping restrictions on size and weight which
had limited plant designs in both industries. The Company actively built
vacuum and testing chambers for the space industry during this decade.
Fabrication and construction projects for the burgeoning nuclear industry
dominated the marketplace of the mid 1970s. Additionally, Saudi Arabia and the
Middle East provided growth opportunity for the Company. In the U.S., the
Company's first application of horizontal foamed-in-place insulation on a low-
temperature tank was completed, and the Company completed a substantial amount
of tankage for the Trans-Alaskan Pipeline Project. During the late 1970s, the
Company built the two largest oil tanks in the U.S. each with an 800,000
barrel capacity. The Company's largest petroleum storage tank, at 1.5 million
barrels and 410 feet in diameter, is in Yanbu, Saudi Arabia, which the Company
believes to be the largest such tank in the world.
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<PAGE>
By 1980, the Company had fabricated and erected its first cryogenic,
transonic wind tunnel for a U.S. military facility. In that decade, the
Company also built the support tower for the largest (to date) wind powered
generator. A roof insulating machine, developed at the Company's research and
development facility, was introduced. During this time frame, the Company also
erected its first two million gallon Waterspheroid. Internationally, the
Company built a 55,000 gallon per-day solar energy water desalination test
facility in Saudi Arabia. This project marked the first use of the Company's
indirect freeze desalination system.
During the 1990s, the Company has continued to expand its global presence.
The Company established formal partnering agreements and closer alliances with
many customers. The construction of turnkey low temperature and cryogenic
facilities for the liquefaction, storing and sendout of liquid natural gas,
ethylene, ammonia, butane, propane and similar products continued to be a
source of projects. The Company completed various special structures,
including a facility for testing solid fuel rocket motors and a large
cavitation channel for testing the propulsor power and acoustics of large ship
models.
GOVERNMENTAL REGULATIONS
General
Many aspects of the Company's operations are subject to government
regulations in the countries in which the Company operates, including those
relating to currency conversion and repatriation, taxation of its earnings and
earnings of its personnel, and its use of local employees and suppliers. In
recent years demand from the worldwide petroleum and petrochemical industry
has been the largest component of the Company's revenues, and the Company is
therefore affected by changing taxes, price controls and laws and regulations
relating to the petroleum and petrochemical industries generally. The
Company's operations are also subject to the risk of changes in national,
federal, state and local laws and policies which may impose restrictions on
the Company, including trade restrictions, which could have a material adverse
effect on the Company's business, financial condition and results of
operations. Other types of government regulation which could, if enacted or
implemented, materially and adversely affect the Company's operations include
expropriation or nationalization decrees, confiscatory tax systems, primary or
secondary boycotts directed at specific countries or companies, embargoes,
import restrictions or other trade barriers, mandatory sourcing rules and high
labor rate and fuel price regulation. The Company cannot determine to what
extent future operations and earnings of the Company may be affected by new
legislation, new regulations or changes in or new interpretations of existing
regulations.
Environmental
The Company's operations and properties are affected by numerous national,
federal, state and local environmental protection laws and regulations, such
as those governing discharges into air and water, as well as handling and
disposal of solid and hazardous wastes. The requirements of these laws and
regulations have tended to become increasingly stringent, complex and costly
to comply with. This is true for both the Company's United States operations
and its non-U.S. facilities, at which operations historically have been
conducted generally pursuant to less stringent environmental laws and
regulations than exist in the United States. In addition, the Company may be
subject to claims alleging personal injury or property damage as a result of
alleged exposure to hazardous substances. The Company is not aware of any non-
compliance with environmental laws that could have a material adverse effect
on the Company's business or operations. However, while the Company has an
environmental compliance program in place, it cannot guarantee that any non-
compliance, if it exists, would not have a material adverse effect on the
Company. In addition, there can be no assurance that environmental laws,
regulations or their interpretation will not change in the future in a manner
that could materially and adversely affect the Company.
Certain environmental laws, such as CERCLA, provide for strict and joint and
several liability for investigation and remediation of spills and other
releases of hazardous substances. Such laws may apply
48
<PAGE>
to conditions at properties presently or formerly owned or operated by an
entity or its predecessors, as well as to conditions at properties at which
wastes or other contamination attributable to an entity or its predecessors
come to be located. The Company's facilities have operated for many years, and
substances which are or might be considered hazardous were used and disposed
of at some locations, which will or may require the Company to make
expenditures for remediation. In addition, the Company has agreed to indemnify
parties to whom it has sold facilities for certain environmental liabilities
arising from acts occurring before the dates on which those facilities were
transferred. However, the Company does not anticipate incurring material
capital expenditures for environmental controls or for investigation or
remediation of environmental conditions during the current or succeeding
fiscal year. Nevertheless, the Company can give no assurance that it, or
entities for which it may be responsible, will not incur liability in
connection with the investigation and remediation of facilities it currently
owns or operates (or formerly owned or operated) or other locations in a
manner that could materially and adversely affect the Company.
Along with multiple other parties, a subsidiary of the Company is currently
identified as a potentially responsible party (a "PRP") under CERCLA and
analogous state laws at several sites as a generator of wastes disposed of at
such sites. While CERCLA imposes joint and several liability on responsible
parties, liability for each site is likely to be apportioned among the
parties. In addition, a subsidiary of the Company is currently identified as a
PRP at several sites in connection with its position as a former corporate
shareholder of a wood treating company. The Company believes that an estimate
of the possible loss or range of possible loss relating to such matters cannot
be made. While it is impossible at this time to determine with certainty the
outcome of such matters and although no assurance can be given with respect
thereto, based on information currently available to the Company and based on
the Company's belief as to the reasonable likelihood of the outcomes of such
matters, the Company does not believe that its liability, if any, in
connection with these sites, either individually or in the aggregate, will
have a material adverse effect on the Company's business, financial condition
and results of operations. See "--Legal Proceedings and Insurance."
The Company's business sometimes involves working around and with volatile
and hazardous substances, which exposes it to risks of liability for personal
injury or property damage caused by any release, spill, or other accident
involving such substances that occurs as a result of the conduct of its
business. The Company has been and may continue to be unable to obtain
adequate environmental damage or pollution insurance at a reasonable cost.
Although the Company maintains general liability insurance, this insurance is
subject to coverage limitations, deductibles and exclusions and may exclude
coverage for losses or liabilities relating to pollution damage. Therefore,
there can be no assurance that liabilities that may be incurred by the Company
will be covered by its insurance policies, or if covered, that the dollar
amount of such liabilities will not exceed the Company's policy limits. Even a
partially uninsured claim, if successful and of significant magnitude, could
have a material adverse effect on the Company's business, financial condition
and results of operations.
It is possible that environmental liabilities in addition to those described
above may arise in the future. Although the Company's facilities in the United
States and certain other jurisdictions operate under stringent environmental
laws, certain of its other operations, including those in the Middle East,
South America, and Southeast Asia, have not been so regulated. As a result,
the Company could incur significant future liability should the laws of the
jurisdictions in which the Company operates change to impose additional
environmental remedial obligations. The precise costs associated with these or
other future environmental liabilities are difficult to predict at this time.
The Company believes that in recent years it has taken a proactive approach
to management of environmental liabilities and minimization of environmental
impacts. The Company's program includes, among other things, formal
environmental training for employees and an auditing program to assist the
Company's facilities in complying with environmental regulations and
identifying potential environmental liabilities. Furthermore, the Company has
implemented management procedures designed to reduce the generation of
hazardous waste and the on-site use and storage of hazardous chemicals and to
prevent exposure to such substances. The Company believes the continued
development and maintenance of its
49
<PAGE>
environmental program will continue to reduce the potential for unanticipated
expenditures for environmental remediation and compliance.
LEGAL PROCEEDINGS AND INSURANCE
A subsidiary of the Company was a minority shareholder from 1934 to 1954 in
a company which owned or operated at various times several wood treating
facilities at sites in the United States, some of which are currently under
investigation, monitoring or remediation under various environmental laws.
With respect to some of these sites, the Company has been named a PRP under
CERCLA and similar state laws. Without admitting any liability, the Company
has entered into a consent decree with the federal government regarding one of
these sites and has had an administrative order issued against it that could
impose cleanup obligations on the Company with respect to another. There can
be no assurance that the Company will not be required to clean up one or more
of these sites pursuant to agency directives or court orders. The Company has
been involved in litigation concerning environmental liabilities, which are
currently undeterminable, in connection with certain of those sites. The
Company denies any liability for each site and believes that the successors to
the wood treating business are responsible for the costs of remediation of the
sites. Without admitting any liability, the Company has reached settlements
for environmental clean-up at most of the sites. In July 1996, a judgment in
favor of the Company was entered in the suit Aluminum Company of America v.
Beazer East, Inc. v. Chicago Bridge & Iron Company, instituted in January 1991
before the U.S. District Court for the Western District of Pennsylvania. In
July 1996, Beazer East, Inc. filed an appeal which is currently pending before
the United States Court of Appeals for the Third Circuit. The Company believes
that an estimate of the possible loss or range of possible loss relating to
such matters cannot be made. Although the Company believes that it is
reasonably likely that it will be successful in such appeal and that such
settlements and any remaining potential liability will not be material, there
can be no assurance that the Company will be successful in upholding the
judgment in its favor or that such settlements and any remaining potential
liability will not have a materially adverse effect on its business, financial
condition and results of operations.
In 1991, CBI Na-Con, Inc. ("CBI Na-Con"), a subsidiary of the Company,
installed a catalyst cooler bundle at Fina Oil & Chemical Company's ("Fina")
Port Arthur, Texas refinery. In July of 1991, Fina determined that the
catalyst cooler bundle was defective and had it replaced. Fina is seeking
approximately $20 million in damages for loss of use of Fina's catalyst
cracking unit and the cost of replacement of the catalyst cooler bundle. On
June 28, 1993, Fina filed a complaint against CBI Na-Con before the District
Court of Harris County, Texas in Fina Oil & Chemical Company v. CBI Na-Con,
Inc. et al. The Company denies that it is liable. The Company believes that an
estimate of the possible loss or range of possible loss cannot be made. While
the Company believes that the claims are without merit and/or the Company has
valid defenses to such claims and that it is reasonably likely to prevail in
defending against such claims, there can be no assurance that if the Company
is finally determined to be liable for all or a portion of any damages
payable, that such liability will not have a materially adverse effect on the
Company's business, financial condition and results of operations.
In addition to the above lawsuits, the Company is a defendant in other
lawsuits arising in the normal course of its business. The Company believes
that an estimate of the possible loss or range of possible loss relating to
such matters cannot be made. While it is impossible at this time to determine
with certainty the ultimate outcome of these other lawsuits, and although no
assurance can be given with respect thereto, based on information currently
available to the Company and based on the Company's belief as to the
reasonable likelihood of the outcomes of such matters, the Company's
management believes that adequate provisions have been made for probable
losses with respect thereto as best as can be determined at this time and that
the ultimate outcome, after provisions therefor, will not have a material
adverse effect, either individually or in the aggregate, on the Company's
business, financial condition and results of operations. The adequacy of
reserves applicable to the potential costs of being engaged in litigation and
potential liabilities resulting from litigation are reviewed as developments
in the litigation warrant. See Note 7 to each of the Consolidated Financial
Statements included elsewhere in this Prospectus.
50
<PAGE>
Furthermore, construction and heavy equipment involve a high degree of
operational risk. Natural disasters, adverse weather conditions and operator
error can cause personal injury or loss of life, severe damage to and
destruction of property and equipment and suspension of operations. Litigation
arising from such an occurrence may result in the Company being named as a
defendant in lawsuits asserting substantial claims. The Company maintains risk
management, insurance and safety programs that seek to mitigate the effects of
loss or damage. Such programs have generally resulted in favorable loss ratios
and cost savings. See "Risk Factors--Operating Risks."
51
<PAGE>
CERTAIN TRANSACTIONS; RELATIONSHIP WITH PRAXAIR
In the first quarter of 1996 Praxair acquired all of the outstanding common
stock of Industries in order to acquire the business of Liquid Carbonic
Industries Corporation. At that time, Praxair announced its intention to
divest the businesses of Industries that were not strategic to Praxair,
including the Company. Industries merged into Praxair on December 19, 1996.
Under the Issuer's Articles of Association, the Selling Shareholder will
have the right to appoint, remove and replace two members of the Supervisory
Board so long as the Selling Shareholder owns at least 20% of the outstanding
Common Shares, and the right to appoint, remove and replace one member of the
Supervisory Board so long as the Selling Shareholder owns at least 10% but
less than 20% of the outstanding Common Shares. On the first day on which the
Selling Shareholder's ownership of the outstanding Common Shares is less than
10%, the Selling Shareholder will cease to have any special rights regarding
the appointment, removal and replacement of the Issuer's supervisory
directors. At the time of the Common Share Offering, the designees of Praxair
serving on the Supervisory Board, if any, will be John A. Clerico, if the
Selling Shareholder is entitled to appoint one member, and Mr. Clerico and
Robert F.X. Fusaro, if it is entitled to appoint two members. If the Common
Share Offering is consummated as currently contemplated, the Selling
Shareholder will have no right to appoint Supervisory Board members pursuant
to these provisions.
SEPARATION AGREEMENT
The Company has entered into agreements (collectively, the "Separation
Agreement") with Praxair fixing the Company's on-going responsibility for
employee benefit matters, goods and services, access and retention of records,
technology and intellectual property rights, certain indemnification
arrangements and other miscellaneous matters and providing that Praxair may
continue to provide certain credit guarantees and letters of credit which
benefit the Company and will provide certain pension related services and the
Company will provide Praxair with certain environmental and pension related
services. Pursuant to the Separation Agreement, subject to certain exceptions,
the Company will assume and be solely responsible for all known and unknown
past, present and future claims and liabilities of any nature, including
without limitation relating to environmental, health, safety, personal injury,
contractual and product liability matters (collectively, "Liabilities")
arising out of the operations of the Company, its subsidiaries, any other
entities in which any of them hold or held any ownership interest and, as to
liabilities arising prior to the Reorganization, Old CBIC (the "CBI
Companies"), and the Company will indemnify Praxair and its subsidiaries and
affiliates from all such Liabilities. Pursuant to the Separation Agreement,
subject to certain exceptions, Praxair will assume and be solely responsible
for all Liabilities arising out of the operations of Praxair, its subsidiaries
and any other entities in which any of them hold or held any ownership
interest (other than the CBI Companies), and Praxair will indemnify the
Company and its subsidiaries and affiliates from all such Liabilities.
Under the Separation Agreement, the Company will retain certain potential
liabilities with respect to the operations of three former subsidiaries, with
respect to periods when such entities were subsidiaries of the Company through
January 31, 1997, up to the Company's self-retained portion of its insurance
policies during such periods. In addition, the Separation Agreement will place
financial responsibility with the Company for the engineering and construction
businesses of Liquid Carbonic Industries Corporation in Argentina upon its
transfer to the Company.
Under the Separation Agreement, the Company has agreed to use its best
efforts to eliminate, on or before December 31, 1997, Praxair's obligations
under the credit guarantees given by Praxair and letters of credit obtained by
Praxair which benefit the Company. Until December 31, 1997, the Company will
pay Praxair a fee of 1% per annum of the amount of such guarantees
outstanding. Effective January 1, 1998, such fee will equal 2% per annum of
such amount.
REVENUES FROM AFFILIATES
The Company has provided in the past and continues to provide services to
Praxair and its affiliates and to Industries and its affiliates for the
construction and expansion of facilities and for certain repair and
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<PAGE>
maintenance work. During the year ended December 31, 1996, the Company
recorded revenues from affiliates of $13.4 million from such services. Gross
profit relating to such revenues, net of overhead costs, was $2.3 million for
the year ended December 31, 1996. The Company believes that these revenues and
gross profits approximate those of similar services provided to independent
third parties.
CORPORATE SERVICES
Industries and Praxair have provided in the past certain support services to
the Company including legal, finance, tax, human resources, information
services and risk management. Charges for these services were allocated by
Industries and Praxair to the Company based on various methods which the
Company believes reasonably approximate the actual costs incurred. The
allocations recorded by the Company for these corporate services in the
accompanying consolidated income statements were $4.7 million for the year
ended December 31, 1996. The amounts allocated by Industries or Praxair are
not necessarily indicative of the actual costs which may have been incurred
had the Company operated as an entity unaffiliated with Industries or Praxair.
However, the Company believes that the allocation is reasonable and in
accordance with the Securities and Exchange Commission's Staff Accounting
Bulletin No. 55. See "Risk Factors--New Status as Independent Entity" and "--
Separation Agreement."
CORPORATE REORGANIZATION
Prior to the consummation of the Common Share Offering, the Selling
Shareholder and certain of its subsidiaries will consummate the Reorganization
whereby (i) the shares of substantially all of Old CBIC's non-U.S.
subsidiaries will be transferred by dividend to its parent corporation, Bridge
Holdings, and contributed to CBICBV in exchange for newly issued common shares
of CBICBV; (ii) the shares of substantially all of Old CBIC's U.S.
subsidiaries will be transferred by dividend to Bridge Holdings and
contributed to New CBIC in exchange for newly issued common stock of New CBIC;
(iii) Bridge Holdings will contribute the shares held by it of each of New
CBIC and CBICBV to the Issuer in exchange for additional Common Shares of the
Issuer; and (iv) New CBIC will assume any remaining assets and liabilities of
Old CBIC. After the Reorganization and prior to the consummation of the Common
Share Offering, Bridge Holdings will be merged into the Selling Shareholder
such that the Selling Shareholder will then directly own all of the then
outstanding Common Shares of the Issuer.
TAX DISAFFILIATION AGREEMENT
The Company and Praxair have entered into a tax disaffiliation agreement
(the "Tax Disaffiliation Agreement") relating to various tax matters including
the allocation of liabilities and credits relating to periods before the
completion of the Reorganization. In particular, the Company will indemnify
Praxair for its allocable share of liabilities for non-income taxes arising
with respect to periods prior to the Reorganization and income taxes arising
with respect to periods prior to the Reorganization based on, among other
things, the subsequent disallowance of research and development credits
claimed by the Company for past periods or of other tax benefit items of the
Company for past periods to the extent that such other tax benefit items are
available to reduce the taxes of the Company for any period after the
Reorganization.
BENEFITS DISAFFILIATION AGREEMENT
The Company and Praxair have entered into an employee benefits
disaffiliation agreement (the "Benefits Agreement") effective upon
consummation of the Common Share Offering, relating to various employee
benefits matters including the allocation and assumption by the parties of
existing liabilities, and cross-indemnifications relating to such allocation
and assumption of liabilities. Among other matters, the Benefits Agreement
relates to defined benefit pension plan and retiree health care and life
insurance obligations. The principal non-contributory tax qualified defined
benefit pension plan in which employees of Old CBIC previously participated
(the "CBI Pension Plan") covered most U.S. salaried employees. Old
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<PAGE>
CBIC's portion of the net pension cost for the CBI Pension Plan was $4.4
million in 1996. Regular benefit accruals under the CBI Pension Plan for
current Company employees were discontinued as of December 31, 1996, except
for certain increases described under "Other Executive Compensation Programs."
The Company's obligations with respect to various CBI Pension Plan funding
requirements and expenses were fixed at $17.3 million as of December 31, 1996,
by agreement between Old CBIC and Praxair. This obligation is payable by the
Company ratably to Praxair over a twelve year period beginning December 1,
1997, with interest at 7.5%.
Effective January 1, 1997, Old CBIC terminated its participation in the post
retirement health care and life insurance benefit plans sponsored by Praxair.
The Company's obligations with respect to existing retirees under these plans
was fixed at $21.4 million as of December 31, 1996, by agreement between Old
CBIC and Praxair. This obligation is payable ratably to Praxair over a twelve
year period beginning December 1, 1997, with interest at 7.5%. The future
obligation for active Old CBIC employees under these plans, which amounted to
$8.5 million as of December 31, 1996, has been assumed by the Company.
REGISTRATION RIGHTS AGREEMENT
In addition to the Registration Statement of which this Prospectus is a
part, Praxair will have the right under a registration rights agreement (the
"Registration Rights Agreement") to request an unspecified number of
additional registrations under the Securities Act for the sale of all or a
portion of the Common Shares held by the Selling Shareholder or its
transferees (the "Registrable Securities"), as well as the right to include
such shares in all registration statements filed by the Issuer under the
Securities Act for the sale of shares solely for cash by the Issuer (other
than certain registration statements relating to the registration of shares
for employee plans (other than the Management Plan) or for dividend
reinvestment plans). In the Registration Rights Agreement, the Issuer has
agreed to indemnify Praxair and any transferee in respect of certain
liabilities, including liabilities under the federal securities laws. Requests
for additional registrations of Registrable Securities must cover Registrable
Securities in the amount of 5% of the Common Shares then outstanding which are
not Management Plan Shares or any lesser percentage if such percentage
represents all outstanding Registrable Securities. The Registration Rights
Agreement also provides that for a period of three years from the date the
Common Share Offering is consummated, if the number of Registrable Securities
which have not yet been registered pursuant to such agreement exceeds 10% of
the outstanding Common Shares which are not Management Plan Shares, the
Selling Shareholder's consent is required prior to the Issuer's registering
additional Common Shares (or similar securities) under the Securities Act. The
right to cause the Company to register Registrable Securities pursuant to the
Registration Rights Agreement is generally assignable to transferees of
Registrable Securities who acquire 10% of the Registrable Securities.
LOANS TO EXECUTIVE OFFICERS AND OTHER TRANSACTIONS WITH MANAGEMENT
On January 7, 1993, an affiliate of the Company made a loan to Thomas L.
Aldinger. The loan was fully repaid on February 26, 1996. The loan bore
interest at 4.75%. The largest amount outstanding at any time during 1996
(including principal and interest) was $153,310. The loan was a home mortgage
loan made in connection with Mr. Aldinger's transfer from the Company's
London, England office to Illinois.
Glenn Group LLC, a consulting company in which Gerald M. Glenn is a
principal, received fees of $172,500 from Praxair in 1996 for consulting
services rendered prior to his employment by the Company.
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<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table furnishes information, as of immediately prior to and
immediately following the closing of the Common Share Offering, with respect
to the number and percentage of Common Shares expected to be beneficially
owned by (i) each current nominee for supervisory director of the Issuer and
each executive officer of New CBIC and CBICBV (the Issuer has no executive
officers), (ii) the Selling Shareholder (who is the sole person owning more
than 5% of the outstanding Common Shares) and (iii) all current nominees for
supervisory director of the Issuer and all executive officers of New CBIC and
CBICBV as a group. Concurrently with the consummation of the Common Share
Offering, all nominees for supervisory director indicated below (other than as
set forth in footnote 2 to this table) are expected to be appointed to the
Issuer's Supervisory Board.
<TABLE>
<CAPTION>
AFTER THE COMMON
BEFORE THE COMMON SHARE OFFERING SHARE OFFERING
-------------------------------- ---------------------------
SHARES PERCENT OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIALLY SHARES BENEFICIALLY SHARES
BENEFICIAL OWNER OWNED OUTSTANDING OWNED(1) OUTSTANDING(1)
------------------- ------------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
Praxair, Inc............ 11,500,000 100% 1,000,000 8.0%
39 Old Ridgebury Road
Danbury, CT 06810-5113
Gerald M. Glenn......... 0 0% 508,776 4.1%
Nominee for Chairman of
the Supervisory Board
of the Issuer,
President and Chief
Executive Officer of
New CBIC, Managing
Director of CBICBV
Thomas L. Aldinger...... 0 0% 107,872 *
Vice President of New
CBIC
Stephen M. Duffy........ 0 0% 17,979 *
Vice President of New
CBIC
Timothy J. Wiggins...... 0 0% 107,872 *
Vice President of New
CBIC, Managing Director
of CBICBV
Robert H. Wolfe......... 0 0% 35,958 *
Vice President, General
Counsel and Secretary
of New CBIC
Jerry H. Ballengee...... 0 0% 0 0%
Nominee for Supervisory
Director of the Issuer
J. Dennis Bonney........ 0 0% 0 0%
Nominee for Supervisory
Director of the Issuer
John A. Clerico......... 0 0% 0 0%
Nominee for Supervisory
Director of the
Issuer(2)
Robert F.X. Fusaro...... 0 0% 0 0%
Nominee for Supervisory
Director of the
Issuer(2)
J. Charles Jennett...... 0 0% 0 0%
Nominee for Supervisory
Director of the Issuer
Vincent L. Kontny....... 0 0% 0 0%
Nominee for Supervisory
Director of the Issuer
Gary L. Neale........... 0 0% 0 0%
Nominee for Supervisory
Director of the Issuer
L. Donald Simpson....... 0 0% 0 0%
Nominee for Supervisory
Director of the Issuer
Marsha C. Williams...... 0 0% 0 0%
Nominee for Supervisory
Director of the Issuer
All current nominees for
supervisory director
listed above and all
executive officers as a
group (16 persons)..... 0 0% 813,339 6.5%
</TABLE>
- --------
* Less than 1%
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(1) Excludes (i) Common Shares which may be purchased in the Common Share
Offering by the nominees for director and the executive officers from the
shares reserved by the Underwriters for sale to directors, officers and
employees of the Company and certain other persons associated with the
Company, (ii) Common Shares issuable upon exercise of options to be
granted under the Company's stock option plans and (iii) Common Shares
issuable upon exercise of the over-allotment option granted to the
Underwriters. Includes Common Shares allocated to the executive officers'
individual accounts under the Management Plan.
(2) Messrs. Clerico and Fusaro are employees of the Selling Shareholder. Under
the Issuer's Articles of Association, the Selling Shareholder will have
the right to appoint, remove and replace two members of the Supervisory
Board so long as the Selling Shareholder owns at least 20% of the
outstanding Common Shares, and the right to appoint, remove and replace
one member of the Supervisory Board so long as the Selling Shareholder
owns at least 10% but less than 20% of the outstanding Common Shares. If
the Common Share Offering is consummated as currently contemplated, the
Selling Shareholder will have no right to appoint Supervisory Board
members pursuant to these provisions. See "Certain Transactions;
Relationships with Praxair." Each of Messrs. Clerico and Fusaro disclaims
beneficial ownership of the Common Shares held by the Selling Shareholder.
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MANAGEMENT
SUPERVISORY BOARD
The general affairs and business of the Issuer and the board which manages
the Issuer (the "Management Board") are supervised by a board appointed by the
general meeting of shareholders (the "Supervisory Board").
The Issuer's Articles of Association (the "Articles of Association") provide
for at least six and no more than 12 directors ("Supervisory Directors") to
serve on the Supervisory Board. Under the law of The Netherlands, a
Supervisory Director cannot be a member of the Management Board ("Managing
Directors") of the Issuer. The members of the Supervisory Board are elected at
the general shareholders' meeting by a majority of the votes cast at the
meeting. The Supervisory Board is authorized to make binding nominations of
two candidates for each position, with the candidate receiving the greater
number of votes being elected. The general meeting of shareholders may
override the binding nomination of the Supervisory Board by vote of two-thirds
of the votes cast at the meeting if such two-thirds vote constitutes more than
one-half of the outstanding share capital of the Issuer (a "Two-thirds
Majority of Quorum"). Under the Issuer's Articles of Association, the Selling
Shareholder will have the right to appoint, remove and replace two members of
the Supervisory Board so long as the Selling Shareholder owns at least 20% of
the outstanding Common Shares, and the right to appoint, remove and replace
one member of the Supervisory Board so long as the Selling Shareholder owns at
least 10% but less than 20% of the outstanding Common Shares. On the first day
on which the Selling Shareholder's ownership of the outstanding Common Shares
is less than 10%, the Selling Shareholder will cease to have any special
rights regarding the appointment, removal and replacement of the Issuer's
supervisory directors. The members of the Supervisory Board appoint a chairman
of the Supervisory Board from among the members of the Supervisory Board.
Resolutions of the Supervisory Board generally require the approval of a
majority of the votes cast. The Supervisory Board meets upon the request of
its Chairman or two or more of its members or upon the request of the
Management Board.
Members of the Supervisory Board must retire no later than at the ordinary
general meeting of shareholders held after a period of three years following
their appointment, but may be re-elected. Members of the Supervisory Board are
elected to serve three-year terms, with approximately one-third of such
members' terms expiring each year. Pursuant to the Articles of Association,
members of the Supervisory Board may be suspended or dismissed by the general
meeting of shareholders. The Supervisory Board may make a proposal to the
general meeting of shareholders for the suspension or dismissal of one or more
of its members. If such a proposal is made by the Supervisory Board, a simple
majority vote of the shareholders is required to effect a suspension or
dismissal. If no such proposal is made, a Two-thirds Majority of Quorum vote
is required to effect a suspension or dismissal. The members of the
Supervisory Board may receive such compensation as may be authorized by the
general meeting of shareholders.
MANAGEMENT BOARD
The management of the Issuer is entrusted to the Management Board under the
supervision of the Supervisory Board. Under the Articles of Association, the
Supervisory Board may specify by resolution certain actions by the Management
Board that require the prior approval of the Supervisory Board. No such
resolution has yet been passed. Under the Articles of Association, both
proposals to amend the Articles of Association, and proposals to legally merge
or dissolve the Issuer require the prior approval of the Supervisory Board.
The Articles of Association provide that the Management Board shall consist
of one or more members. The members of the Management Board are elected for
terms of indefinite duration upon a binding nomination of the Supervisory
Board and election at the general shareholders' meeting by a majority of the
votes cast at the meeting. The shareholders may override the binding
nomination of the Supervisory Board by a Two-thirds Majority of Quorum vote.
57
<PAGE>
The general meeting of shareholders may suspend or dismiss one or more
members of the Management Board by a Two-thirds Majority of Quorum vote. The
Supervisory Board may suspend members of the Management Board. Such suspension
may be discontinued by the general meeting of shareholders at any time. If
within three months after such suspension no decision has been taken on
termination of the suspension or on dismissal of the relevant member, the
suspension will cease. The Articles of Association provide that the
Supervisory Board shall, in the event of absence or inability to act of all
the members of the Management Board, be temporarily responsible for the
management of the Issuer. The Supervisory Board determines the compensation
and other terms and conditions of employment of the members of the Management
Board.
Upon consummation of the Common Share Offering, the sole member of the
Issuer's Management Board will be CBICBV, a Netherlands private company.
CBICBV is the Company's principal holding company subsidiary for its non-U.S.
operations. Under Netherlands law, shareholder action is required in order to
appoint or dismiss a management board member. A corporate subsidiary of the
Issuer will serve as the sole member of the Issuer's Management Board in order
to avoid the necessity of shareholder action on appointment and removal of
management personnel and to implement a management structure similar to that
of a United States corporation. Pursuant to CBICBV's Articles of Association,
the members of its management board or holders of a power of attorney will
have the authority to act on behalf of CBICBV. The managing directors of
CBICBV, each of whom is an employee or an officer of the Company or its
affiliates, have the authority to act on behalf of CBICBV.
The business address of the members of the Supervisory Board and the
Management Board of the Issuer is Koningslaan 32-36, 1075 AD, Amsterdam, The
Netherlands and the mailing address is P.O. Box 74658, 1070 BR Amsterdam, The
Netherlands.
DIRECTORS OF THE ISSUER AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the Issuer's
current nominees for supervisory director and the executive officers of New
CBIC and CBICBV. At the time of the Common Share Offering, as permitted under
the law of The Netherlands, the Issuer will not have executive officers.
CBICBV will serve as the Issuer's Management Board.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gerald M. Glenn................ 54 Nominee for Chairman of the Supervisory
Board of the Issuer; President and Chief
Executive Officer of New CBIC; Managing
Director of CBICBV
Thomas L. Aldinger............. 45 Vice President--Business Development and
Operations of New CBIC; Managing Director
of CBICBV
Stephen M. Duffy............... 47 Vice President--Human Resources and
Administration of New CBIC
Timothy J. Wiggins............. 40 Vice President--Treasurer and Chief
Financial Officer of New CBIC; Managing
Director
of CBICBV
Robert H. Wolfe................ 47 Vice President, General Counsel and
Secretary of New CBIC; Secretary of CBICBV
Jerry H. Ballengee............. 59 Nominee for Supervisory Director of the
Issuer
J. Dennis Bonney............... 66 Nominee for Supervisory Director of the
Issuer
John A. Clerico (1)............ 55 Nominee for Supervisory Director of the
Issuer
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert F.X. Fusaro (1)............. 55 Nominee for Supervisory Director of the
Issuer
J. Charles Jennett................. 56 Nominee for Supervisory Director of the
Issuer
Vincent L. Kontny.................. 59 Nominee for Supervisory Director of the
Issuer
Gary L. Neale...................... 57 Nominee for Supervisory Director of the
Issuer
L. Donald Simpson.................. 61 Nominee for Supervisory Director of the
Issuer
Marsha C. Williams................. 45 Nominee for Supervisory Director of the
Issuer
</TABLE>
- --------
(1) If, upon consummation of the Common Share Offering, the Selling
Shareholder owns (i) 20% or more of the outstanding Common Shares, Messrs.
Clerico and Fusaro will serve as Supervisory Directors, (ii) 10% or more
(but less than 20%) of the outstanding Common Shares, Mr. Clerico will serve
as a Supervisory Director and (iii) less than 10% of the outstanding Common
Shares, no designee of the Selling Shareholder will serve as a Supervisory
Director. If the Common Share Offering is consummated as currently
contemplated, the Selling Shareholder will have no right to appoint
Supervisory Board members pursuant to these provisions.
Gerald M. Glenn has been the President and Chief Executive Officer of Old
CBIC since May 1996, will hold the same position at New CBIC and has been a
Managing Director of CBICBV since its inception. Mr. Glenn has been nominated
to serve as Chairman of the Supervisory Board. From April 1994 to present Mr.
Glenn has been a principal in The Glenn Group LLC. From November 1986 to April
1994, Mr. Glenn served as Group President--Fluor Daniel, Inc. Mr. Glenn's term
as a Supervisory Director will expire in 2000.
Thomas L. Aldinger has been the Vice President--Business Development and
Operations of Old CBIC since January 1995, will hold the same position at New
CBIC and has been a Managing Director of CBICBV since its inception. Prior to
that time from January 1993 to January 1995 Mr. Aldinger served as President
of CBI Services, Inc. and from January 1991 to January 1993 Mr. Aldinger
served as Vice President and Area General Manager for Europe, Africa and the
Middle East of Old CBIC. Mr. Aldinger has been continuously employed by the
Company since 1974.
Stephen M. Duffy has been Vice President--Human Resources and Administration
of Old CBIC since June 1996 and will hold the same position at New CBIC. Mr.
Duffy was Vice President--Human Resources and Administration of Industries
from November 1991 through May 1996.
Timothy J. Wiggins has been Vice President--Treasurer and Chief Financial
Officer of Old CBIC since September 1996, will hold the same position at New
CBIC and has been a Managing Director of CBICBV since its inception. From
August 1993 to September 1996, Mr. Wiggins was Executive Vice President--
Finance and Administration, Chief Financial Officer and Secretary and a
director of Fruehauf Trailer Corporation ("Fruehauf"), a publicly-held
manufacturer of truck trailers. Fruehauf filed a petition under the Federal
bankruptcy laws in October 1996. From May 1993 to August 1993, Mr. Wiggins was
employed by Glass & Associates, Inc., a turnaround and management consulting
firm. From 1988 to March 1993, Mr. Wiggins served Autodie Corporation, a
publicly-held manufacturer of large-scale stamping dies and molds primarily
for the automotive industry, in various executive positions. Mr. Wiggins was
promoted to Chief Executive Officer of Autodie Corporation shortly after
Autodie Corporation filed a petition under the Federal bankruptcy laws.
Robert H. Wolfe has been the Vice President, General Counsel and Secretary
of Old CBIC since November 1996 and will hold the same position at New CBIC.
Before that time, from June 1996 to November 1996, Mr. Wolfe served as a
private consultant to Rust Engineering & Construction Inc. ("Rust"). He served
as Vice President, General Counsel and Secretary to Rust from November 1993 to
June 1996 and as Associate General Counsel for that company from July 1988 to
November 1993.
59
<PAGE>
Jerry H. Ballengee is a nominee to the Supervisory Board of the Issuer. He
has served as President and Chief Operating Officer of Union Camp Corporation
since July 1994 and has served in various other executive capacities and as a
member of the Board of Directors of Union Camp Corporation since 1988. He is
also a member of the Boards of Directors of Goulds Pumps, Inc. and United
Cities Gas Company. Mr. Ballengee's term as a Supervisory Director will expire
in 1998.
J. Dennis Bonney is a nominee to the Supervisory Board of the Issuer. He
served as Vice Chairman of the Board of Chevron Corporation from 1987 to 1995.
He currently serves as Chairman of the Board of Aeromovel USA, and has also
been a Director since 1996 of Alumax Inc. and United Meridian Corporation. Mr.
Bonney's term as a Supervisory Director will expire in 2000.
John A. Clerico is a nominee for Supervisory Director of the Issuer. Mr.
Clerico has served as Vice President and Chief Financial Officer of Praxair,
Inc. since January 1992, and has also served as a Director of Praxair, Inc.
since January 1992. If Mr. Clerico serves as a Supervisory Director, his term
will expire in 1998.
Robert F.X. Fusaro is a nominee for Supervisory Director of the Issuer. Mr.
Fusaro has served as Director of Acquisitions & Divestitures at Praxair, Inc.
since March 1996. Prior to that time, from October 1993 to March 1996, Mr.
Fusaro was Associate General Counsel of Union Carbide Corporation, and from
January 1988 to October 1993, Mr. Fusaro served as the Director of
Acquisitions & Divestitures and Assistant General Counsel of Union Carbide
Corporation. Mr. Fusaro served as a Managing Director of the Issuer from
November 1996 to the time of the Reorganization. If Mr. Fusaro serves as a
Supervisory Director, his term will expire in 1998.
J. Charles Jennett is a nominee to the Supervisory Board of the Issuer. He
has served as President of Texas A&M International University since 1996. He
was Provost and Vice President of Academic Affairs at Clemson University from
1992 through 1996. Mr. Jennett's term as Supervisory Director will expire in
1999.
Vincent L. Kontny is a nominee to the Supervisory Board of the Issuer. Mr.
Kontny was President and Chief Operating Officer of Fluor Corporation from
1992 until September 1994. Mr. Kontny is currently the owner and CEO of the
Double Shoe Cattle Company. He has held this position at Double Shoe Cattle
Company since 1992. Mr. Kontny's term as a Supervisory Director will expire in
2000.
Gary L. Neale is a nominee to the Supervisory Board of the Issuer. He is
currently President, CEO and Chairman of the Board of NIPSCO Industries, Inc.,
whose primary business is the operation of Northern Indiana Public Service
Company, a gas and electric utility company. Mr. Neale has served as a
director of NIPSCO Industries, Inc. since 1991, a director of Northern Indiana
Public Service Company since 1989, and a director of Modine Manufacturing
Company since 1977. Mr. Neale's term as a Supervisory Director will expire in
1999.
L. Donald Simpson is a nominee to the Supervisory Board of the Issuer. Since
December 1996 Mr. Simpson has served as Executive Vice President of Great
Lakes Chemical Corporation. Prior thereto, beginning in 1992, Mr. Simpson
served in various executive capacities at Great Lakes Chemical Corporation.
Mr. Simpson's term as a Supervisory Director will expire in 1998.
Marsha C. Williams is a nominee to the Supervisory Board of the Issuer.
Since October 1993, she has served as Treasurer of Amoco Corporation, where
she was in the Mergers, Acquisitions and Negotiations Department from December
1992 through September 1993 and was a Senior Financial Manager in the
Treasurer's Department from November 1989 through December 1992. Ms. Williams'
term as Supervisory Director will expire in 1999.
60
<PAGE>
1996 EXECUTIVE OFFICER COMPENSATION
The following table sets forth certain information regarding compensation
paid to Old CBIC's Chief Executive Officer and to each of the four other most
highly compensated executive officers of Old CBIC (the "named executive
officers"). Neither the Issuer nor CBICBV paid compensation to executive
officers in 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
PRINCIPAL ALL OTHER
POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3)
--------- ---- --------- -------- ---------------
<S> <C> <C> <C> <C>
Gerald M. Glenn....................... 1996 $230,770 $469,500 $ 26,094
President and Chief Executive Officer
Lewis E. Akin......................... 1996 $ 43,750 -- $957,635(4)
Former President and Chief Executive
Officer
Thomas L. Aldinger.................... 1996 $166,200 $315,075 $261,258(4)
Vice President--Business Development
and Operations
Timothy J. Wiggins.................... 1996 $ 59,230 $ 50,000 $ 55,026
Vice President--Treasurer and Chief
Financial Officer
Stephen M. Duffy...................... 1996 $ 89,230 $219,129 $ 10,362(4)
Vice President--Human Resources
and Administration
Robert H. Wolfe....................... 1996 $ 16,827 $ 25,000 --
Vice President, General Counsel
and Secretary
</TABLE>
- --------
(1) Salary paid in 1996 for actual period of employment by the Company. Mr.
Akin terminated employment on January 12, 1996. Mr. Aldinger was employed
in his position during all of 1996. Messrs. Glenn, Wiggins, Duffy and
Wolfe commenced employment with the Company on the following respective
dates: Mr. Glenn--May 27, 1996; Mr. Wiggins--September 16, 1996; Mr.
Duffy--June 1, 1996; and Mr. Wolfe--November 18, 1996.
(2) Bonus amounts include payments under the Company's Senior Management
Incentive Program effective only during 1996 and under the Company's 1996
Management Incentive Compensation Program which was replaced by the Bonus
Plan (as defined below).
(3) The compensation reported includes items such as excess group life
insurance, auto and moving expenses and club dues paid by the Company and
for Messrs. Aldinger and Duffy also includes the dollar value of "split
dollar" life insurance benefits provided by CB&I with respect to Mr.
Aldinger and by a subsidiary of Praxair which is not a subsidiary of the
Issuer with respect to Mr. Duffy.
(4) The compensation reported includes payments under various compensation
plans and other employment arrangements in effect at the time Industries
was acquired by Praxair which became payable because of such acquisition
totalling $954,816, $240,619 and $7,586 for Messrs. Akin, Aldinger and
Duffy, respectively.
COMPENSATION AND BENEFITS
The Company's overall compensation and benefit strategy is to provide
programs which are competitive within its industry. The Company believes that
this strategy will give the Company the opportunity to attract and retain the
highly-skilled managerial, supervisory, technical, sales and marketing
personnel that are key to the Company's success. The overall compensation and
benefit packages offered
61
<PAGE>
by the Company are intended to link the interests of executive officers and
employees with those of shareholders through the use of equity-based plans
with a long-term perspective, as well as short-term programs which allow
employees and executive officers to share in the rewards of improved
performance. The following is a brief description of the components of the
Company's compensation and benefits program. Plans sponsored by Old CBIC, upon
consummation of the Reorganization, will be sponsored by New CBIC.
Executive Compensation
The Company's executive compensation program is designed to support the
achievement of corporate performance goals; to attract, retain and motivate
key executives; and to enhance shareholder value. The program utilizes a
combination of competitive base salaries, short term cash incentives (annual
bonuses), long-term stock-based incentives and other competitive benefit
plans.
Annual Incentive Compensation. The Company has adopted an Annual Incentive
Compensation Plan (the "Bonus Plan"), to take effect in fiscal 1997. The Bonus
Plan is an annual short-term incentive plan covering a group consisting of the
executive officers of the Company and its principal operating subsidiaries and
other designated key management employees. The Bonus Plan is based on the
annual operating plan of the Company, arrived at as a result of discussion and
analysis of the business plans within the major divisions of the Company.
Payment of bonuses is based on attaining a specific goal of operating income,
and is payable following the end of the fiscal year. The operating income goal
would be set from year to year, at the beginning of each year (subject to
modifications relating to extraordinary events), upon management's
recommendation and approval by the Issuer's Supervisory Board.
A target bonus will be established for each participating employee at the
beginning of each year based on position, responsibilities and grade level.
The bonus may be earned from two sources--achievement of the corporate
operating income goal and a discretionary portion. A percentage of target
bonus opportunity is allocated to each bonus source. The discretionary bonus
is determined by the management's evaluation of individual performance and in
the case of the CEO, the Compensation Committee of the Supervisory Board of
the Issuer.
Long-Term Compensation. Old CBIC adopted a long-term incentive compensation
plan (the "Incentive Plan") for its executive officers, other management
employees and Supervisory Directors which is a so-called "omnibus" plan. The
Company believes that through the use of long-term, stock-based incentive
compensation plans it is possible to create alignment between executive
compensation and long-term improvements in shareholder value. The objective of
the Incentive Plan is to provide an opportunity and incentive to a group of
management employees and non-employee directors to achieve above market levels
of compensation based on long-term growth in the value of the Company, which
at the same time is aligned with the financial interests of shareholders.
The Incentive Plan offers the flexibility to the Company to provide the
incentive of such long-term compensation in any of the following forms: non-
qualified options to purchase Common Shares; qualified "incentive" options to
purchase Common Shares; restricted Common Shares; "performance shares," paying
out a variable number of Common Shares depending on goal achievement, and
"performance units," which would be cash payments based on either the value of
the Common Shares or appreciation in the price of the Common Shares upon
achievement of specific financial goals. In addition, the Incentive Plan will
specifically provide that only non-qualified options will be granted from it
during the Incentive Plan's first year. Selection of participating employees
and the number of options to be granted are subject to the approval of the
Compensation Committee of the Issuer's Supervisory Board.
The exercise price of all options granted under the Incentive Plan shall not
be less than one hundred percent (100%) of the fair market value (as defined
in the Incentive Plan) of the stock subject to the option on the date the
option is granted. An option shall be exercisable in accordance with the terms
set forth in
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<PAGE>
the individual award agreement, provided that, no option shall be exercisable
prior to the third anniversary of the date of the grant. The expiration date
of each option shall be established by the Compensation Committee, but shall
not exceed 10 years from the date of the grant.
Awards of restricted stock shall be subject to a period of restriction
during which the transfer of such shares of restricted stock shall be limited.
Such restrictions shall lapse based on the passage of time, the achievement of
performance goals, or the occurrence of other events as determined by the
Compensation Committee, in accordance with the terms of each restricted stock
award agreement.
Each performance unit shall have an initial value that is established by the
Compensation Committee at the time of grant, and each performance share shall
have an initial value equal to the fair market value (as defined in the
Incentive Plan) of a share of Company Common Stock on the date the award is
granted. Holders of performance units and shares shall be entitled to receive
a payout on the number and value of performance units and shares, based on the
achievement during the performance period of specified performance goals.
In the event of a change in control (as defined in the Incentive Plan),
unless otherwise prohibited under applicable law, all options shall become
immediately exercisable, the restriction period imposed on any restricted
stock award shall lapse and the payout opportunities attainable under all
outstanding awards of restricted stock, performance units and performance
shares shall be deemed to have been fully earned for the entire performance
period.
The number of options granted to participants would be targeted to an
appropriate percentage of such participant's compensation by his or her
position or grade level, as determined by comparative market data.
The Issuer intends to reserve Common Shares of the Company for the Incentive
Plan equal to 10% of the number of Common Shares issued and outstanding at the
time of the Common Share Offering. The Issuer expects that options exercisable
for approximately 4% of the number of Common Shares outstanding will be
granted at or immediately prior to the date of the Common Share Offering. It
is expected that the initial options granted would be exercisable after 1999
subject to achievement of a cumulative earnings per share for the three year
period from 1997 through 1999 of at least $6.25 per Common Share (excluding
the pretax charge of approximately $21.9 million (assuming an initial public
offering price of $21.50) relating to the implementation of the Management
Plan). The Issuer expects that all of such options which have not previously
vested would vest automatically nine years from their date of grant. The
Incentive Plan would have a life of five years for the purpose of making
grants or awards, unless the number of shares reserved for such plan are used
up before the expiration of that period, in which case shareholder approval
would be required in order to reserve additional Common Shares for the
Incentive Plan. The vesting and exercise periods for options granted would be
in addition to such five year period.
Special Stock-Based, Long-Term Compensation Related to the Common Share
Offering
The Company intends to establish the Management Plan prior to the
consummation of the Common Share Offering. The Management Plan is not
qualified under Section 401(a) of the Code and each participant's account
shall be treated as a separate account under Section 404(a)(5) of the Code.
The designation of the Management Plan's participants, the amount of Company
contributions to the Management Plan and the amount allocated to the
individual participants will be determined by the Issuer's Supervisory Board.
The allocation to the participant's individual accounts will occur
concurrently with the Company's contributions. Management Plan Shares will
vest as determined by the Issuer's Supervisory Board. Upon vesting, the
distribution of the balance held in the individual participant's account can
be distributed at the election of the participant. Forfeitures of Management
Plan Shares under the provisions of the Management Plan will be reallocated to
the other Management Plan participants. The number of initial participants is
expected to be 40 to 60.
As an incentive to increasing the long-term value of the Company, Mr. Glenn
has an agreement with Praxair, and Messrs. Wiggins, Aldinger, Wolfe and Duffy
have agreements with CB&I, whereby each will
63
<PAGE>
respectively receive special compensation related to the sale of the Common
Shares pursuant to the Common Share Offering, in the amounts of approximately
508,776, 107,872, 107,872, 35,958 and 17,979 Common Shares, respectively
(assuming an initial public offering price of $21.50 per share). Each of such
officers, along with a group of approximately 35 to 55 other key management
employees, will be participants in the Management Plan. In fulfillment of
Praxair's commitment, upon consummation of the Common Share Offering, the
Company has agreed to make a contribution to the Management Plan in the form
of Common Shares having a value of approximately $21.9 million (approximately
1,017,552 Common Shares, assuming an initial public offering price of $21.50
per share (the mid-point of the price range as set forth on the cover page of
this Prospectus)). Accordingly, the Company will record a pretax charge of
approximately $21.9 million (assuming an initial public offering price of
$21.50 per share) at the time of the contribution to the Management Plan. This
initial contribution of Management Plan Shares will vest three years (and with
respect to one participant, two years) after the date of the Common Share
Offering.
Other Executive Compensation Programs
In addition to the annual short-term incentive compensation programs and
long-term incentive compensation programs described above, Old CBIC sponsors
and New CBIC will sponsor, the following additional compensation programs in
which management employees, including all of the named executive officers are
eligible to participate.
Old CBIC adopted, effective January 1, 1997, a restated tax-qualified
defined contribution pension plan for eligible employees (the "New 401(k)
Plan"), including, but not limited to, the named executive officers. Such plan
consists of a typical voluntary pretax salary deferral feature under Section
401(k) of the Code; a dollar-for-dollar Company matching contribution
applicable to such employee deferrals, up to 3% of a participating employee's
considered earnings; a basic additional Company contribution of 5% of each
participating employee's considered earnings; and an additional discretionary
Company profit-sharing contribution.
The New 401(k) Plan substantially replaces the former 401(k) plan (the "CBI
401(k) Pay Deferral Plan") and the CBI Pension Plan. The New 401(k) Plan
provides that the Company may, at the discretion of management, make certain
of its matching contributions or additional discretionary profit sharing
contributions in a uniform manner in the form of either cash or Common Shares.
Since December 31, 1996, no employees of the Company participate in the CBI
Pension Plan who were not already participants as of December 31, 1996. No
further benefits will accrue under the provisions of the CBI Pension Plan's
normal benefit formulas for employees participating as of December 31, 1996.
Instead, benefits accrued as of that date will be computed and increased at a
rate of 5% per year (not compounded) or fraction thereof of continuing
service, to a maximum of three additional years. The number of years of
credited service, as of December 31, 1996, for the following named executive
officers, who are the only such officers who have or will have benefits
accrued under the CBI Pension Plan, are: Thomas L. Aldinger, 22.9 years; and
Stephen M. Duffy, 5.1 years.
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<PAGE>
The following table shows approximate annual pensions payable to salaried
employees, including participating executive officers, assuming normal
retirement at age 65 and that the current social security tax base remains
unchanged:
PENSION PLAN TABLE(1)
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE AT RETIREMENT
ANNUAL ----------------------------------------------------------------
EARNINGS 15 20 25 30 35 40
- ---------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 21,540 $ 28,720 $ 35,900 $ 43,080 $ 50,260 $ 57,440
200,000 42,540 56,720 70,900 85,080 99,260 113,440
300,000 63,540 84,720 105,900 127,080 148,260 169,440
400,000 84,540 112,720 140,900 169,080 197,260 225,440
500,000 105,540 140,720 175,900 211,080 246,260 281,440
600,000 126,540 168,720 210,900 253,080 295,260 337,440
700,000 147,540 196,720 245,900 295,080 344,260 393,440
800,000 168,540 224,720 280,900 337,080 393,260 449,440
900,000 189,540 252,720 315,900 379,080 442,260 505,440
1,000,000 210,540 280,720 350,900 421,080 491,260 561,440
</TABLE>
- --------
(1) The pension amounts indicated are subject to an offset adjustment for each
individual for primary social security benefits and a portion of the value
of benefits under the now terminated CBI Salaried Employee Stock Ownership
Plan (1987) previously sponsored by Industries.
In conjunction with the adoption of the New 401(k) Plan, Old CBIC adopted an
"excess" benefit plan. Under such a plan, the Company will determine the
amount of matching and discretionary contributions which it would have
contributed to the New 401(k) Plan on behalf of designated management
employees, except as limited by the Code. Under the excess benefit plan,
retirement benefits in excess of the amounts permitted under the limitations
on contributions under the Code will be paid. It also allows affected
participants to elect to voluntarily defer more than the $9,500 limitation on
employee contributions under the New 401(k) Plan. Such benefits are payable to
a participant upon retirement, other specified terminations of employment, or
upon other specified events. The amount of such benefits payable will be
determined by attributing an imputed rate of interest or earnings on the
equivalent amount of excess plan contributions not made to the qualified plan.
The obligations to provide such benefits will constitute general obligations
of New CBIC.
Supplemental Executive Death Benefits Plan. Old CBIC adopted a plan for
selected management employees to provide additional benefits upon pre- or
post-retirement death to a participant's named beneficiary. Such plan is in
addition to any group life insurance plan provided generally to all employees,
and may be provided through New CBIC's general assets, New CBIC-owned
insurance policies, or "split-dollar" life insurance policies. The amount of
such benefits provided is significantly greater than that provided under such
group life insurance plan. The taxability of such benefits, or payments on
premiums therefor, to a participant or his or her beneficiaries, and the tax
deductibility of such amounts by the Company, will be determined by the
selection of the actual means by which the Company pays such benefits, which
has not been determined at this time.
EMPLOYEE SHARE PURCHASE PLAN
The Issuer believes that a key element of its future success will be broad-
based stock ownership by all its employees, and providing incentives to become
and remain shareholders. The Issuer intends to adopt a broad-based employee
share purchase plan (the "Share Purchase Plan"), in which certain employees of
the Company, including the named executive officers, would be eligible to
participate. Pursuant to the Share Purchase Plan, each employee electing to
participate would be granted an option to purchase
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<PAGE>
common shares of the Issuer upon a specified future date at 85% of the fair
market value of such shares on the date of purchase. During specified periods
preceding such purchase date, a percentage of the participating employees'
after-tax pay, as such employee elects, would be withheld and placed in an
account to apply to the purchase of as many shares as such funds allow at the
discounted purchase price. Common Shares so purchased would be registered in
the name of the employee participant.
Pursuant to the Code, the Share Purchase Plan would not permit any
participant to purchase Common Shares under the proposed plan and all other
share purchase plans (if any) in excess of $25,000 of market value per year,
determined at the time each option to purchase is granted. The Share Purchase
Plan is intended to qualify under Section 423 of the Code.
The Company anticipates that it will reserve a total of 250,000 Common
Shares for purchase pursuant to the Share Purchase Plan, with such plan to
expire no later than the date that is on or about five years from the date of
this Prospectus.
TERMINATION AND EMPLOYMENT AGREEMENTS
Old CBIC and Messrs. Wiggins, Wolfe, Aldinger and Duffy have entered into
change of control severance agreements each providing that, in the event of a
termination of their respective employment with the Company (other than by
reason of the employee's willful misconduct or gross negligence) or a
significant reduction in their respective responsibilities, salary or benefits
or a substantive change in the respective location of their employment, within
the two-year period following a change of control of the Company, each will
receive a special lump-sum payment following separation equal to $1,000,000,
$750,000, $1,500,000, and $240,000, respectively. In addition, upon a
termination for any reason (other than by reason of the employee's willful
misconduct or gross negligence) during the six month period prior to a change
of control, each employee will be entitled to receive a special lump-sum
payment (in the amount previously set forth) minus the gross amount of any
severance payments otherwise paid to such employee, within ten days following
a change of control. Each employee who receives a special lump-sum payment is
also entitled to receive outplacement services at the expense of the Company.
The agreements provide that the Company will pay an amount necessary to
reimburse each employee, on an after-tax basis, for any excise tax due under
Section 4999 of the Code, as a result of any such payment being treated as a
"parachute payment" under Section 280G of the Code. The receipt by each
employee of any of the amounts payable pursuant to the agreements is
contingent upon the employee's execution of a release of claims in favor of
the Company. A change of control for purposes of such agreements is deemed to
occur if, other than in connection with the Common Share Offering, (i) any
person or group of persons other than Praxair, Inc. or one of its subsidiaries
becomes the beneficial owner of 25% or more of the total voting power of the
Company's or any such subsidiary's outstanding securities, (ii) upon
consummation of any merger or other business combination of the Company or any
such subsidiary with or into another person pursuant to which the shareholders
of the Company or such subsidiary do not own, upon consummation of such
combination, more than 50% of the voting power and value of the stock of the
surviving person or (iii) if, during any period of two years or less, a
majority of the members of the Issuer's Supervisory Board changes and new
members were not nominated by at least 75% of the directors then still in
office who were directors at the beginning of such period.
In addition, the Company has entered into employment arrangements with
Messrs. Glenn, Wiggins and Wolfe to serve the Company as President and Chief
Executive Officer, Vice President--Treasurer and Chief Financial Officer, and
Vice President--General Counsel and Secretary, respectively. Pursuant to these
arrangements, Mr. Glenn's base salary is $400,000 per year, Mr. Wiggins' base
salary is $220,000 per year, and Mr. Wolfe's base salary is $175,000 per year.
Such arrangements do not establish any required term of employment. The
arrangements provide for, among other things, participation in Company bonus
and incentive compensation programs, lump sum payments in the event of
termination (or a significant reduction in levels of responsibility) within
two years of a sale of the Company and for a special stock-based compensation
award relating to an initial public offering of Common Shares. See "--
Compensation and Benefits--Special Stock-Based, Long-Term Compensation Related
to the Common
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Share Offering." Each such employee is also entitled to participate in the
Company's relocation program and to receive either an automobile allowance of
$500 per month or the use of a Company-owned vehicle.
COMPENSATION OF DIRECTORS
The Issuer intends to compensate Supervisory Directors who are not officers
of the Company or designees of the Selling Shareholder by an annual retainer
of $20,000 per year, paid in quarterly installments, and $1,500 for attendance
at each Board meeting as well as an annual grant of options to purchase 500
Common Shares at an exercise price equal to the fair market value of the
Common Shares at the time of grant. Directors who are chairpersons of
committees shall receive an additional retainer of $3,000. Those who serve on
Board Committees shall receive $1,000 for each committee meeting attended.
Supervisory Directors may elect to receive their compensation in Common Shares
and may elect to defer their compensation. Selling Shareholder designees who
tender resignations which are not accepted by the Chairman of the Supervisory
Board will be entitled to the same compensation as Supervisory Directors who
are not officers of the Company or designees of the Selling Shareholder.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For 1996, compensation decisions were made by or in accordance with the
entire Board of Directors of Old CBIC, the members of which were E.G. Hotard,
G.M. Glenn, T.J. Wiggins, R.F.X. Fusaro, J.S. Sawyer, B.A. Harris, J.R.
Vipond, S.C. Cunningham and W.F. McClure, Jr. For 1997, compensation decisions
for employees of New CBIC will be made by the Board of Directors of New CBIC
and for employees of CBICBV by its management board.
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DESCRIPTION OF NEW REVOLVING CREDIT FACILITY
The Company, The Chase Manhattan Bank ("Chase") and a syndicate of other
banks have entered into a five year senior, unsecured competitive advance and
revolving credit facility (the "New Revolving Credit Facility"). Maximum
availability under the New Revolving Credit Facility is $100.0 million for the
first three years and $50.0 million thereafter. The borrowers include the
Issuer and certain wholly owned subsidiaries, and substantially all material
subsidiaries will unconditionally guarantee (to the extent not prohibited by
applicable law) the borrowers' obligations thereunder. The Company expects,
concurrently with the consummation of the Common Share Offering, to borrow all
funds necessary thereunder to repay indebtedness owed to Praxair on the date
the Common Share Offering is consummated. As of February 27, 1997, the amount
of such indebtedness outstanding was approximately $73 million.
The unused available committed amounts under the New Revolving Credit
Facility will be available for general corporate purposes, including working
capital, letter of credit and other requirements of the Company. Amounts may
be borrowed, repaid and reborrowed, subject to availability and applicable
conditions to borrowing. Revolving credit loans would be available at interest
rates based upon the lenders' alternate base rate or a spread ranging from
0.325% to 0.875% (based on the Company's debt coverage ratio) over LIBOR or on
a competitive bid basis. Letters of credit may be issued, subject to a $35.0
million sublimit, on either a committed or competitive bid basis and expire
one year after issuance unless otherwise provided. The New Revolving Credit
Facility will terminate on the fifth anniversary of the date of its execution
unless terminated sooner.
The New Revolving Credit Facility contains various covenants, including
financial covenants (the terms of which are set out in the credit agreement
governing such facility) that, among other things, (1) require the Company to
maintain a minimum level of consolidated tangible net worth equal to its
consolidated net worth as of December 31, 1996 minus $10.0 million plus 50% of
its consolidated net income for each fiscal year during which its consolidated
net income is positive, a consolidated EBITDA to interest expense ratio of at
least 5.00 to 1 for any period of four consecutive fiscal quarters and a
consolidated leverage ratio (a) for any period of four consecutive fiscal
quarters ending on or prior to March 31, 1998 not greater than 2.75 to 1 and
(b) for any period of four consecutive fiscal quarters ending thereafter not
greater than 2.50 to 1 and (2) restrict the Company's capital expenditures to
$22.5 million in 1997 and $20.0 million (plus the lesser of (x) the difference
between the amount permitted to be expended in the prior year and the amount
actually expended and (y) $5.0 million), in each fiscal year thereafter, and
other covenants that limit mergers, certain asset sales, the incurrence of
indebtedness by subsidiaries (excluding letters of credit and performance
bonds), the granting of liens, dividends and other payments in respect of
capital stock and indebtedness, the making of investments, the issuance of
stock by subsidiaries and future transactions with affiliates. The restriction
on dividends permits, so long as no default is continuing at the time thereof
or giving effect thereto, the payment of cash dividends in an aggregate amount
not to exceed (a) prior to December 31, 1997, $5.0 million and (b) during any
fiscal year of the Company thereafter, $5.0 million plus 10% of the Company's
consolidated net income for the immediately preceding fiscal year.
The New Revolving Credit Facility contains customary events of default,
including failure to pay principal or interest, any breach of representations
when made, any default under covenants (subject to grace periods), bankruptcy
events, cross defaults to other indebtedness exceeding a specified amount, a
change of control of the Issuer, New CBIC or CBICBV, unsatisfied judgments,
ERISA events or the invalidity of the subsidiary guarantees.
The Company's ability to initially borrow under the New Revolving Credit
Facility is subject to, among other conditions, consummation of the
Reorganization and the Common Share Offering, the repayment simultaneously
with the initial borrowing of all indebtedness owed to Praxair and the absence
of outstanding indebtedness of the Company and its subsidiaries (other than
indebtedness existing on the date the New Revolving Credit Facility was
executed and performance bonds and letters of credit securing ordinary course
performance obligations).
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DESCRIPTION OF SHARE CAPITAL
The Issuer was organized under the law of The Netherlands as a public
company with limited liability ("naamloze vennootschap") by Deed of
Incorporation dated November 22, 1996. The Issuer is registered in the trade
register of Amsterdam under No. 286.441. Set forth below is a summary of
certain provisions, including all material provisions relating to the Common
Shares, contained in the Articles of Association and the law of The
Netherlands. Such summary does not purport to be a complete statement of the
Articles of Association and the law of The Netherlands and is qualified in its
entirety by reference to the Articles of Association which are filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
The authorized share capital of the Issuer is NLG 500,000 consisting of
50,000,000 Common Shares, each with a par value of NLG .01. As of November 22,
1996, 10,000,000 Common Shares were outstanding, all of which were owned by
Bridge Holdings. In connection with the Reorganization, additional Common
Shares will be issued by the Issuer to Bridge Holdings. Upon consummation of
the Common Share Offering 12,517,552 Common Shares will be outstanding. Common
Shares may be issued either in registered or bearer form, except that New York
Shares may only be issued in registered form.
Harris Trust and Savings Bank will maintain the New York Registry and act as
transfer agent and registrar for the New York Shares (the "New York Transfer
Agent and Registrar"). Kas-Associatie N.V. will act as transfer agent and
paying agent for the Bearer Shares and the Common Shares in the Amsterdam
Register (as defined below) and as registrar for the Common Shares in the
Amsterdam Register (the "Dutch Transfer and Paying Agent").
All of the New York Shares sold in the Common Share Offering will initially
be represented by a single global certificate held through the Depository
Trust Company ("DTC") and registered in the name of Cede & Co., the nominee of
DTC. Beneficial interests in the New York Shares represented by the global
certificate or otherwise held through DTC will be represented, and transfers
of such beneficial interests will be effected, through accounts of financial
institutions acting on behalf of beneficial owners as direct and indirect
participants in DTC. Investors may hold beneficial interests in New York
Shares directly through DTC if they are a participant in such system, or
indirectly through organizations that are participants in such system.
The Bearer Shares, at the discretion of the Management Board, subject to the
approval of the Supervisory Board, may be represented either by share
certificates issued in the form of a main part with a dividend sheet
consisting of a set of dividend coupons ("K-certificates") or by share
certificates in the form of a main part with a simplified dividend sheet ("CF-
certificates"). The CF-certificates may only be transferred through the book-
entry transfer system maintained by NECIGEF (Nederlands Centraal Instituut
voor Giraal Effectenverkeer, the Netherlands Central Institute for Giro
Securities). For the time being, the Issuer intends only to issue CF-
certificates. Investors may hold interests in the Bearer Shares through
NECIGEF, Euroclear and Cedel, if they are participants in such systems, or
indirectly through organizations that are participants in such systems. Common
Shares may also be registered in the shareholders' register kept in Amsterdam,
The Netherlands ("Amsterdam Register") for any number of Common Shares.
COMMON SHARES
After the consummation of the Common Share Offering, there will be
12,517,552 Common Shares outstanding. Each shareholder of record (or if
applicable, a beneficiary of a life interest to whom the voting rights have
been transferred) is entitled to one vote for each Common Share held on every
matter submitted to a vote of shareholders. In the event of the dissolution
and liquidation of the Issuer, holders of
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Common Shares are entitled to receive, on a pro rata basis, all assets of the
Issuer remaining available for distribution to the holders of Common Shares.
The Articles of Association make no provision for cumulative voting and, as a
result, the holders of a majority of the Issuer's voting power will have the
power, subject to the Supervisory Board's right to make binding nominations,
to elect all members of the Supervisory Board and the Management Board. See
"--Summary of Certain Provisions of the Articles of Association and Other
Matters--Election and Tenure of Managing Directors and Supervising Directors;
Power to Represent and Bind the Issuer."
SUMMARY OF CERTAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION AND OTHER MATTERS
Dividends
Pursuant to the Articles of Association, the Management Board, with the
approval of the Supervisory Board, may establish reserves out of the Issuer's
annual profits. The portion of the Issuer's annual profits that remains after
the establishment of reserves is at the disposal of the general meeting of
shareholders. Out of the Issuer's share premium reserve and other reserves
available for shareholder distributions under the law of The Netherlands, the
general meeting of shareholders may declare distributions upon the proposal of
the Management Board (after approval by the Supervisory Board). Pursuant to a
resolution of the Supervisory Board (provided that the Supervisory Board is
authorized to issue such shares), distributions approved by the general
meeting of shareholders may be fully or partially made in the form of Common
Shares. The Issuer may not pay dividends if the payment would reduce
shareholders' equity below the aggregate par value of the Common Shares
outstanding, plus the reserves statutorily required to be maintained. Although
under Dutch law, dividends are generally paid annually, the Management Board,
with the approval of the Supervisory Board, may, subject to certain statutory
provisions, distribute one or more interim dividends before the accounts for
any year have been approved and adopted at a general meeting of shareholders
in anticipation of the final dividend. Rights to cash dividends and
distributions that have not been collected within five years after the date on
which they became due and payable shall revert to the Issuer.
At the date of its inception on November 22, 1996, the Issuer had no
retained earnings available to pay dividends under the law of The Netherlands.
Since its inception in 1996, the Issuer has not paid dividends on Common
Shares. The Issuer currently anticipates that it will declare a $0.06
quarterly cash dividend on each outstanding Common Share, payable initially
for the first quarter commencing subsequent to the date of this Prospectus.
The Issuer currently intends to declare regular quarterly cash dividends;
however, there can be no assurance that any such dividends will be declared or
paid. The payment of dividends in the future will be subject to the discretion
of the Issuer's shareholders (in the case of annual dividends), its Management
Board and its Supervisory Board and will depend upon general business
conditions, legal restrictions on the payment of dividends and other factors.
The Issuer expects that it would pay any such dividends in U.S. dollars. Cash
dividends to holders of New York Shares will be paid to the New York Transfer
Agent and Registrar, who will, if necessary, convert such dividends into U.S.
dollars at the rate of exchange on the date such dividends are paid, for
disbursement to such holders. Cash dividends payable to holders of Bearer
Shares will be paid to the Dutch Transfer and Paying Agent, who will, if
necessary, convert such dividends into Dutch guilders, for disbursement to
such holders. See "Dividend Policy." In certain cases, however, cash dividends
may be paid directly to the holders of K-certificates.
Shareholder Meetings and Voting Rights
Each holder of Bearer Shares and each other shareholder has the right to
attend general meetings of shareholders, either in person or represented by a
person holding a written proxy, to address shareholder meetings, and to
exercise voting rights, subject to the provisions of the Articles of
Association. Ordinary general meetings of shareholders of the Issuer will be
held in The Netherlands at least annually, within six
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months after the close of each financial year. Extraordinary general meetings
of shareholders may be held as often as the Management Board or the
Supervisory Board deem necessary, or as otherwise provided for pursuant to the
law of The Netherlands.
Unless otherwise required by the Articles of Association or the law of The
Netherlands, resolutions of general meetings of shareholders occurring in The
Netherlands require the approval of a majority of the votes cast at a meeting.
Resolutions of general meetings of shareholders occurring outside The
Netherlands are valid if the entire share capital is present or represented
(unless voting rights have been transferred to holders of life interests).
There are no laws currently in effect in The Netherlands or provisions in the
Articles of Association of the Issuer limiting the rights of nonresident
investors to hold or vote Common Shares.
The Issuer will give notice by mail to registered holders of Common Shares
of each meeting of shareholders. Such notice will be given no later than the
fifteenth day prior to the day of the meeting and will include a statement of
the business to be considered. The New York Transfer Agent and Registrar will
provide notice of general meetings of shareholders to, and compile voting
instructions from, holders of Common Shares held directly or indirectly
through the New York Transfer Agent and Registrar. The Issuer also will give
notice of each meeting of shareholders by notice published by advertisement,
which shall be published in at least one national daily newspaper distributed
throughout The Netherlands and in the Officiele Prijscourant of the Amsterdam
Stock Exchange (the official newspaper of the Amsterdam Stock Exchange), and,
if required, elsewhere.
Election and Tenure of Managing Directors and Supervising Directors; Power to
Represent and Bind the Issuer
The Management Board is entrusted with the management of the Issuer. The
Supervisory Board supervises the Management Board. The Management Board will
have one or more members and the Supervisory Board will have at least six and
no more than 12 members. Supervisory Board and Management Board vacancies will
be filled by a vote of shareholders at the first general meeting after such
vacancy occurs or is created. The Supervisory Board and the Management Board
members are elected from binding nominations made by the Supervisory Board. At
least two persons must be nominated for each vacancy. Under the law of The
Netherlands and the Articles of Association, the shareholders may deprive the
nominations of their binding effect by a resolution passed by Two-thirds
Majority of Quorum vote.
Under the Issuer's Articles of Association, the Selling Shareholder will
have the right to appoint, remove and replace two members of the Supervisory
Board so long as the Selling Shareholder owns at least 20% of the outstanding
Common Shares, and the right to appoint, remove and replace one member of the
Supervisory Board so long as the Selling Shareholder owns at least 10% but
less than 20% of the outstanding Common Shares. On the first day on which the
Selling Shareholder's ownership of the outstanding Common Shares is less than
10%, the Selling Shareholder will cease to have any special rights regarding
the appointment, removal and replacement of the Issuer's supervisory
directors.
Supervisory Directors and Managing Directors serve until the expiration of
their respective terms of office or their resignation, death or removal, with
or without cause, by the shareholders or, in the case of Supervisory
Directors, upon reaching the mandatory retirement age of 72.
The executive power of the Issuer resides in the members of the Management
Board acting together and in each member acting individually. Each managing
director, acting alone, is authorized to represent the Issuer. The Issuer may
execute (i) a power of attorney granting certain officers of the Issuer the
power to bind the Issuer individually on certain administrative day-to-day
matters and (ii) a power of attorney to the Issuer's transfer agent and
registrar to acknowledge transfers of the Common Shares.
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Approval of Annual Accounts and Discharge of Management Liability
Each year, the Management Board is responsible for the preparation of annual
accounts. The annual accounts must be approved and signed by the Supervisory
Board and then submitted to a general meeting of shareholders for adoption
within five months after the end of the Issuer's financial year, unless the
general meeting of shareholders has extended this period due to special
circumstances.
Adoption of the Issuer's annual accounts by the general meeting of
shareholders discharges the members of the Management Board and the
Supervisory Board from liability in respect of the exercise of their duties
during the financial year concerned, unless an explicit reservation is made by
the general meeting of shareholders and without prejudice to the provisions of
the law of The Netherlands relating to liability of members of supervisory
boards and management boards upon bankruptcy of a company pursuant to Articles
138 and 149 of Book 2 of the Civil Code of The Netherlands. Under the law of
The Netherlands, this discharge from liability does not extend to matters not
disclosed to shareholders.
Liquidation Rights
In the event of the dissolution and liquidation of the Issuer, the assets
remaining after payment of all debts and liquidation expenses will be
distributed among holders of Common Shares on a pro rata basis.
Issue of Shares; Preemptive Rights
Prior to the Common Share Offering, the Issuer's shareholders have approved
the issuance of up to an aggregate of 1,501,755 authorized but unissued Common
Shares upon exercise of options or otherwise in connection with the Company's
benefit plans. The Issuer's shareholders are also expected to authorize, prior
to the Common Share Offering, the Supervisory Board to issue such additional
authorized but unissued Common Shares as the Supervisory Board shall
determine. Under the law of The Netherlands, such authorization can only be
granted for a maximum period of five years and the above-mentioned
authorization is expected to expire on or about five years from the date of
this Prospectus, subject to future extension(s). Under the Articles of
Association, each holder of Common Shares shall generally have a preemptive
right to subscribe with regard to any issue of Common Shares pro rata to the
shareholder's existing holdings of Common Shares, except for certain issuances
to employees, issuances for noncash consideration, issuances to persons who
exercise a previously acquired right to subscribe for Common Shares and
issuances exempted from such requirement by the Supervisory Board when the
Supervisory Board is so empowered by shareholders. A resolution expected to be
adopted by shareholders on or about the date of this Prospectus provides the
Supervisory Board with an irrevocable five-year authorization to limit or
exclude preemptive rights.
Repurchase of Common Shares
The shareholders, prior to the consummation of the Common Share Offering,
are expected to have delegated to the Management Board the authority, subject
to certain restrictions contained in the law of The Netherlands and the
Articles of Association, to cause the Issuer to acquire its own fully paid
Common Shares in an amount not to exceed 10% of the outstanding shares at any
time in open market purchases. Such authorization, which may not be granted
for more than 18 months, is expected to be adopted through the date on or
about 18 months from the date of this Prospectus.
Capital Reduction
Upon proposal by the Management Board (after approval by the Supervisory
Board) the general meeting of shareholders may reduce the issued share capital
by cancellation of Common Shares held by the Issuer, subject to certain
statutory provisions.
AMENDMENT OF THE ARTICLES OF ASSOCIATION
The Articles of Association may be amended at a general meeting of
shareholders if the proposal is stated in the convocation notice for the
general meeting and a complete copy of the proposed amendment
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is filed at the Issuer's office so that it may be inspected prior to the
meeting and the amendment is approved by a majority of the votes cast at a
general meeting of shareholders. Proposals to amend the Articles of
Association, to legally merge the Issuer, or to dissolve the Issuer require
prior approval by the Supervisory Board. Notwithstanding the foregoing, no
such amendment shall become effective until approved by the Ministry of
Justice of The Netherlands.
DISCLOSURE OF HOLDINGS
Under the law of The Netherlands, if Common Shares are admitted to official
quotation or listing on the Amsterdam Stock Exchange or on any other stock
exchange in the European Economic Area, holders and certain beneficial owners
of Common Shares must promptly notify the Issuer and the Securities Board of
The Netherlands if their shareholding in the Company reaches, exceeds or falls
below 5%, 10%, 25%, 50% or 66 2/3% of the outstanding Common Shares. For this
purpose shareholding includes either or both of economic interests or voting
rights. Failure to comply constitutes a criminal offense and could result in
civil sanctions, including suspension of voting rights.
TRANSFER AGENT, REGISTRAR AND PAYING AGENT
The New York Transfer Agent and Registrar for the Common Shares is Harris
Trust and Savings Bank. The Dutch Transfer and Paying Agent for the Common
Shares is Kas-Associatie N.V.
LIABILITY OF DIRECTORS AND OFFICERS
Prior to completion of the Common Share Offering, certain of the Issuer's
directors and executive officers will enter into an indemnity agreement with
the Issuer. The agreements provide, to the fullest extent permitted by the law
of The Netherlands, that the Issuer will indemnify the directors and executive
officers against any costs and expenses, judgments, settlements and fines
incurred in connection with any claim involving a director or an executive
officer by reason of his or her position as director or officer. A form of
indemnity agreement containing such standards of conduct is included as an
exhibit to the Company's Registration Statement on Form S-1 (the "Registration
Statement") of which this Prospectus is a part.
The Articles of Association provide that the Issuer will, to the fullest
extent permitted by the law of The Netherlands, as amended from time to time,
indemnify, and may advance expenses to, each of its now acting and former
board members, officers, employees and agents, whenever any such person is
made a party, or threatened to be made a party, in any action, suit or
proceeding by reason of his or her service with the Issuer. The Articles of
Association also provide that the Issuer may purchase and maintain directors'
and officers' liability insurance.
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SHARE CERTIFICATES AND TRANSFER
GENERAL
The Common Shares are available in either registered or bearer form except
that the New York Shares are available in registered form only. Share
Registers are maintained in New York, New York (the "New York Registry") by
the New York Transfer Agent and Registrar and in The Netherlands by or on
behalf of the Issuer. All of the New York Shares to be sold in the Offering
will be initially represented by a single global certificate held through DTC
and registered with the New York Transfer Agent and Registrar in the name of
Cede & Co., the nominee of DTC. The Common Shares will trade on the New York
Stock Exchange; however, only the New York Shares may be traded on such
exchange. The Common Shares will also trade on the Amsterdam Stock Exchange
but only in the form of Bearer Shares.
Persons who are not DTC participants may beneficially own New York Shares
held by DTC only through direct or indirect participants in DTC. So long as
Cede & Co., as the nominee of DTC, is the registered owner of New York Shares,
Cede & Co. for all purposes will be considered the shareholder of such New
York Shares. Accordingly, any person owning a beneficial interest in New York
Shares must rely on the procedures of DTC and, if such person is not a
participant, on the procedures of the participant through which such person
owns its interest, to exercise any rights of a shareholder. The Issuer
understands that, under existing industry practice, in the event that an owner
of a beneficial interest in New York Shares desires to take any action that
Cede & Co., as the shareholder, is entitled to take, Cede & Co. would
authorize the participants to take such action, and the participants would
authorize beneficial owners holding interests through such participants to
take such action or would otherwise act upon the instructions of beneficial
owners holding interests through them. New York Shares may be transferred on
the books of the Issuer at the office of the New York Transfer Agent and
Registrar. Certificates representing New York Shares may be exchanged at such
office for certificates representing New York Shares of other authorized
denominations. Under Dutch law, the transfer of registered shares requires a
written instrument of transfer and written acknowledgment by the Issuer of
such transfer.
Common Shares registered in The Netherlands are booked in the Amsterdam
Register for any number of Common Shares. Bearer Shares, at the discretion of
the Management Board, subject to the approval of the Supervisory Board, will
be represented by K-certificates or CF-certificates. CF-certificates must
remain deposited with an authorized custodian and may only be transferred
through the book-entry transfer system maintained by NECIGEF. For the time
being, the Issuer intends only to issue CF-certificates. The Common Shares
trade on the Amsterdam Stock Exchange under the symbol "CBI". Only Bearer
Shares may be traded on the Amsterdam Stock Exchange. Common Shares booked in
the Amsterdam Register may be converted into Bearer Shares or into New York
Shares in accordance with the procedures more fully described below.
GLOBAL CLEARANCE AND SETTLEMENT
Although DTC, Euroclear and Cedel have agreed to the procedures provided
below in order to facilitate transfers of Common Shares among participants of
DTC, Euroclear and Cedel, they are under no obligation to perform or continue
to perform such procedures and such procedures may be modified or discontinued
at any time. The Issuer will not have any responsibility for the performance
by DTC, Euroclear or Cedel or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
DTC, Euroclear and Cedel have advised the Issuer as follows:
DTC
DTC is a limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act.
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DTC was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants
through electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. DTC participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations such as the
Underwriters. Indirect access to the DTC system also is available to indirect
DTC participants such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a DTC participant,
either directly or indirectly.
Because DTC can only act on behalf of DTC participants, who in turn act on
behalf of indirect DTC participants and certain banks, the ability of an owner
of a beneficial interest in the New York Shares to pledge such interest to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interest, may be limited by the lack of a
definitive certificate for such interest. The laws of some jurisdictions
require that certain persons take physical delivery of securities in
definitive form. Consequently, the ability to transfer beneficial interests in
the New York Shares to such persons may be limited. In addition, beneficial
owners of New York Shares through the DTC system will receive dividend
payments only through DTC participants.
NECIGEF
NECIGEF is an independent central institution whose objects are the
safekeeping and administration of securities and the operation of a security
giro on behalf of its participants. NECIGEF was established following the Wet
Giraal Effectenverkeer (Securities Giro Administration and Transfer Act)
published in The Netherlands in 1977, and is under the supervision of the
Dutch Minister of Finance. Participants in NECIGEF are banks and brokers
registered as credit institutions. Under the operation of the Securities Giro
Administration and Transfer Act, book-entry transfers are made between the
collective securities deposits held by NECIGEF (immobilized).
EUROCLEAR AND CEDEL
Euroclear and Cedel hold securities for participating organizations and
facilitate the clearance and settlement of securities transactions between
their respective participants through electronic book-entry changes in
accounts of such participants. Euroclear and Cedel provide to their
participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Euroclear and Cedel interface with United States
domestic securities markets. Euroclear and Cedel participants are financial
institutions such as underwriters, securities brokers and dealers, banks,
trust companies and certain other organizations and include certain of the
Underwriters. Indirect access to Euroclear or Cedel is also available to
others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Euroclear or Cedel participant
either directly or indirectly.
INITIAL SETTLEMENT
Investors electing to hold their New York Shares through DTC will follow the
settlement practices applicable to U.S. corporate common shares. The
securities custody accounts of investors will be credited with their holdings
against payment of U.S. dollars in same-day funds on the settlement date.
Investors electing to hold their Bearer Shares through an account with
NECIGEF ("NECIGEF Holders"), Euroclear accounts ("Euroclear Holders") or Cedel
accounts ("Cedel Holders") will follow the settlement procedures applicable to
settlement of common shares in the respective clearing system. Such Bearer
Shares will be credited to the securities custody accounts of NECIGEF Holders
on the settlement date against payment in same-day funds, of Euroclear Holders
on the business day following the settlement date against payment for value on
the settlement date and of Cedel Holders on the settlement date against
payment in same-day funds. All such payments will be made in Dutch guilders.
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SECONDARY MARKET TRADING
For purposes of secondary market trading, the Common Shares will be priced
in dollars on the New York Stock Exchange and in guilders on the Amsterdam
Stock Exchange.
Because the purchaser determines the place of delivery, it is important to
establish at the time of trading of any New York Shares where both the
purchaser's and seller's accounts are located to ensure that settlement can be
made on the desired value date.
Trading between DTC participants. Secondary market trading between DTC
participants is settled using the procedures applicable to U.S. corporate
common shares in same-day funds.
Trading between Euroclear and/or Cedel participants. Secondary market
trading between Euroclear participants and/or Cedel participants is settled
using the procedures applicable to common shares in same-day funds.
Trading between NECIGEF Participants. Secondary market trading between
NECIGEF participants is settled using the procedures applicable to Bearer
Shares in same-day funds.
Transfers of Shares from DTC to NECIGEF (including Euroclear and
Cedel). Upon a request to the New York Transfer Agent and Registrar to
transfer or exchange New York Shares for Bearer Shares or Common Shares booked
on the Amsterdam Register, the New York Transfer Agent and Registrar will
cancel certificates representing the appropriate number of New York Shares
(including New York Shares registered in the name of Cede & Co. if such New
York Shares are held in DTC) and appropriately adjust its register. The New
York Transfer Agent and Registrar will then instruct the Dutch Transfer and
Paying Agent to deliver a Bearer Share certificate representing the same
number of Common Shares or to cause the Common Shares to be booked in the
Amsterdam Register. Bearer Share certificates in the form of CF-certificates
must remain deposited with an authorized custodian and may only be transferred
through the book-entry system of NECIGEF. If the transferee/owner elects to
hold directly through NECIGEF or indirectly through Euroclear and Cedel, the
Dutch Transfer and Paying Agent will notify the respective custodians of
NECIGEF, Euroclear or Cedel, as the case may be. Participants of NECIGEF,
Euroclear and Cedel should submit instructions accordingly to receive delivery
of Bearer Shares in accordance with the respective systems' procedures.
Transfers from NECIGEF (including Euroclear and Cedel) to DTC. Upon a
request to the Dutch Transfer and Paying Agent to transfer or exchange Bearer
Shares for New York Shares, the Dutch Transfer and Paying Agent will cancel
certificates representing the appropriate number of Bearer Shares (including
shares held by the custodian through NECIGEF and indirectly Euroclear or Cedel
if such shares are held in the clearing systems). Holders should instruct
their custodian in NECIGEF to deliver Bearer Shares to the Dutch Transfer and
Paying Agent. If the transferor or exchanging holder holds directly through a
participant in NECIGEF or through Euroclear and Cedel, as the case may be,
such participant should submit instructions to effect transfer of the shares
in accordance with their procedures and the Dutch Transfer and Paying Agent
will instruct the New York Transfer Agent and Registrar to issue a certificate
representing New York Shares to the appropriate transferee/registered owner.
The New York Transfer Agent and Registrar will then issue a new certificate
registered in the name of the transferee/registered owner or Cede & Co., if
the transferee/registered owner elects to hold through DTC and to
appropriately adjust its register. If the transferee/registered owner elects
to hold through DTC, the New York Transfer Agent will also notify DTC of the
increase of the number of New York Shares held through DTC and instruct DTC to
have the exchanged or transferred Common Shares credited to the appropriate
account.
Under Dutch law, the transfer of registered Common Shares requires a written
instrument of transfer and written acknowledgment by the Issuer of such
transfer. In order to facilitate such transfers, the Issuer has provided the
New York Transfer Agent and Registrar and the Dutch Transfer and Paying Agent
with powers of attorney to enable execution and acknowledgment of the
appropriate documents to comply with Dutch law.
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Because of time-zone differences, the mechanics of registering exchanges and
transfers between the New York Transfer Agent and Registrar and the Dutch
Transfer Agent described above as well as the need for DTC, NECIGEF and
Euroclear and Cedel accountholders to comply with the respective systems'
rules and procedures, including their established deadlines, exchanges and
transfers of Common Shares between the New York Transfer Agent and Registrar
and the Dutch Transfer and Paying Agent may not be credited to the relevant
account at DTC, NECIGEF or Euroclear and Cedel, as the case may be, until two
business days following delivery of the instructions to transfer the Common
Shares to the respective system. Settlement between a holder of New York
Shares transferred to a transferee who will hold Bearer Shares or Common
Shares booked on the Amsterdam Register or a holder of Bearer Shares or Common
Shares booked on the Amsterdam Register transferred to a transferee who will
hold New York Shares cannot be made on a delivery versus payments basis. The
arrangements for transfer of payments must be established separately from the
arrangements for transfer of securities, the latter being effected on a free
delivery basis. The customary arrangements for delivery versus payments
between DTC participants, NECIGEF participants and Euroclear and Cedel
accountholders are not affected.
Persons wishing to obtain physical delivery of share certificates in respect
of their Common Shares must make arrangements with the NECIGEF, Euroclear or
Cedel participant through which Bearer Shares are held or with NECIGEF,
Euroclear or Cedel, as the case may be, and pay all related costs and taxes
incurred. Similar arrangements will also need to be made with DTC or DTC
participants through which New York Shares are held and all related costs and
taxes incurred paid to obtain physical delivery of share certificates for New
York Shares. Delivery of share certificates in either case normally takes
between 30 and 45 days after the settlement date.
A fee of $.05 per share will be charged by the New York Transfer Agent and
Registrar for the exchange of New York Shares for Bearer Shares or for Common
Shares booked on the Amsterdam Register (and for the reverse).
Bearer Shares have been accepted for clearance through Euroclear and Cedel
under common code number . The International Securities Identification
Number for the Common Shares is . The CUSIP number for New York Shares is
.
TAXATION
The following is a summary of certain tax consequences in the United States
and in The Netherlands of the acquisition, ownership and disposition of Common
Shares under current law. It does not, however, discuss every aspect of such
taxation that may be relevant to a particular taxpayer under special
circumstances or who is subject to special treatment under applicable law, nor
does it address the income taxes imposed by any political subdivision of the
United States or The Netherlands or any tax imposed by any other jurisdiction.
Such discussion assumes that the Company is organized and its business is
conducted in the manner outlined in this Prospectus. The laws upon which such
discussion is based are subject to change, perhaps with retroactive effect.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE TAX
CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF THE COMMON SHARES.
NETHERLANDS TAXES
The following is a summary of the material Netherlands tax consequences to
an owner of Common Shares who is not, or is not deemed to be, a resident of
The Netherlands for purposes of the relevant tax codes (a "nonresident
shareholder"). This discussion is based upon the advice of Loeff Claeys
Verbeke, Netherlands tax advisors of the Company. No assurance can be given
that tax authorities or courts in The Netherlands will agree with the
conclusions expressed herein.
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Netherlands Dividend Withholding Tax
Dividend distributions by the Issuer are generally subject to dividend
withholding tax at a rate of 25%. These dividend distributions include
dividends in cash or in kind, constructive dividends, certain repayments of
capital qualified as dividends and liquidation proceeds in excess of,
according to Netherlands tax law, recognized paid-in capital. Stock dividends
are also subject to Netherlands dividend withholding tax unless they are
distributed out of the Issuer's paid-in capital as recognized for Netherlands
tax purposes.
A nonresident shareholder may be eligible, however, for a reduction or a
refund of Netherlands dividend withholding tax under a tax convention, which
is in effect between the country of residence of the shareholder and The
Netherlands or based upon international conventions or regulations (e.g.,
European Community directives), provided certain conditions are met. The
Netherlands has concluded such tax conventions with, among others, most
European countries (including the United Kingdom), the United States, Canada
and Japan.
Under most of these conventions (including the tax convention with the
United States) the recipient nonresident shareholder may benefit from a
reduced dividend withholding rate of 15% or less, unless the recipient
nonresident shareholder has a permanent establishment or a permanent
representative or a fixed base in The Netherlands to which or to whom the
Common Shares are attributable (in which case varying rates may apply).
Under the Tax Convention of December 18, 1992, concluded between The
Netherlands and the United States (the "U.S. Tax Treaty"), dividends paid by
the Issuer to a resident of the United States (other than an exempt
organization or exempt pension trust, as discussed below, or an individual who
performs independent personal services from a fixed base situated in The
Netherlands if the holding in respect of which the dividends are paid pertains
to such fixed base) are generally eligible for a reduction of the 25%
Netherlands dividend withholding tax to 15% or, in the case of certain U.S.
corporate shareholders beneficially owning the dividends and directly owning
at least 10% of the voting power of the Issuer, 5%, provided that such
shareholder does not have an enterprise or an interest in an enterprise that
is, in whole or in part, carried on through a permanent establishment or
permanent representative in The Netherlands and to which enterprise or part of
an enterprise the Common Shares are attributable. The U.S. Tax Treaty provides
for a complete exemption for dividends received by exempt pension trusts and
exempt organizations, as defined therein. Except in the case of exempt
organizations, such reduced dividend withholding rate (or exemption from
withholding) can be applied at the source upon payment of the dividends,
provided that the proper forms have been filed in advance of the payment.
Exempt organizations remain subject to the statutory withholding rate of 25%
and are required to file for a refund of such withholding.
A person may not claim the benefits of the U.S. Tax Treaty unless (i) it is
a resident of the United States, as defined therein and (ii) such person's
entitlement to such benefits is not limited by the provisions of article 26
("limitation on benefits") of the U.S. Tax Treaty.
No Netherlands dividend withholding tax applies on the sale or other
disposition of Common Shares to persons other than the Company or its direct
and indirect subsidiaries.
Netherlands Income Tax and Corporate Income Tax
In general, a nonresident shareholder will not be subject to Netherlands
income tax (other than the dividend withholding tax described above) with
respect to dividends distributed by the Issuer on the Common Shares or with
respect to any gain derived from the sale or other disposition of Common
Shares, provided that:
(i) such shareholder is neither resident nor deemed to be resident in The
Netherlands;
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<PAGE>
(ii) such shareholder does not carry on a business in The Netherlands
through a permanent establishment or a permanent representative or a fixed
base to which or to whom the Common Shares are attributable; and
(iii) such shareholder does not have a substantial interest or a deemed
substantial interest, as defined under the laws of The Netherlands, in the
Issuer, or if such shareholder does have such an interest, it forms part of
the assets of a business.
In general, a nonresident shareholder has a substantial interest in the
Issuer if such shareholder, alone or together with his or her spouse, owns,
directly or indirectly, at least 5% of the issued capital of any class of
shares in the capital of the Issuer. There are various situations in which a
nonresident shareholder may have a deemed substantial interest in the Issuer,
e.g., a deemed substantial interest may exist if the nonresident person has
option rights over at least 5% of the issued capital of any class of shares in
the capital of the Issuer. The above does not cover all possible situations
where a substantial interest or a deemed substantial interest may exist. If
there is any doubt whether the "substantial interest" regulations may apply,
each prospective investor should consult his or her tax advisor regarding the
tax consequences.
As a general rule, under a tax convention which is in effect between the
country of residence of the nonresident shareholder and The Netherlands, such
nonresident shareholder may benefit from treaty protection against Netherlands
income tax under the "substantial interest" regulations on any gains from the
alienation of Common Shares, depending on the contents of the specific tax
convention and provided that certain conditions are met.
Netherlands Net Wealth Tax
A nonresident shareholder who is an individual is not subject to Netherlands
net wealth tax with respect to the Common Shares, provided that the
nonresident shareholder does not carry on a business in The Netherlands
through a permanent establishment or a permanent representative to which or to
whom the shares are attributable. Corporations are not subject to Netherlands
net wealth tax.
Netherlands Gift and Inheritance Tax
No Netherlands gift or inheritance tax arises as a result of a gift of the
Common Shares by, or the transfer of the Common Shares at the death of, a
shareholder who is neither resident nor deemed to be resident of The
Netherlands, unless the Common Shares are attributable to a permanent
establishment or a permanent representative of the shareholder in The
Netherlands. An individual of Netherlands nationality is deemed to be a
resident of The Netherlands, for the purposes of Netherlands gift and
inheritance tax, if he or she has been a Netherlands resident at any time
during the ten years preceding the time of the gift or death. A person not
possessing Netherlands nationality is deemed to be a resident of The
Netherlands, only for the purposes of Netherlands gift tax, if he or she has
been residing in The Netherlands at any time during the 12 months preceding
the time of the gift.
UNITED STATES FEDERAL INCOME TAXES
The following is a summary of the material United States federal income tax
consequences of the acquisition, ownership and disposition of Common Shares
under present United States law which is expected to be generally applicable.
It does not, however, discuss every aspect of United States federal income
taxation that may be relevant to a particular taxpayer under special
circumstances or who is subject to special treatment under United States
federal income tax laws. Except as noted to the contrary, statements of legal
conclusion regarding tax effects in this section are based upon an opinion
which the Company has received from Cahill Gordon & Reindel, United States
counsel to the Company. No assurance can be given that the Internal Revenue
Service or the courts in the United States will agree with the conclusions
expressed herein.
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Dividends
The gross amount of distributions (including any Netherlands withholding tax
thereon) received with respect to one or more Common Shares by a citizen or
resident of the United States, by a corporation which is organized in the
United States or by a person who is otherwise subject to United States federal
income tax on a net income basis with respect to such Common Shares (a "U.S.
Holder") are dividends taxable in the United States as ordinary income to the
extent of the current and accumulated earnings and profits of the Issuer, as
determined under U.S. federal income tax principles. These dividends are not
eligible for the dividends received deduction which is generally allowed to
United States corporate shareholders on dividends which are received from a
U.S. corporation.
Distributions in excess of the current and accumulated earnings and profits
of the Issuer will be treated first as nontaxable returns of capital to the
extent of such U.S. Holder's adjusted tax basis in the Common Shares, and any
such distribution in excess of such basis will constitute gain, which gain
will be capital gain if the Common Shares are held as capital assets.
The amount of income recognized upon the receipt of guilders as a dividend
will be the U.S. dollar value of the guilders on the date of distribution,
regardless of whether the U.S. Holder converts the payment into U.S. dollars.
Gain or loss, if any, recognized by a U.S. Holder on the sale or disposition
of guilders will be ordinary income or loss.
Subject to certain conditions and limitations, Netherlands taxes withheld in
accordance with the U.S. Tax Treaty will be treated as a foreign tax that U.S.
Holders may elect to deduct in computing their U.S. federal taxable income or
credit against their U.S. federal income tax liability. Additional withholding
tax, if any, in excess of the rate applicable under the U.S. Tax Treaty
generally will not be eligible for credit against the U.S. Holder's U.S.
federal income tax liability. For foreign tax credit purposes, dividends paid
by the Issuer (except in very limited situations) will be foreign source
"passive income" or, in the case of certain U.S. Holders, "financial services
income."
For foreign tax credit purposes, it is likely that, following the Offering,
50% or more of the Common Shares will be treated as directly or indirectly
owned by U.S. persons. If so and if ten percent or more of the Issuer's
earnings and profits, as calculated under U.S. federal income tax principles,
for any taxable year were attributable to sources within the United States, a
portion of any dividends paid by the Issuer could be recharacterized as U.S.
source income for foreign tax credit purposes. In such a case, it may not be
possible for U.S. Holders to claim the full amount of any Netherlands
withholding tax as a credit against their U.S. federal income tax liability.
Sale or Other Disposition of Common Shares
A U.S. Holder will generally recognize gain or loss for United States
federal income tax purposes upon the sale or other disposition of Common
Shares in an amount equal to the difference between the amount realized from
such sale or other disposition and the U.S. Holder's tax basis for such Common
Shares. Such gain or loss will be a capital gain or loss if the Common Shares
are held as a capital asset and will be long-term capital gain or loss if such
U.S. Holder's holding period for the Common Shares is more than one year.
Under most circumstances, any gain from the sale or other disposition of the
Common Shares will be treated as U.S. source income for foreign tax credit
purposes.
Gain that is recognized upon a sale or other disposition of Common Shares by
a person who is not a U.S. Holder with respect to such Common Shares will not
be subject to income tax in the United States unless such person is an
individual who is present in the United States for 183 days or more during his
or her taxable year in which such sale or other disposition occurred and
either the income from the disposition is attributable to an office or other
fixed place of business maintained by such individual in the United States or
such individual has a tax home, as defined in Section 911(d)(3) of the Code,
in the United States during such taxable year.
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Foreign Personal Holding Company Classification
The Issuer or any of its non-U.S. subsidiaries could be classified as a
foreign personal holding company ("FPHC") if in any taxable year five or fewer
individuals who are U.S. citizens or residents own (directly or constructively
through certain attribution rules) more than 50% of the voting power or the
value of the outstanding Common Shares. Classification as an FPHC would
generally result in each U.S. shareholder who held Common Shares on the last
day of the taxable year of the Issuer having to include in gross income as a
dividend such shareholder's pro rata portion of undistributed income of the
Issuer and of any non-U.S. subsidiaries that are also FPHCs. The Issuer has
been advised by an officer of Praxair that Praxair's shares are held primarily
by large institutional investors, such as banks, insurance companies, pension
funds and corporate investors, and that, to the best of his knowledge and
belief, five or fewer United States citizens or residents do not own more than
50% of the vote or value of the shares of Praxair. Based upon such
information, the Issuer believes that at the time of the Common Share
Offering, it will not be an FPHC.
Controlled Foreign Corporation Classification
The Company would be classified as a controlled foreign corporation if any
United States person acquires 10% or more of the shares of the Issuer
(including ownership through the attribution rules of Section 958 of the Code)
and the sum of the percentage ownership by all such persons exceeds 50%
(by voting power or value) of the Issuer's stock. In that event, all U.S.
Holders of 10% or more of the Common Shares will be subject to taxation under
Subpart F of the Code, including possible taxation of such U.S. Holders based
on certain income of the Issuer even in the absence of distributions of such
income by the Issuer.
Back-up Withholding and Information Reporting
Information reporting may apply to certain dividends on the Common Shares
and to the proceeds of sale of the Common Shares paid to U.S. Holders other
than certain exempt recipients (such as corporations). A 31% back-up
withholding tax (which is a refundable credit against the otherwise applicable
tax) may apply to such payments if the U.S. Holder fails to provide an
accurate taxpayer identification number or certification of exempt status.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Common Share Offering and the contribution to the
Management Plan, the Issuer will have 12,517,552 outstanding Common Shares,
including 1,000,000 Common Shares owned by the Selling Shareholder (none if
the Underwriters' over-allotment option is exercised in full) and 500,702
shares reserved for issuance upon exercise of outstanding stock options. Of
these shares, the 10,500,000 Common Shares sold in the Common Share Offering
(11,500,000 if the Underwriters' over-allotment option is exercised in full)
will be freely tradeable without restrictions or further registration under
the Securities Act, except for any shares purchased by an "affiliate" (as that
term is defined in Rule 144 under the Securities Act ("Rule 144")) of the
Company, which will be subject to the resale limitations of Rule 144 under the
Securities Act.
The 1,000,000 Common Shares that the Selling Shareholder will hold upon
completion of the Common Share Offering (none if the Underwriters' over-
allotment option is exercised in full), up to 1,251,755 Common Shares that may
be issuable to directors of the Issuer or employees of the Company under the
Incentive Plan, the 1,017,552 Management Plan Shares as described under
"Management--Compensation and Benefits--Special Stock-Based, Long-Term
Compensation Related to the Common Share Offering" and any Common Shares
purchased by affiliates may be sold by the respective holders thereof only
pursuant to an effective registration statement under the Securities Act,
pursuant to Rule 144 under the Securities Act or in accordance with an
exemption under the Securities Act.
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In general, under Rule 144 as currently in effect, a person (including the
"affiliate") who beneficially owns shares that are "restricted securities" as
to which at least two years have elapsed since the later of the date of
acquisition of such securities from the issuer or the acquisition from an
affiliate of the issuer, and any affiliate who owns shares that are not
"restricted securities," is entitled to sell, within any three- month period,
a number of shares that does not exceed (together with sale by other persons
required to be aggregated) the greater of 1% of the then outstanding Common
Shares (approximately 125,176 shares following completion of the Common Share
Offering) or the average weekly trading volume in the Common Shares in
composite trading on all exchanges during the four calendar weeks preceding
such sale. A person (or persons whose shares are aggregated) who is not deemed
an "affiliate" of the Company and who has beneficially owned restricted
securities as to which at least three years have elapsed since the later of
the date of the acquisition of such securities from the issuer or the
acquisition from an affiliate of the issuer is entitled to sell such shares
under Rule 144 without regard to the volume limitations described above. The
foregoing summary of Rule 144 is not intended to be a complete description
thereof.
The Issuer has granted registration rights to Praxair pursuant to which
Praxair has certain rights to demand registrations of the Common Shares held
by the Selling Shareholder (or its transferee) at the Issuer's expense as well
as the right to include such shares in registration statements filed by the
Issuer.
Prior to the Common Share Offering, there has been no public market for the
Common Shares, and no prediction can be made as to the effect, if any, that
market sales of Common Shares, or the availability of such shares for sale,
will have on the market price of the Common Shares prevailing from time to
time. Nevertheless, sales of substantial amounts of Common Shares in the
public market, or the perception that such sales could occur, could adversely
affect prevailing market prices for the Common Shares. In connection with the
Common Share Offering, subject to certain exceptions, the Issuer, the Selling
Shareholder and each of its directors and executive officers have agreed not
to sell, grant any option to sell or otherwise dispose of, directly or
indirectly, any Common Shares or securities convertible into or exercisable
for Common Shares or warrants or other rights to purchase Common Shares or
permit the registration of Common Shares for a period of 180 days after the
date of this Prospectus without the prior consent of Credit Suisse First
Boston Corporation.
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UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1997 (the "U.S. Underwriting Agreement"), the
underwriters named below (the "U.S. Underwriters"), for whom Credit Suisse
First Boston Corporation, Goldman, Sachs & Co., Smith Barney Inc. and UBS
Securities LLC are acting as representatives (the "Representatives"), have
severally but not jointly agreed to purchase from the Selling Shareholder the
following respective numbers of U.S. Shares:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER U.S. SHARES
----------- -----------
<S> <C>
Credit Suisse First Boston Corporation...........................
Goldman, Sachs & Co. ............................................
Smith Barney Inc. ...............................................
UBS Securities LLC...............................................
---------
Total........................................................ 8,400,000
=========
</TABLE>
The U.S. Underwriting Agreement provides that the obligations of the U.S.
Underwriters are subject to certain conditions precedent and that the U.S.
Underwriters will be obligated to purchase all the U.S. Shares offered hereby
(other than those shares covered by the over-allotment option described below)
if any are purchased. The U.S. Underwriting Agreement provides that, in the
event of a default by a U.S. Underwriter, in certain circumstances the
purchase commitments of non-defaulting U.S. Underwriters may be increased or
the U.S. Underwriting Agreement may be terminated.
The Issuer and the Selling Shareholder have entered into a Subscription
Agreement (the "Subscription Agreement") with the Managers of the
International Offering (the "Managers") providing for the concurrent offer and
sale of the International Shares outside the United States and Canada. The
closing of the U.S. Offering is a condition to the closing of the
International Offering and vice versa.
The Selling Shareholder has granted to the U.S. Underwriters and the
Managers an option, exercisable by Credit Suisse First Boston Corporation,
expiring at the close of business on the 30th day after the date of this
Prospectus, to purchase up to 1,000,000 additional shares at the initial
public offering price, less the underwriting discounts and commissions, all as
set forth on the cover page of this Prospectus. Such option may be exercised
only to cover over-allotments, if any, in the sale of the Common Shares
offered hereby. To the extent that this option to purchase is exercised, each
U.S. Underwriter and each Manager will become obligated, subject to certain
conditions, to purchase approximately the same percentage of shares being sold
to the U.S. Underwriters and the Managers as the number of U.S. Shares set
forth next to such U.S. Underwriter's name in the preceding table and as the
number set forth next to such Manager's name in the corresponding table in the
prospectus relating to the International Offering bears to the sum of the
total number of Common Shares in such tables.
The Company and the Selling Shareholder have been advised by the
Representatives that the U.S. Underwriters propose to offer the U.S. Shares in
the United States and Canada to the public initially at the offering price set
forth in the cover page of this Prospectus and, through the Representatives,
to certain dealers at such price less a concession of $ per share, and the
U.S. Underwriters and such dealers may allow a discount of $ per share on
sales to certain other dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
Representatives.
The public offering price, the aggregate underwriting discounts and
commissions per share and per share concession and discount to dealers for the
U.S. Offering and the concurrent International Offering will be identical.
Pursuant to an Agreement between the U.S. Underwriters and Managers (the
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"Intersyndicate Agreement") relating to the Common Share Offering, changes in
the public offering price, concession and discount to dealers will be made
only upon the mutual agreement of Credit Suisse First Boston Corporation, as
representative of the U.S. Underwriters, and Credit Suisse First Boston
(Europe) Limited ("CSFBL"), on behalf of the Managers.
Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters has
agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any Common Shares or distribute any prospectus
relating to the Common Shares to any person outside the United States or
Canada or to any other dealer who does not so agree. Each of the Managers has
agreed or will agree that, as part of the distribution of the International
Shares and subject to certain exceptions, it has not offered or sold, and will
not offer or sell, directly or indirectly, any Common Shares or distribute any
prospectus relating to the Common Shares in the United States or Canada or to
any other dealer who does not so agree. The foregoing limitations do not apply
to stabilization transactions or to transactions between the U.S. Underwriters
and the Managers pursuant to the Intersyndicate Agreement. As used herein,
"United States" means the United States of America (including the States and
the District of Columbia), its territories, possessions and other areas
subject to its jurisdiction, "Canada" means Canada, its provinces,
territories, possessions and other areas subject to its jurisdiction, and an
offer or sale shall be in the United States or Canada if it is made to (i) any
individual resident in the United States or Canada or (ii) any corporation,
partnership, pension, profit sharing or other trust or other entity (including
any such entity acting as an investment adviser with discretionary authority)
whose office most directly involved with the purchase is located in the United
States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the U.S.
Underwriters and the Managers of such number of Common Shares as may be
mutually agreed upon. The price of any shares so sold will be the public
offering price, less such amount as may be mutually agreed upon by Credit
Suisse First Boston Corporation, as representative of the U.S. Underwriters,
and CSFBL, on behalf of the Managers, but not exceeding the selling concession
applicable to such shares. To the extent there are sales between the U.S.
Underwriters and the Managers pursuant to the Intersyndicate Agreement, the
number of Common Shares initially available for sale by the U.S. Underwriters
or by the Managers may be more or less than the amount appearing on the cover
page of this Prospectus. Neither the U.S. Underwriters nor the Managers are
obligated to purchase from the other any unsold Common Shares.
The Company, certain of its officers and directors, the Selling Shareholder
and certain other shareholders have agreed (subject to certain exceptions)
that they will not offer, sell, contract to sell, announce an intention to
sell, pledge or otherwise dispose of, directly or indirectly, or file or cause
to be filed with the Securities and Exchange Commission a registration
statement under the Securities Act relating to, any Common Shares or
securities or other rights convertible into or exchangeable or exercisable for
any Common Shares, without the prior written consent of Credit Suisse First
Boston Corporation, for a period of 180 days after the date of this
Prospectus.
The Company and the Selling Shareholder have agreed to indemnify the U.S.
Underwriters and the Managers against certain liabilities, including civil
liabilities under the Securities Act, or to contribute to payments that the
U.S. Underwriters and the Managers may be required to make in respect thereof.
At the request of the Company, the U.S. Underwriters and the Managers have
reserved up to 525,000 Common Shares for sale at the initial offering price to
certain directors, officers and employees (current or former) of the Company
and its subsidiaries. The number of Common Shares available to the general
public will be reduced to the extent these persons purchase the reserved
shares. Any reserved shares that are not so purchased by such persons at the
closing of the Common Share Offerings will be offered by the U.S. Underwriters
and the Managers to the general public on the same terms as the other shares
offered by this Prospectus.
84
<PAGE>
The Representatives and the Managers have informed the Company and the
Selling Shareholder that they do not expect discretionary sales by the U.S.
Underwriters and the Managers to exceed 5% of the number of Common Shares
offered hereby.
The Common Shares have been approved for listing on the New York Stock
Exchange subject to notice of issuance. The Issuer has applied to list the
Common Shares in bearer form on the Official Market of the Amsterdam Stock
Exchange. To satisfy one of the requirements for listing of the Common Shares
on the New York Stock Exchange, the Underwriters have undertaken to sell lots
of 100 or more Common Shares to a sufficient number of persons to establish a
minimum of 2,000 round lot beneficial holders after the Common Share Offering.
Prior to the Common Share Offering, there has been no public market for the
Common Shares. The initial public offering price for the Shares will be
determined by negotiations among the Company, the Selling Shareholder and the
Representatives. In determining such price, consideration will be given to
various factors, including market conditions for initial public offerings, the
history of and prospects for the Company's business, the Company's past and
present operations, its past and present earnings and current financial
position, an assessment of the Company's management, the market of securities
of companies in businesses similar to those of the Company, the general
condition of the securities markets and other relevant factors. There can be
no assurance that the initial public offering price will correspond to the
price at which the Common Shares will trade in the public market subsequent to
the Common Share Offering or that an active trading market for the Common
Shares will develop and continue after the Common Share Offering.
The Representatives, on behalf of the U.S. Underwriters and Managers, may
engage in over-allotment, stabilizing transactions, syndicate covering
transactions and penalty bids in accordance with Regulation M under the
Securities Act of 1934 (the "Exchange Act"). Over-allotment involves syndicate
sales in excess of the offering size, which creates a syndicate short
position. Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified maximum.
Syndicate covering transactions involve purchases of the Common Shares in the
open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Representatives to reclaim
a selling concession from a syndicate member when the Common Shares originally
sold by such syndicate member are purchased in a syndicate covering
transaction to cover syndicate short positions. Such stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of the
Common Shares to be higher than it would otherwise be in the absence of such
transactions. These transactions may be effected on The New York Stock
Exchange, the Amsterdam Stock Exchange or otherwise and, if commenced, may be
discontinued at any time.
Certain of the U.S. Underwriters and Managers have from time to time
performed, and continue to perform, financial advisory, investment banking and
commercial banking services for the Company or Praxair, for which customary
compensation has been received.
85
<PAGE>
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Common Shares in Canada is being made only on a
private placement basis exempt from the requirement that the Issuer and the
Selling Shareholder prepare and file a prospectus with the securities
regulatory authorities in each province where trades of the Common Shares are
effected. Accordingly, any resale of the Common Shares in Canada must be made
in accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the Common Shares.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Common Shares in Canada who receives a purchase
confirmation will be deemed to represent to the Issuer, the Selling
Shareholder and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial securities
laws to purchase such Common Shares without the benefit of a prospectus
qualified under such securities laws, (ii) where required by law, that such
purchaser is purchasing as principal and not as agent, and (iii) such
purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U.S. federal securities
laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein and the Selling Shareholder may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such issuer or persons outside of Canada.
NOTICE OF BRITISH COLUMBIA RESIDENTS
A purchaser of Common Shares to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Shares acquired by such purchaser pursuant to this offering. Such
report must be in the form attached to British Columbia Securities Commission
Blanket Order BOR #95/17, a copy of which may be obtained from the Issuer.
Only one such report must be filed in respect of Common Shares acquired on the
same date and under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Common Shares should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the Common
Shares in their particular circumstances and with respect to the eligibility
of the Common Shares for investment by the purchaser under relevant Canadian
legislation.
86
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the offering made hereby will be
passed upon for the Issuer by Cahill Gordon & Reindel, a partnership including
a professional corporation, New York, New York. The validity of the Common
Shares offered hereby is being passed upon for the Issuer by Loeff Claeys
Verbeke, Amsterdam, The Netherlands. Certain legal matters in connection with
the Common Shares being offered hereby will be passed upon for the
Underwriters by Dewey Ballantine, New York, New York. Both Cahill Gordon &
Reindel and Loeff Claeys Verbeke have also provided certain legal services to
Praxair and its affiliates in connection with the Common Share Offering and
have represented and will continue to represent Praxair and its affiliates in
various other matters.
EXPERTS
The financial statements of the Company, as of December 31, 1996, 1995 and
1994 and for each of the three fiscal years in the period ended December 31,
1996, and the balance sheet of Chicago Bridge & Iron Company N.V. as of
December 31, 1996, included in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
Arthur Andersen LLP's address is 33 West Monroe Street, Chicago, IL 60603 in
the United States and Arthur Andersen & Co.'s address is P.O. Box 75381, 1070
AJ Amsterdam, The Netherlands.
AVAILABLE INFORMATION
The Issuer has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act,
with respect to the Common Shares offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, to which reference is hereby made. Statements made in this
Prospectus as to the contents of any contract, agreement or other document are
not necessarily complete; with respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved.
After consummation of the Common Share Offering, the Issuer will be subject
to the informational requirements of the Securities Exchange Act of 1934, as
amended, and, in accordance therewith, will file reports, proxy and
information statements and other information with the Commission. Such
reports, proxy and information statements and other information and the
Registration Statement and exhibits and schedules thereto filed by the Issuer
with the Commission can be inspected and copied at the Public Reference
section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission
located at 7 World Trade Center, 15th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference section of
the Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission maintains an Internet web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission (http://www.sec.gov).
The Issuer will also comply with its obligations under the law of The
Netherlands to prepare annual financial statements complying with Netherlands
corporate law and deposit the same at the Commercial Register of the Chamber
of Commerce and Industry in Amsterdam, The Netherlands.
87
<PAGE>
SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES
The Issuer is a Netherlands company and a substantial portion of its assets
are located outside the United States. In addition, certain members of the
Management and Supervisory Boards of the Issuer are residents of countries
other than the United States. The Company has been advised by its Netherlands
counsel, Loeff Claeys Verbeke, that as a result, it may not be possible for
investors to effect service of process within the United States upon such
persons or to enforce against such persons or the Issuer judgments of courts
of the United States predicated upon civil liabilities under the United States
federal securities laws. Since there is no treaty between the United States
and The Netherlands providing for the reciprocal recognition and enforcement
of judgments, United States judgments are not enforceable in The Netherlands.
However, a final judgment for the payment of money obtained in a United States
court, which is not subject to appeal or any other means of contestation and
is enforceable in the United States, would in principle be upheld and be
regarded by a Netherlands court of competent jurisdiction as conclusive
evidence when asked to render a judgment in accordance with such final
judgment by a United States court, without substantive re-examination or
relitigation on the merits of the subject matter thereof, provided that such
judgment has been rendered by a court of competent jurisdiction, in accordance
with rules of proper procedure, that it has not been rendered in proceedings
of a penal or revenue nature and that its content and possible enforcement are
not contrary to public policy or public order of The Netherlands.
Notwithstanding the foregoing, there can be no assurance that United States
investors will be able to enforce against the Issuer, or members of the
Management or Supervisory Boards, or certain experts named herein who are
residents of The Netherlands or other countries outside the United States, any
judgments in civil and commercial matters, including judgments under the
federal securities laws. In addition, there is doubt as to whether a
Netherlands court would impose civil liability on the Issuer or on the members
of the Management or Supervisory Boards in an original action predicated
solely upon the federal securities laws of the United States brought in a
court of competent jurisdiction in The Netherlands against the Issuer or such
members.
88
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS (POST-PRAXAIR ACQUISITION):
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheet as of December 31, 1996....................... F-3
Consolidated Income Statement for the Year Ended December 31, 1996....... F-4
Consolidated Statement of Changes in Shareholder's Equity for the Year
Ended December 31, 1996................................................. F-5
Consolidated Statement of Cash Flows for the Year Ended December 31,
1996.................................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
CONSOLIDATED FINANCIAL STATEMENTS (PRE-PRAXAIR ACQUISITION):
Report of Independent Public Accountants................................. F-22
Consolidated Balance Sheets as of December 31, 1995 and 1994............. F-23
Consolidated Income Statements for the Years Ended December 31, 1995 and
1994.................................................................... F-24
Consolidated Statements of Changes in Shareholder's Equity for the Years
Ended December 31, 1995 and 1994........................................ F-25
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995 and 1994........................................................... F-26
Notes to Consolidated Financial Statements............................... F-27
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of
Chicago Bridge & Iron Company:
We have audited the accompanying consolidated balance sheet of CHICAGO
BRIDGE & IRON COMPANY (a Delaware corporation) AND SUBSIDIARIES as of December
31, 1996 and the related consolidated statements of income, changes in
shareholder's equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Chicago Bridge & Iron
Company and Subsidiaries as of December 31, 1996 and the results of its
operations and cash flows for the year then ended in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
February 7, 1997
F-2
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................................... $ 11,864
Accounts receivable............................................. 96,782
Receivable from Affiliates...................................... 4,893
Contracts in progress with earned revenues exceeding related
progress billings.............................................. 79,782
Assets held for sale............................................ 5,374
Other current assets............................................ 7,364
--------
Total current assets.......................................... 206,059
--------
Assets held for sale.............................................. 5,118
Property and equipment............................................ 107,875
Goodwill.......................................................... 19,027
Other non-current assets.......................................... 13,417
--------
Total assets.................................................. $351,496
========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Notes payable................................................... $ 3,114
Accounts payable................................................ 24,804
Accrued liabilities............................................. 44,513
Contracts in progress with progress billings exceeding related
earned revenues................................................ 34,727
Payable to Parent Company....................................... 6,008
Income taxes payable............................................ 4,440
--------
Total current liabilities..................................... 117,606
--------
Debt to Parent Company............................................ 53,907
Minority interest in subsidiaries................................. 7,428
Other non-current liabilities..................................... 81,809
--------
Total liabilities............................................. 260,750
--------
SHAREHOLDER'S EQUITY:
Common stock, $1 par value, 1,000 authorized shares; 1,000 is-
sued and outstanding in 1996................................... 1
Additional paid-in capital...................................... 79,958
Retained earnings............................................... 11,562
Cumulative translation adjustment............................... (775)
--------
Total shareholder's equity.................................... 90,746
--------
Total liabilities and shareholder's equity.................... $351,496
========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
F-3
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Revenues
Third party customers............................................. $650,337
Affiliates of Praxair............................................. 13,384
--------
Total revenues................................................... 663,721
Cost of revenues
Third party customers............................................. $578,933
Affiliates of Praxair............................................. 11,097
--------
Total cost of revenues........................................... 590,030
--------
Gross profit..................................................... 73,691
Selling and administrative expenses................................ 42,921
Gain on sale of assets............................................. (493)
--------
Income from operations........................................... 31,263
Interest expense................................................... (5,002)
Other income....................................................... 990
--------
Income before taxes and minority interest........................ 27,251
Income tax expense................................................. 7,789
--------
Income before minority interest.................................. 19,462
Minority interest in income........................................ (2,900)
--------
Net income....................................................... $ 16,562
========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
F-4
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL ADVANCES CUMULATIVE TOTAL
COMMON PAID-IN RETAINED TO PARENT TRANSLATION SHAREHOLDER'S
STOCK CAPITAL EARNINGS COMPANY ADJUSTMENT EQUITY
------ ---------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1995................... $ 1 $ 185,493 $ 159,672 $(142,786) $(15,873) $186,507
Praxair acquisition ad-
justments.............. -- 52,292 (159,672) -- 15,873 (91,507)
---- --------- --------- --------- -------- --------
BALANCE AT JANUARY 1,
1996................... 1 237,785 -- (142,786) -- 95,000
Net income.............. -- -- 16,562 -- -- 16,562
Advances to Parent
Company................ -- -- -- (15,041) -- (15,041)
Return of capital
dividend to Parent
Company................ -- (157,827) -- 157,827 -- --
Cash dividend payable to
Parent Company......... -- -- (5,000) -- -- (5,000)
Translation adjustment.. -- -- -- -- (775) (775)
---- --------- --------- --------- -------- --------
BALANCE AT DECEMBER 31,
1996................... $ 1 $ 79,958 $ 11,562 $ -- $ (775) $ 90,746
==== ========= ========= ========= ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
F-5
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income................................................. $ 16,562
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................ 17,281
Decrease in deferred income taxes........................ 4,251
Gain on sale of fixed assets............................. (493)
Change in operating assets and liabilities (see below)..... (12,442)
--------
Net Cash Provided by Operating Activities................ 25,159
--------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of fixed assets and investments......... 9,077
Capital expenditures....................................... (20,425)
--------
Net Cash Used in Investing Activities.................... (11,348)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Advance to Parent Company.................................. (15,041)
Increase in notes payable.................................. 1,337
Repayment of Debt to Parent Company........................ (1,093)
--------
Net Cash Used in Financing Activities.................... (14,797)
--------
Decrease in cash & cash equivalents.......................... (986)
Cash and cash equivalents, beginning of the year............. 12,850
--------
Cash and cash equivalents, end of the year................... $ 11,864
========
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Decrease in receivables, net............................... $ 9,213
Increase in contracts in progress, net..................... (24,950)
Decrease in other current assets........................... 8,689
Decrease in accounts payable & accrued liabilities......... (5,740)
Increase in payable to Parent Company...................... 1,088
Increase in income tax payable............................. 404
Increase other............................................. (1,146)
--------
Total.................................................... $(12,442)
========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest................................... $ 3,902
Cash paid for income taxes............................... $ 3,536
SUPPLEMENTAL NON-CASH DISCLOSURE:
Return of capital dividend to Parent Company............. $157,827
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
F-6
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(IN THOUSANDS)
1. ORGANIZATION AND NATURE OF OPERATIONS:
Chicago Bridge & Iron Company and Subsidiaries ("the Company") is a global
engineering and construction company specializing in the engineering and
design, materials procurement, fabrication, erection, repair and modification
of steel tanks, other steel plate structures and associated systems such as
petroleum terminals, refinery pressure vessels, low temperature and cryogenic
storage facilities and elevated water storage tanks. Based on its knowledge of
and experience in its industry, the Company believes it is the leading
provider of field erected steel tanks and other steel plate structures,
associated systems and related services in North America and one of the
leading providers of these specialized products and services in the world. The
Company seeks to maintain its leading industry position by focusing on using
its technological expertise in design, metallurgy and welding, along with its
ability to complete logistically and technically complex metal plate projects
virtually anywhere in the world. The Company has been continuously engaged in
the engineering and construction industry since its founding in 1889.
The worldwide petroleum and petrochemical industry has been the largest
sector of the Company's revenues, accounting for approximately 60% of revenues
in 1996. Numerous factors influence capital expenditure decisions in this
industry which are beyond the control of the Company. Therefore, no assurance
can be given that the Company's business, financial condition and results of
operations will not be adversely effected because of reduced activity or
changing taxes, price controls and laws and regulations related to the
petroleum and petrochemical industry.
During the periods and as of the dates for which the financial statements
are presented, the Company was a wholly owned subsidiary of Chi Bridge
Holdings, Inc., which in turn was a wholly owned subsidiary of CBI Industries,
Inc. ("Industries"). On January 12, 1996, pursuant to the merger agreement
dated December 22, 1995, Industries became a subsidiary of Praxair, Inc.
("Praxair"). This merger transaction was reflected in the Company's
consolidated financial statements as a purchase effective to January 1, 1996
("Merger Date"). Accordingly, the historical information provided for the
periods prior to January 1, 1996 ("Pre- Praxair Acquisition") will not be
comparable to subsequent financial information ("Post-Praxair Acquisition").
Effective December 19, 1996, Industries was merged with and into Praxair, with
no consequences to the Company's financial statements.
The fair value assigned to the Company as of the Merger Date was $150,000,
excluding any bank or assumed debt ("Merger Value"). This Merger Value
approximates the portion of the total Industries purchase price that relates
to the Company. The allocation of this Merger Value to the fair value of
individual assets and liabilities is based on the respective fair values. The
allocation of this fair value resulted in the following opening balance sheet:
F-7
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PURCHASE
HISTORICAL ACCOUNTING OPENING
BALANCE SHEET ADJUSTMENTS BALANCE SHEET
DECEMBER 31, 1995 INCREASE/ JANUARY 1, 1996
(PRE-PRAXAIR) (DECREASE) (POST-PRAXAIR)
----------------- ----------- ---------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents.... $ 12,850 $ -- $ 12,850
Accounts receivable.......... 106,634 4,095 (A) 110,729
Contracts in progress........ 70,918 -- 70,918
Assets held for sale......... 5,157 4,374 (B) 9,531
Deferred income taxes........ 7,369 (5,507)(C) 1,862
Other current assets......... 14,617 (192)(A) 14,425
--------- --------- ---------
Total current assets....... 217,545 2,770 220,315
Property and equipment....... 100,496 4,307 (B) 104,803
Assets held for sale......... 2,235 7,527 (B) 9,762
Deferred income taxes........ 28,405 (28,405)(C) --
Goodwill..................... -- 19,515 (D) 19,515
Other non-current assets..... 7,444 3,238 (A) 10,682
--------- --------- ---------
Total Assets............... $ 356,125 $ 8,952 $ 365,077
--------- --------- ---------
LIABILITIES & SHAREHOLDER'S
EQUITY LIABILITIES
Contracts in progress........ $ 47,660 $ 3,153 (A) $ 50,813
Other current liabilities.... 59,545 5,048 (E) 64,593
--------- --------- ---------
Total current liabilities.. 107,205 8,201 115,406
Long-Term debt to Parent
Company..................... -- 55,000 (F) 55,000
Other non-current
liabilities................. 62,413 37,258 (E) 99,671
--------- --------- ---------
Total liabilities.......... 169,618 100,459 270,077
SHAREHOLDER'S EQUITY
Common stock................. 1 -- 1
Additional paid-in capital... 185,493 52,292 (A) 237,785
Retained earnings............ 159,672 (159,672)(G) --
Advances to Parent Company... (142,786) -- (142,786)
Cumulative translation
adjustment.................. (15,873) 15,873 (G) --
--------- --------- ---------
Total shareholder's
equity.................... 186,507 (91,507) 95,000
Total liabilities &
shareholder's equity........ $ 356,125 $ 8,952 $ 365,077
========= ========= =========
</TABLE>
- --------
Description of Purchase Accounting Adjustments:
(A) To record other estimated fair value and purchase accounting adjustments.
(B) To record estimated fair value of property, equipment and assets held for
sale and to reclassify certain assets from property to assets held for
sale.
(C) To write-off $36,231 of U.S. deferred tax assets which may not be
realizable on a stand-alone company basis and to reclassify $2,319 of
foreign deferred tax liabilities.
(D) To record goodwill which will be amortized over 40 years.
(E) Relates primarily to recognition of the unamortized portion of actuarial
gains and losses and other adjustments relating to the Company's defined
benefit and postretirement plans, and the recognition of severance for
personnel reductions.
(F) To record the assumption of Praxair acquisition related debt in the
Company's financial statements.
(G) To eliminate historical retained earnings and cumulative translation
adjustment.
F-8
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES:
Basis of Consolidation
The consolidated financial statements include all significant subsidiaries
where control exists and are attributable to the Company's continuing
operations. Significant intercompany balances and transactions are eliminated
in consolidation. Investments in non-majority owned affiliates are accounted
for by the equity method.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities.
Management is also required to make judgments regarding the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
Revenues are recognized using the percentage of completion method. Contract
revenues are accrued based generally on the percentage that costs-to-date bear
to total estimated costs. The cumulative impact of revisions in total cost
estimates during the progress of work is reflected in the period in which
these changes become known. Contract revenue reflects the original contract
price adjusted for agreed upon claim and change order revenue, if any. Losses
expected to be incurred on jobs in process, after consideration of estimated
minimum recoveries from claims and change orders, are charged to income as
soon as such losses are known. A significant portion of the Company's work is
performed on a fixed price or lump sum basis. The balance of projects
primarily are performed on variations of cost reimbursable and target, fixed
or lump sum price approaches. Progress billings in accounts receivable are
currently due and exclude retentions until such amounts are due in accordance
with contract terms. Cost of revenues include direct contract costs such as
material and construction labor, and indirect costs which are attributable to
contract activity.
Foreign Currency Translation and Exchange
The primary effects of foreign currency translation adjustments are
recognized in shareholder's equity as cumulative translation adjustment.
Charges for foreign currency exchange losses are included in the determination
of income, and were $587 in 1996.
Cash Equivalents
Cash equivalents are considered to be all highly liquid securities with
original maturities of three months or less.
Property and Equipment
Property and equipment are recorded at cost and depreciated on a straight-
line basis over their estimated useful lives: buildings and improvements, 10
to 40 years; plant and field equipment, 3 to 20 years. Renewals and
betterments which substantially extend the useful life of an asset are
capitalized and depreciated. Depreciation expense was $16,793 for the year
ended December 31, 1996.
F-9
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." This adoption did not
cause a material effect on the company's financial position or results of
operations.
Goodwill
The excess of cost over the fair value of tangible net assets of the Company
is recorded as goodwill on the balance sheet and is amortized on a straight-
line basis over 40 years. Amortization expense and accumulated amortization
was $488 in 1996. The carrying value of goodwill is reviewed periodically
based on the undiscounted cash flows of the entity acquired over the remaining
amortization period. If this review indicates that goodwill is not
recoverable, the Company's carrying value of the goodwill is reduced by the
estimated shortfall of undiscounted cash flows.
Assets Held for Sale
The Company separately classified several assets held for sale as of
December 31, 1996. These assets are valued at estimated realizable value and
were classified as current and non-current based on their expected selling
date.
Financial Instruments
The Company uses various methods and assumptions to estimate the fair value
of each class of financial instrument. Due to their nature, the carrying value
of cash and temporary cash investments, accounts receivable and accounts
payable approximates fair value. The Company's other financial instruments are
not significant. For the year ended December 31, 1996, the Company recorded
interest expense on the Debt to Parent Company, notes payable and certain
other interest bearing obligations.
Forward Contracts
The Company periodically uses forward contracts to hedge foreign currency
assets and foreign currency payments that the Company is committed to make in
connection with the normal course of its business. Gains or losses on forward
contracts designated to hedge a foreign currency transaction are included in
the measurement of income. At December 31, 1996, the Company had a forward
contract, which will mature in 1997, for foreign currencies totaling $4,005.
The fair value of the forward contract approximated its carrying value in the
financial statements at December 31, 1996. The counterparties to the Company's
forward contracts are major financial institutions, which the Company
continually evaluates as to their creditworthiness. The Company has never
experienced, nor does it anticipate, nonperformance by any of its
counterparties.
Research and Development
Expenditures for research and development activities, which are charged to
income as incurred, amounted to $730 in 1996.
F-10
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
3. TRANSACTIONS WITH PARENT COMPANY:
Related-party transactions with Industries or Praxair (the "Parent Company")
not disclosed elsewhere in the financial statements are as follows:
Revenues from Affiliates
The Company provides services to affiliates of the Parent Company for the
construction and expansion of facilities and for certain repair and
maintenance work. The balance due for these services is reflected as
Receivable from Affiliates. During the year ended December 31, 1996, the
Company recorded revenues from affiliates of $13,384. Gross profit, net of
overhead costs, was $2,287 for the year ended December 31, 1996. The Company
believes these revenues and gross profits approximate those of similar
services provided to independent third parties.
Advances to Parent Company
Advances to Parent Company represent advances to the Parent Company and its
affiliates from operating cash flows generated by the Company, net of cash
received from the Parent Company and its affiliates to fund operating and
investing activities. On December 31, 1996, the Company declared a dividend to
Praxair for the September 30, 1996 balance of the Advance to Parent Company.
Advance activity subsequent to September 30, 1996 was included in the Debt to
Parent Company account.
Debt to Parent Company
In conjunction with Praxair's acquisition of Industries effective January 1,
1996, the Company assumed $55,000 of acquisition related debt payable to
Praxair. Subsequent to September 30, 1996, the Company's long-term debt
balance increases when the Company requires cash and decreases when a cash
surplus is available to reduce the long-term debt balance. The debt matures no
earlier than January 1, 1998 and the Company pays interest at 7% per annum on
a quarterly basis. Interest expense for the year ended December 31, 1996 was
$3,850. In addition, approximately $22,000 of letters of credit were
outstanding on behalf of Praxair at December 31, 1996 relating to the
Company's insurance program.
In contemplation of the public equity offering, the Company expects to enter
into a long-term credit agreement with a financial institution (or group of
financial institutions) in order to repay the Debt to Parent Company and to
provide liquidity to support letters of credit and working capital
requirements.
Payable to Parent Company
Payable to Parent Company includes a $5,000 dividend to Praxair payable in
the first quarter of 1997 and interest accrued on the Debt to Parent Company,
net of an income tax receivable from the Parent Company.
Corporate Services
The Parent Company provided certain support services to the Company through
June 30, 1996, including legal, finance, tax, human resources, information
services and risk management. Charges for these services were allocated by the
Parent Company to the Company based on various methods which reasonably
approximate the actual costs incurred. The allocations recorded by the Company
for these
F-11
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
corporate services in the accompanying consolidated income statements were
approximately $4,732 for the year ended December 31, 1996. Subsequent to June
30, 1996, the Company performed substantially all of these support services
internally. The amounts allocated by the Parent Company are not necessarily
indicative of the actual costs which may have been incurred had the Company
operated as an entity unaffiliated with the Parent Company. However, the
Company believes that the allocation is reasonable and in accordance with the
Securities and Exchange Commission's Staff Accounting Bulletin No. 55.
4. UNCOMPLETED CONTRACTS:
Contract terms generally provide for progress billings based on completion
of certain phases of the work. The excess of revenues recognized for
construction contracts over progress billings on uncompleted contracts is
reported as a current asset and the excess of progress billings over revenues
recognized on uncompleted contracts is reported as a current liability as
follows:
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Revenues recognized on uncompleted contracts..................... $680,223
Billings on uncompleted contracts................................ 635,168
--------
$ 45,055
========
Shown on balance sheet as:
Contracts in progress with earned revenues exceeding related
progress billings............................................... $ 79,782
Contracts in progress with progress billings exceeding related
earned revenues................................................. (34,727)
--------
$ 45,055
========
</TABLE>
5. LEASES:
Certain facilities and equipment are rented under operating leases that
expire at various dates through 2006. Rental expense on operating leases was
$3,372 in 1996. Future rental commitments during the years ending in 1997
through 2001 and thereafter are $3,731, $1,817, $1,554, $1,209, $937, and
$2,578, respectively.
6. SUPPLEMENTAL BALANCE SHEET DETAIL:
The activity recorded in the allowance for doubtful accounts was as follows:
<TABLE>
<CAPTION>
DEDUCTIONS-
WRITE-OFF OF
BALANCE, PURCHASE BALANCE AT CHARGES TRADE BALANCE,
BEGINNING ACCOUNTING JANUARY 1, TO RECEIVABLES, END OF
OF THE YEAR ADJUSTMENTS 1996 EXPENSE NET OF RECOVERIES THE YEAR
----------- ----------- ---------- ------- ----------------- --------
<S> <C> <C> <C> <C> <C> <C>
For the year ended
December 31, 1996...... $6,343 $(2,000) $4,343 $2,313 $(3,609) $3,047
</TABLE>
F-12
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
The components of property and equipment are:
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Land and improvements.............................................. $ 11,954
Buildings and improvements......................................... 30,460
Plant and field equipment.......................................... 81,159
--------
Total property and equipment..................................... 123,573
Accumulated depreciation........................................... (15,698)
--------
Net property and equipment....................................... $107,875
========
The components of accrued liabilities are:
<CAPTION>
1996
--------
<S> <C>
Payroll, vacation and bonuses...................................... $ 11,533
Self-insurance reserves............................................ 10,000
Postretirement benefit obligation.................................. 1,783
Pension obligation................................................. 1,439
Other.............................................................. 19,758
--------
$ 44,513
========
The components of non-current liabilities are:
<CAPTION>
1996
--------
<S> <C>
Self-insurance reserves............................................ $ 27,608
Postretirement benefit obligation.................................. 28,148
Pension obligation................................................. 15,831
Other.............................................................. 10,222
--------
$ 81,809
========
</TABLE>
7. COMMITMENTS AND CONTINGENT LIABILITIES:
Environmental Matters
A subsidiary of the Company was a minority shareholder from 1934 to 1954 in
a company which owned or operated at various times several wood treating
facilities at sites in the United States, some of which are currently under
investigation, monitoring or remediation under various environmental laws.
With respect to some of these sites, the Company has been named a potentially
responsible party ("PRP") under CERCLA and similar state laws. Without
admitting any liability, the Company has entered into a consent decree with
the federal government regarding one of these sites and has had an
administrative order issued against it with respect to another. There can be
no assurance that the Company will not be required to clean up one or more of
these sites pursuant to agency directives or court orders. The Company has
been involved in litigation concerning environmental liabilities, which are
currently indeterminable, in connection with certain of those sites. The
Company denies any liability for each site and believes that the successors to
the wood treating business are responsible for the costs of remediation of the
sites. Without admitting any liability, the Company has reached settlements
for environmental clean-up at most of the sites. In July 1996, a judgment in
favor of the Company was entered in the suit Aluminum
F-13
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
Company of America v. Beazer East, Inc. v. Chicago Bridge & Iron Company,
instituted in January 1991, before the U.S. District Court for the Western
District of Pennsylvania. In July 1996, Beazer East, Inc. filed an appeal
which is currently pending before the United States Court of Appeals for the
Third Circuit. The Company believes that an estimate of the possible loss or
range of possible loss relating to such matters cannot be made. Although the
Company believes that it is reasonably likely that it will be successful in
such appeal and that such settlements and any remaining potential liability
will not be material, there can be no assurance that the Company will be
successful in upholding the judgment in its favor or that such settlements and
any remaining potential liability will not have a materially adverse effect on
its business, financial condition or results of operations.
The Company's facilities have operated for many years and substances which
currently are or might be considered hazardous were used and disposed of at
some locations, which will or may require the Company to make expenditures for
remediation. In addition, the Company has agreed to indemnify parties to whom
it has sold facilities for certain environmental liabilities arising from acts
occurring before the dates those facilities were transferred. The Company is
aware of no manifestation by a potential claimant of awareness by such
claimant of a possible claim or assessment and does not consider it to be
probable that a claim will be asserted which claim is reasonably possible to
have an unfavorable outcome, in each case, which would be material to the
Company with respect to the matters addressed in this paragraph. The Company
believes that any potential liability for these matters will not have a
materially adverse effect on its business, financial condition or results of
operations.
Along with multiple other parties, a subsidiary of the Company is currently
a PRP under CERCLA and analogous state laws at several sites as a generator of
wastes disposed of at such sites. While CERCLA imposes joint and several
liability on responsible parties, liability for each site is likely to be
apportioned among the parties. The Company believes that an estimate of the
possible loss or range of possible loss relating to such matters cannot be
made. While it is impossible at this time to determine with certainty the
outcome of such matters and although no assurance can be given with respect
thereto, based on information currently available to the Company and based on
the Company's belief as to the reasonable likelihood of the outcomes of such
matters, the Company does not believe that its potential liability in
connection with these sites, either individually or in the aggregate, will
have a material adverse effect on its business, financial condition or results
of operations.
The Company does not anticipate incurring material capital expenditures for
environmental controls or for investigation or remediation of environmental
conditions during the current or succeeding fiscal year. Nevertheless, the
Company can give no assurance that it, or entities for which it may be
responsible, will not incur liability in connection with the investigation and
remediation of facilities it currently (or formerly) owns or operates or other
locations in a manner that could materially and adversely affect the Company.
Other Contingencies
In 1991, CBI Na-Con, Inc. ("CBI Na-Con"), a subsidiary of the Company,
installed a catalyst cooler bundle at Fina Oil & Chemical Company's ("Fina")
Port Arthur, Texas Refinery. In July 1991, Fina determined that the catalyst
cooler bundle was defective and had it replaced. Fina is seeking approximately
$20,000 in damages for loss of use of Fina's catalyst cracking unit and the
cost of replacement of the catalyst cooler bundle. On June 28, 1993, Fina
filed a complaint against CBI Na-Con before the District Court of Harris
County, Texas in Fina Oil & Chemical Company v. CBI Na-Con, Inc. et al. The
Company denies that it is liable. The Company believes that an estimate of the
possible loss or range of possible
F-14
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
loss cannot be made. While the Company believes that the claims are without
merit and/or the Company has valid defenses to such claims and that it is
reasonably likely to prevail in defending against such claims, there can be no
assurance that if the Company is finally determined to be liable for all or a
portion of any damages payable, that such liability will not have a materially
adverse effect on the Company's business, financial condition and results of
operations.
The Company is a defendant in a number of other lawsuits arising in the
normal course of its business. The Company believes that an estimate of the
possible loss or range of possible loss relating to such matters cannot be
made. While it is impossible at this time to determine with certainty the
ultimate outcome of these lawsuits and although no assurance can be given with
respect thereto, based on information currently available to the Company and
based on the Company's belief as to the reasonable likelihood of the outcomes
of such matters, the Company's management believes that adequate provision has
been made for probable losses with respect thereto as best as can be
determined at this time and that the ultimate outcome, after provisions
therefore, will not have a material adverse effect, either individually or in
the aggregate, on the Company's business, financial condition and results of
operations. The adequacy of reserves applicable to the potential costs of
being engaged in litigation and potential liabilities resulting from
litigation are reviewed as developments in the litigation warrant.
The Company is jointly and severally liable for certain liabilities of
partnerships and joint ventures. The Company has also given certain
performance guarantees arising in the ordinary course of business for its
subsidiaries and unconsolidated affiliates.
The Company has elected to retain portions of anticipated losses through the
use of deductibles and self-insured retentions for its exposures related to
third party liability and workers' compensation. Liabilities in excess of
these amounts are the responsibilities of an insurance carrier. To the extent
the Company self- insures for these exposures, reserves have been provided for
based on management's best estimates with input from the Company's legal and
insurance advisors. Changes in assumptions, as well as changes in actual
experience, could cause these estimates to change in the near term. The
Company's management believes that the reasonably possible losses, if any, for
these matters, to the extent not otherwise disclosed and net of recorded
reserves, will not be material to its financial position or its results of
operations.
8. EMPLOYEE BENEFIT PROGRAMS:
Health and Welfare Programs
The Company participated in various health and welfare programs for active
employees that were sponsored by the Parent Company. These programs include
medical, life insurance and disability. The Company reimbursed the Parent
Company for its proportionate cost of these programs based on historical
experience and relative headcount. The Company recorded expense related to the
reimbursement of these costs of approximately $8,349 for the year ended
December 31, 1996. The costs were charged to cost of revenues and selling and
administrative expense based on the number of employees in each of these
categories. The Company believes its allocation of the proportionate cost is
reasonable. Subsequent to December 31, 1996, the Company terminated its
participation in the Parent Company-sponsored plans and initiated its own
plans.
Pension and Defined Contribution Plans
The Company participates in a defined benefit plan sponsored by the Parent
Company (the "CBI Pension Plan"), three defined benefit plans sponsored by the
Company's Canadian subsidiary, and makes contributions to union sponsored
multi-employer pension plans.
F-15
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
The CBI Pension Plan, which is the principal non-contributory tax qualified
defined benefit plan, covered most U.S. salaried employees. The Company's
portion of the net pension cost for the CBI Pension Plan was $4,414 in 1996.
Benefit accruals under the CBI Pension Plan for current Company employees were
discontinued as of December 31, 1996. The Company's obligation to fund its
portion of the accumulated benefit obligation for its participants in excess
of plan assets was fixed at $17,270 as of December 31, 1996, as agreed to by
the Company and Praxair. This obligation is payable ratably to Praxair over a
twelve-year period beginning December 1, 1997 with interest at 7.5%.
The Company's three Canadian pension plans cover field, hourly, and salaried
employees. The following tables reflect the components of net pension cost and
the funded status of the Company's Canadian pension plans:
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Net Pension Cost
Service cost..................................................... $ 301
Interest cost.................................................... 1,287
Actual return on assets.......................................... (1,840)
Net amortization and deferral.................................... 0
Curtailment gain................................................. (1,899)
--------
Net defined benefit pension plans income......................... $ (2,151)
========
<CAPTION>
1996
--------
<S> <C>
Funded Status
Accumulated benefit obligation (including vested benefits of
$14,056)........................................................ $(14,172)
Additional benefits based on projected salary levels............. (2,563)
--------
Projected benefit obligation..................................... (16,735)
Market value of plan assets...................................... 28,091
--------
Plan assets over projected benefit obligation.................... 11,356
Unrecognized gains............................................... (1,075)
--------
Pension asset.................................................... $ 10,281
========
</TABLE>
The principal defined benefit plan assets consist of long-term investments,
including equity and fixed income securities and cash. The significant
assumptions used in determining the 1996 pension expense and the related
pension obligations were: discount rate of 7.5%; increase in compensation
levels of 6.0%; and long-term rate of return on plan assets of 7.5%. Of these
three Canadian plans, one was terminated in December, 1994. Since that time,
all members who elected to transfer their balance have been paid out, while
the remaining members continue to have benefits under the plan. The second
plan is in the process of being terminated. The Company recorded $1,899 in
curtailment gains related to the termination of these plans.
The Company made contributions of $2,467 in the year ended December 31, 1996
to the union sponsored multi-employer pension plans. Benefits under these
defined benefit plans are based on years of service and compensation levels.
F-16
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
The Company is the sponsor for several defined contribution plans which
cover salaried and hourly employees for which the Company does not provide
matching contributions. The cost of these plans to the Company was
insignificant in 1996.
Effective January 1, 1997, the Company adopted a new tax-qualified defined
contribution plan ("New 401(k) Plan") for eligible employees. The New 401(k)
Plan consists of a voluntary pre- tax salary deferral feature under Sections
401(k) of the Internal Revenue Code, a Company matching contribution, and an
additional Company profit-sharing contribution to be determined annually by
the Company. The New 401(k) Plan substantially replaces the current Parent
Company-sponsored pension and 401(k) plans.
Postretirement Health Care and Life Insurance Benefits
The Company participates in a health care and life insurance benefit program
sponsored by the Parent Company. This program provides certain separate health
care and life insurance benefits for employees retiring under the principal
non-contributory defined benefit pension plan of the Parent Company. Retiree
health care benefits are provided under an established formula which limits
costs based on prior years of service of retired employees. This plan may be
changed or terminated by the Parent Company at any time.
The Company reimbursed the Parent Company for its proportionate cost of this
program. The following table reflects the components of the net cost of
postretirement benefits allocated to the Company:
<TABLE>
<CAPTION>
1996 1996
ACTIVES RETIREES
------- --------
<S> <C> <C>
Net Periodic Postretirement Benefit Cost
Service cost.............................................. $375 $ --
Interest cost............................................. 582 1,318
Actual return on assets................................... -- --
---- ------
Postretirement health care and life insurance benefits
cost..................................................... $957 $1,318
==== ======
</TABLE>
The significant assumption used in determining the 1996 other postretirement
benefit expense was a discount rate of 7.0%.
Effective January 1, 1997, the Company terminated its participation in the
program sponsored by the Parent Company. The Company's obligation with respect
to existing retirees under the program was fixed at $21,400 as of December 31,
1996, as agreed to by the Company and Praxair. This obligation is payable
ratably to Praxair over a twelve-year period beginning December 1, 1997 with
interest at 7.5%. The future obligation for the Company's active employees
under this program, which amounted to $8,531 as of December 31, 1996, has been
assumed by the Company. The following table reflects the funded status
allocated to the Company for active employees:
<TABLE>
<CAPTION>
1996
-------
<S> <C>
Net Postretirement Liability
Accumulated postretirement benefit obligation--Active employees... $(7,781)
Unrecognized gain................................................. (750)
-------
Postretirement health care and life insurance benefits
(liability)...................................................... $(8,531)
=======
</TABLE>
F-17
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
9. INCOME TAXES:
The consolidated amount of current and deferred tax expense was allocated
among the members of the Parent Company group using the pro-rata method, which
assumed the Company's taxes would be filed as a part of Parent Company's
consolidated return.
The sources of income before income taxes and minority interest are:
<TABLE>
<S> <C>
U.S. ............................................................... $ 2,919
Non-U.S. ........................................................... 24,332
-------
$27,251
=======
The provision for income taxes consisted of:
Current income taxes--
U.S. ............................................................. $(1,295)
Non-U.S. ......................................................... 4,833
-------
3,538
-------
Deferred income taxes--
U.S. ............................................................. 3,087
Non-U.S. ......................................................... 1,164
-------
4,251
-------
Total provision..................................................... $ 7,789
=======
A reconciliation of income taxes at the U.S. statutory rate and the
provision for income taxes follows:
Tax provision at U.S. statutory rate................................ $ 9,538
State income taxes.................................................. 50
Non-U.S. tax rate differential...................................... (2,519)
Other, net.......................................................... 720
-------
Provision for income taxes.......................................... $ 7,789
-------
Effective tax rates............................................... 28.6%
=======
</TABLE>
F-18
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
The principal temporary differences included in deferred income taxes
reported on the December 31, 1996 balance sheet are:
<TABLE>
<S> <C>
Current Deferred Taxes
Insurance....................................................... $ 4,070
Employee Benefits............................................... 2,162
Contracts....................................................... 1,378
Other........................................................... 865
--------
8,475
Valuation Allowance............................................. (8,475)
Non-current Deferred Taxes
Employee Benefits............................................... 8,722
Insurance....................................................... 11,417
Other........................................................... 2,342
--------
22,481
Valuation Allowance............................................. (18,680)
Depreciation.................................................... (8,749)
--------
Net Deferred Tax Liabilities...................................... $ (4,948)
========
</TABLE>
The Company has established a valuation allowance of $27,155 for its
domestic deferred tax assets as realization is dependent on sustained U.S.
taxable income. The Company has not recorded any additional U.S. deferred
income taxes on indefinitely reinvested undistributed earnings of non-U.S.
subsidiaries and affiliates at December 31, 1996. If any such undistributed
earnings were distributed, foreign tax credits should become available under
current law to significantly reduce or eliminate any resulting U.S. income tax
liability
10. OPERATIONS BY GEOGRAPHIC SEGMENT:
The Company operates in four major geographic business segments: North
America; Central and South America; Europe, Africa, the Middle East; and the
Asia Pacific Area. No customer accounted for more than 10% of revenues. Export
sales, to unrelated customers outside of the United States, were less than 10%
of revenues. Transfers between geographic areas are not material. Corporate
costs were allocated to the segments based on their relative revenues, assets
or work force.
F-19
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
Revenues, income from operations and assets by geographic area are:
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Revenues
North America...................................................... $328,836
Central and South America.......................................... 90,877
Europe, Africa, Middle East........................................ 109,522
Asia Pacific Area.................................................. 134,486
--------
$663,721
========
Income from operations
North America...................................................... $ 9,469
Central and South America.......................................... 6,530
Europe, Africa, Middle East........................................ 4,298
Asia Pacific Area.................................................. 10,966
--------
$ 31,263
========
Assets
North America...................................................... $165,651
Central and South America.......................................... 31,756
Europe, Africa, Middle East........................................ 90,389
Asia Pacific Area.................................................. 63,700
--------
$351,496
========
</TABLE>
11. SUBSEQUENT EVENTS:
In November 1996, Chi Bridge Holdings, Inc. ("Bridge Holdings"), a
subsidiary of Praxair, formed its wholly owned subsidiary, Chicago Bridge &
Iron Company N.V. (the "Issuer"), a corporation organized under the laws of
the Netherlands. In December 1996, the Issuer filed a registration statement
with the Securities and Exchange Commission for an initial public offering of
a majority of the Issuer's common shares (the "Offering"). Praxair and its
affiliates will own the balance of the Issuer's shares. The net proceeds of
the Offering will remain with Praxair or its affiliates and the Issuer will
not receive any of the proceeds from the sale of its common shares.
Prior to the consummation of the Offering, Bridge Holdings and certain of
its subsidiaries will consummate a reorganization. Pursuant to the
reorganization, (i) the shares of substantially all of Chicago Bridge & Iron
Company's ("Old CBIC") non-U.S. subsidiaries will be transferred by dividend
to its parent corporation, Bridge Holdings, and contributed to Chicago Bridge
& Iron Company B.V. ("CBICBV") in exchange for newly issued common shares of
CBICBV; (ii) the shares of substantially all of Old CBIC's U.S. subsidiaries
will be transferred by dividend to Bridge Holdings and contributed to a wholly
owned subsidiary of Bridge Holdings ("New CBIC"), which will become a wholly
owned subsidiary of the Issuer after the reorganization, in exchange for newly
issued common stock of New CBIC; (iii) Bridge Holdings will contribute the
shares held by it of each of New CBIC and CBICBV to the Issuer in exchange for
additional Common Shares of the Issuer; and (iv) New CBIC will assume any
remaining assets and liabilities of Old CBIC. After the reorganization and
prior to the consummation of the Common Share Offering, Bridge Holdings will
be merged into Praxair such that Praxair will then directly own all of the
then outstanding Common Shares of the Issuer. This Reorganization will not
affect the carrying amounts of the Company's assets and liabilities, nor
result in any distribution of the Company's cash or other assets to Praxair.
F-20
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
CB&I Management Plan
The Company intends to establish the CB&I Management Plan ("the Management
Plan") in early 1997. The Management Plan is not qualified under Section
401(a) of the Internal Revenue Code ("the Code") and each participant's
account shall be treated as a separate account under Section 404(a)(5) of the
Code. The designation of the Management Plan's participants, the amount of
Company contributions to the Management Plan and the amount allocated to the
individual participants will be determined by the Issuer's Supervisory Board.
The allocation to the participant's individual accounts will occur
concurrently with the Company's contributions. Management Plan shares will
vest as determined by the Issuer's Supervisory Board. Upon vesting, the
distribution of the balance held in the individual participant's account can
be distributed at the election of the participant. Forfeitures of Management
Plan shares under the provisions of the Management Plan will be reallocated to
the other Management Plan participants. The number of initial participants is
expected to be 40 to 60.
Upon consummation of the Offering, the Company will make a contribution to
the Management Plan in the form of common shares having a value of
approximately $21,900 (assuming an initial public offering price of $21.50 per
share.) Accordingly, the Company will record a pretax charge of approximately
$21,900 at the time of the contribution to the Management Plan.
Impact of Operating as a Stand-Alone Entity
The accompanying financial statements reflect the Company's costs of doing
business, including expenses incurred by the Parent Company on the Company's
behalf in accordance with SEC Staff Accounting Bulletin No. 55. However, the
Company estimates it would have incurred increased expenses as a stand-alone
company as well as other incremental public company expenses. These additional
costs would have decreased pretax income by approximately $1,900 for the year
ended December 31, 1996.
12. QUARTERLY OPERATING RESULTS (UNAUDITED):
The following table sets forth selected unaudited consolidated income
statement information for the Company on a quarterly basis for the year ended
December 31, 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues................................ $139,721 $160,789 $183,021 $180,190
Gross profit............................ 15,733 17,690 19,585 20,683
Income from operations.................. 5,647 6,955 8,539 10,122
Net income.............................. 2,370 3,187 5,373 5,632
</TABLE>
F-21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of
Chicago Bridge & Iron Company:
We have audited the accompanying consolidated balance sheets of CHICAGO
BRIDGE & IRON COMPANY (a Delaware corporation) AND SUBSIDIARIES as of December
31, 1995 and 1994, and the related consolidated statements of income, changes
in shareholder's equity and cash flows for each of the two years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Chicago Bridge & Iron
Company and Subsidiaries as of December 31, 1995 and 1994, and the results of
its operations and cash flows for each of the two years in the period ended
December 31, 1995, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Chicago, Illinois
December 16, 1996
F-22
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 12,850 $ 16,090
Accounts receivable.................................... 106,634 101,966
Contracts in progress with earned revenues exceeding
related progress billings............................. 70,918 64,624
Assets held for sale................................... 5,157 --
Deferred income taxes.................................. 7,369 14,003
Other current assets................................... 14,617 13,300
--------- ---------
Total current assets................................. 217,545 209,983
--------- ---------
Property and equipment................................... 100,496 116,676
Assets held for sale..................................... 2,235 2,103
Deferred income taxes.................................... 28,405 22,903
Other non-current assets................................. 7,444 8,247
--------- ---------
Total assets......................................... $ 356,125 $ 359,912
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Notes payable.......................................... $ 1,777 $ 776
Accounts payable....................................... 20,389 23,948
Accrued liabilities.................................... 37,379 37,595
Contracts in progress with progress billings exceeding
related earned revenues .............................. 47,660 41,579
Income taxes payable................................... -- 7,272
--------- ---------
Total current liabilities............................ 107,205 111,170
--------- ---------
Non-current liabilities.................................. 56,811 59,346
Minority interest in subsidiaries........................ 5,602 6,295
--------- ---------
Total liabilities.................................... 169,618 176,811
--------- ---------
SHAREHOLDER'S EQUITY:
Common stock, $1 par value, 1,000 authorized shares;
1,000 issued and outstanding in 1995 and 1994......... 1 1
Additional paid-in capital............................. 185,493 185,493
Retained earnings...................................... 159,672 185,278
Advances to Parent Company............................. (142,786) (173,797)
Cumulative translation adjustment...................... (15,873) (13,874)
--------- ---------
Total shareholder's equity........................... 186,507 183,101
--------- ---------
Total liabilities and shareholder's equity........... $ 356,125 $ 359,912
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
F-23
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Revenues
Third party customers...................................... $581,564 $658,758
Affiliates of Praxair...................................... 40,374 104,045
-------- --------
Total revenues............................................ 621,938 762,803
Cost of revenues
Third party customers...................................... $579,372 $597,643
Affiliates of Praxair...................................... 34,858 94,623
-------- --------
Total cost of revenues.................................... 614,230 692,266
-------- --------
Gross profit.............................................. 7,708 70,537
Selling and administrative expenses......................... 43,023 45,503
Special charges............................................. 5,230 16,990
Gain on sale of assets...................................... (10,030) (11,360)
-------- --------
Income (loss) from operations............................. (30,515) 19,404
Interest expense............................................ (799) (180)
Other income................................................ 1,191 1,652
-------- --------
Income (loss) before taxes and minority interest.......... (30,123) 20,876
Income tax expense (benefit)................................ (8,093) 3,074
-------- --------
Income (loss) before minority interest.................... (22,030) 17,802
Minority interest in income................................. (3,576) (1,359)
-------- --------
Net income (loss)......................................... $(25,606) $ 16,443
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
F-24
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL ADVANCES CUMULATIVE TOTAL
COMMON PAID-IN RETAINED TO PARENT TRANSLATION SHAREHOLDER'S
STOCK CAPITAL EARNINGS COMPANY ADJUSTMENT EQUITY
------ ---------- -------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... $ 1 $185,493 $168,845 $(124,293) $(12,805) $217,241
Net income.............. -- -- 16,433 -- -- 16,433
Translation adjustment.. -- -- -- -- (1,069) (1,069)
Advances to Parent
Company................ -- -- -- (49,504) -- (49,504)
---- -------- -------- --------- -------- --------
Balance at December 31,
1994................... 1 185,493 185,278 (173,797) (13,874) 183,101
Net loss................ -- -- (25,606) -- -- (25,606)
Translation adjustment.. -- -- -- -- (1,999) (1,999)
Advances from Parent
Company................ -- -- -- 31,011 -- 31,011
---- -------- -------- --------- -------- --------
Balance at December 31,
1995................... $ 1 $185,493 $159,672 $(142,786) $(15,873) $186,507
==== ======== ======== ========= ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
F-25
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1995 1994
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income................................................ $(25,606) $16,443
Adjustments to reconcile net income to net cash provided
by operating activities:
Special Charge.......................................... 1,850 --
Depreciation............................................ 16,077 15,569
Decrease in deferred income taxes....................... 1,132 1,079
Gain on sale of fixed assets............................ (10,030) (4,360)
Change in operating assets and liabilities (see below).... (22,574) 9,716
-------- -------
Net Cash Provided by/(Used in) Operating Activities..... (39,151) 38,447
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of fixed assets and investments........ 16,434 29,889
Capital expenditures...................................... (14,880) (18,772)
Increase/(decrease) in equity in unconsolidated
affiliates............................................... 1,352 (2,720)
Increase in other......................................... 993 5,654
-------- -------
Net Cash Provided by Investing Activities............... 3,899 14,051
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Advance (to)/from Parent Company.......................... 31,011 (49,504)
Increase/(decrease) in notes payable...................... 1,001 (238)
-------- -------
Net Cash Provided by/(Used in) Financing Activities..... 32,012 (49,742)
-------- -------
Increase/(decrease) in cash & cash equivalents.............. (3,240) 2,756
Cash and cash equivalents, beginning of the year............ 16,090 13,334
-------- -------
Cash and cash equivalents, end of the year.................. $ 12,850 $16,090
======== =======
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Increase in receivables, net.............................. $ (4,770) $27,628
Increase in contracts in progress, net.................... (213) (10,416)
(Increase)/decrease in other current assets............... 1,731 (2,259)
Decrease in accounts payable & accrued liabilities........ (6,310) (1,753)
Increase/(decrease) in income tax payable/prepaid income
taxes.................................................... (10,320) 2,535
Decrease other............................................ (2,692) (6,019)
-------- -------
Total................................................... $(22,574) $ 9,716
======== =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest.................................... $ 829 $ 30
Cash paid for income taxes................................ $ 2,936 $ 7,137
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
F-26
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
1. ORGANIZATION AND NATURE OF OPERATIONS:
Chicago Bridge & Iron Company and Subsidiaries ("the Company") is a global
engineering and construction company specializing in the engineering and
design, materials procurement, fabrication, erection, repair and modification
of steel tanks, other steel plate structures and associated systems such as
petroleum terminals, refinery pressure vessels, low temperature and cryogenic
storage facilities and elevated water storage tanks. Based on its knowledge of
and experience in its industry, the Company believes it is the leading
provider of field erected steel tanks and other steel plate structures,
associated systems and related services in North America and one of the
leading providers of these specialized products and services in the world. The
Company seeks to maintain its leading industry position by focusing on using
its technological expertise in design, metallurgy and welding, along with its
ability to complete logistically and technically complex metal plate projects
virtually anywhere in the world. The Company has been continuously engaged in
the engineering and construction industry since its founding in 1889.
The worldwide petroleum and petrochemical industry has been the largest
sector of the Company's revenues. Numerous factors influence capital
expenditure decisions in this industry which are beyond the control of the
Company. Therefore, no assurance can be given that the Company's business,
financial condition and results of operations will not be adversely effected
because of reduced activity or changing taxes, price controls and laws and
regulations related to the petroleum and petrochemical industry.
During the periods and as of the dates for which the financial statements
are presented, the Company was a wholly owned subsidiary of Chi Bridge
Holdings, Inc., which in turn was a wholly owned subsidiary of CBI Industries,
Inc. ("Industries"). On January 12, 1996, pursuant to the merger agreement
dated December 22, 1995, Industries became a subsidiary of Praxair, Inc.
("Praxair"). This merger transaction was reflected in the Company's
consolidated financial statements as a purchase effective to January 1, 1996
("Merger Date"). Accordingly, the historical information provided for the
periods prior to January 1, 1996 ("Pre-Praxair Acquisition") will not be
comparable to subsequent financial information ("Post-Praxair Acquisition").
In December 1996, Praxair intends to merge Industries into and with Praxair,
with no consequences to the Company's financial statements.
The accompanying financial statements include selected entities which are
involved in the engineering and construction specialties of the Company and do
not include certain service related subsidiaries which are involved in
unrelated businesses. The assets, liabilities, revenues and expenses
attributable to these entities are recorded net in the Advance to Parent
Company caption of shareholder's equity. These service related subsidiaries
are being held for sale by Praxair.
2. SIGNIFICANT ACCOUNTING POLICIES:
Basis of Consolidation
The consolidated financial statements include all significant subsidiaries
where control exists and are attributable to the Company's continuing
operations. Significant intercompany balances and transactions are eliminated
in consolidation. Investments in non-majority owned affiliates are accounted
for by the equity method.
F-27
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities.
Management is also required to make judgments regarding the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
Revenues are recognized using the percentage of completion method. Contract
revenues are accrued based generally on the percentage that costs-to-date bear
to total estimated costs. The cumulative impact of revisions in total cost
estimates during the progress of work is reflected in the period in which
these changes become known. Contract revenue reflects the original contract
price adjusted for agreed upon claim and change order revenue, if any. Losses
expected to be incurred on jobs in process, after consideration of estimated
minimum recoveries from claims and change orders, are charged to income as
soon as such losses are known. A significant portion of the Company's work is
performed on a lump sum or fixed price basis. The balance of projects
primarily are performed on variations of cost reimbursable and target, fixed
or lump sum price approaches. Progress billings in accounts receivable are
currently due and exclude retentions until such amounts are due in accordance
with contract terms. Cost of revenues include direct contract costs such as
material and construction labor, and indirect costs which are attributable to
contract activity.
Foreign Currency Translation and Exchange
The primary effects of foreign currency translation adjustments are
recognized in shareholder's equity as cumulative translation adjustment.
Charges for foreign currency exchange losses are included in the determination
of income, and were $974 and $674 in 1995 and 1994, respectively.
Cash Equivalents
Cash equivalents are considered to be all highly liquid securities with
original maturities of three months or less.
Property and Equipment
Property and equipment are recorded at cost and depreciated on a straight-
line basis over their estimated useful lives: buildings and improvements, 10
to 40 years; plant and field equipment, 3 to 20 years. Renewals and
betterments which substantially extend the useful life of an asset are
capitalized and depreciated. Depreciation expense was $16,077 and $15,569 for
the years ended December 31, 1995 and 1994, respectively.
The Company expects that there will be no material effect on its financial
position or results of operations resulting from the January 1, 1996 adoption
of Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
F-28
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
Assets Held for Sale
The Company separately classified several assets held for sale as of
December 31, 1995 and 1994. These assets are valued at estimated realizable
value and were classified as current and non-current based on their expected
selling date.
Financial Instruments
The Company uses various methods and assumptions to estimate the fair value
of each class of financial instrument. Due to their nature, the carrying value
of cash and temporary cash investments, accounts receivable and accounts
payable approximates fair value. The Company's other financial instruments are
not significant. For the years ended December 31, 1995 and 1994, the Company
recorded interest expense on notes payable and certain other interest bearing
obligations.
Forward Contracts
The Company periodically uses forward contracts to hedge foreign currency
assets and foreign currency payments that the Company is committed to make in
connection with the normal course of its business. Gains or losses on forward
contracts designated to hedge a foreign currency transaction are included in
the measurement of income. At December 31, 1995, the Company had forward
contracts, which mature throughout 1996, for foreign currencies totaling
$4,900. The fair value of forward contracts approximated their carrying value
in the financial statements at December 31, 1995. The counterparties to the
Company's forward contracts are major financial institutions, which the
Company continually evaluates as to their creditworthiness. The Company has
never experienced, nor does it anticipate, nonperformance by any of its
counterparties.
Research and Development
Expenditures for research and development activities, which are charged to
income as incurred, amounted to $2,474 and $3,624 in 1995 and 1994,
respectively.
Pending Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation," which encourages, but does
not require, companies to recognize compensation expense for grants of common
stock, stock options and other equity instruments to employees based on new
fair value accounting rules. The Company does not expect to adopt the new
rules and will continue to apply the existing accounting rules contained in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." Statement No. 123 requires companies to comply with certain
disclosures about stock-based employee compensation arrangements regardless of
the method used to account for them.
3. TRANSACTIONS WITH INDUSTRIES:
Related-party transactions with Industries not disclosed elsewhere in the
financial statements are as follows:
F-29
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
Revenues from Affiliates
The Company provides services to affiliates of Industries for the
construction and expansion of facilities and for certain repair and
maintenance work. During the years ended December 31, 1995 and 1994, the
Company recorded revenues from affiliates of $40,374 and $104,045,
respectively. Gross profit, net of overhead costs, were $5,516 and $9,422 for
the years ended December 31, 1995 and 1994, respectively. The Company believes
these revenues and gross profits approximate those of similar services
provided to independent third parties.
Advances to Parent Company
Advances to Parent Company represent advances to Industries and its
affiliates from operating cash flows generated by the Company, net of cash
received from Industries and its affiliates to fund operating and investing
activities.
The Advances to Parent Company have been included as a component of
shareholder's equity as such amounts are generally not due and payable, and as
the Advances to Parent Company will be eliminated as a part of the Company's
reorganization, as discussed in Note 12.
Corporate Services
Industries provided certain support services to the Company including legal,
finance, tax, human resources, information services and risk management.
Charges for these services were allocated by Industries to the Company based
on various methods which reasonably approximate the actual costs incurred. The
allocations recorded by the Company for these corporate services in the
accompanying consolidated income statements were approximately $10,008 and
$11,599 for the years ended December 31, 1995 and 1994, respectively. The
amounts allocated by Industries are not necessarily indicative of the actual
costs which may have been incurred had the Company operated as an entity
unaffiliated with Industries. However, the Company believes that the
allocation is reasonable and in accordance with the Securities and Exchange
Commission's Staff Accounting Bulletin No. 55.
4. UNCOMPLETED CONTRACTS:
Contract terms generally provide for progress billings based on completion
of certain phases of the work. The excess of revenues recognized for
construction contracts over progress billings on uncompleted contracts is
reported as a current asset and the excess of progress billings over revenues
recognized on uncompleted contracts is reported as a current liability as
follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Revenues recognized on uncompleted contracts.............. $654,619 $785,703
Billings on uncompleted contracts......................... 631,361 762,658
-------- --------
$ 23,258 $ 23,045
======== ========
Shown on balance sheet as:
Contracts in progress with earned revenues exceeding
related progress billings.............................. $ 70,918 $ 64,624
Contracts in progress with progress billings exceeding
related earned revenues................................ 47,660 41,579
-------- --------
$ 23,258 $ 23,045
======== ========
</TABLE>
F-30
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
5. LEASES:
Certain facilities and equipment are rented under operating leases that
expire at various dates through 2006. Rental expense on operating leases was
$3,589 and $3,472 in 1995 and 1994, respectively. Future rental commitments
during the years ending in 1996 through 2000 and thereafter are $3,476,
$1,873, $1,122, $885, $597 and $1,061, respectively.
6. SUPPLEMENTAL BALANCE SHEET DETAIL:
The activity recorded in the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
DEDUCTIONS--
WRITE-
BALANCE, OFF OF TRADE BALANCE,
BEGINNING CHARGES RECEIVABLES, END OF
OF THE YEAR TO EXPENSE NET OF RECOVERIES THE YEAR
----------- ----------- ----------------- ---------
<S> <C> <C> <C> <C>
For the year ended De-
cember 31, 1995........ $2,862 $5,656 $(2,175) $6,343
For the year ended De-
cember 31, 1994........ 3,039 2,071 (2,248) 2,862
</TABLE>
The components of property and equipment are:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Land and improvements.................................. $ 10,373 $ 21,739
Buildings and improvements............................. 39,704 46,367
Plant and field equipment.............................. 164,964 189,057
--------- ---------
Total property and equipment......................... 215,041 257,163
Accumulated depreciation............................... (114,545) (140,487)
--------- ---------
Net property and equipment........................... $ 100,496 $ 116,676
========= =========
The components of accrued liabilities are:
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Self-insurance reserves................................ $ 11,700 $ 11,356
Payroll, vacation and bonuses.......................... 9,461 7,133
Accrued accounts payable............................... 6,182 5,406
Other.................................................. 10,036 13,700
--------- ---------
$ 37,379 $ 37,595
========= =========
The components of non-current liabilities are:
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Self-insurance reserves................................ $ 27,403 $ 25,504
Postretirement benefit obligation...................... 22,583 24,986
Other.................................................. 6,825 8,856
--------- ---------
$ 56,811 $ 59,346
========= =========
</TABLE>
F-31
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
7. COMMITMENTS AND CONTINGENT LIABILITIES:
Environmental Matters
A subsidiary of the Company was a minority shareholder from 1934 to 1954 in
a company which owned or operated at various times several wood treating
facilities at sites in the United States, some of which are currently under
investigation, monitoring or remediation under various environmental laws.
With respect to some of these sites, the Company has been named a potentially
responsible party ("PRP") under CERCLA and similar state laws. Without
admitting any liability, the Company has entered into a consent decree with
the federal government regarding one of these sites and has had an
administrative order issued against it with respect to another. There can be
no assurance that the Company will not be required to clean up one or more of
these sites pursuant to agency directives or court orders. The Company has
been involved in litigation concerning environmental liabilities, which are
currently indeterminable, in connection with certain of those sites. The
Company denies any liability for each site and believes that the successors to
the wood treating business are responsible for the costs of remediation of the
sites. Without admitting any liability, the Company has reached settlements
for environmental clean-up at most of the sites. In July 1996, a judgment in
favor of the Company was entered in the suit Aluminum Company of America v.
Beazer East, Inc. v. Chicago Bridge & Iron Company, instituted in January 1991
before the U.S. District Court for the Western District of Pennsylvania. In
July 1996, Beazer East, Inc. filed an appeal which is currently pending before
the United States Court of Appeals for the Third Circuit. The Company believes
that an estimate of the possible loss or range of possible loss relating to
such matters cannot be made. Although the Company believes that it is
reasonably likely that it will be successful in such appeal and that such
settlements and any remaining potential liability will not be material, there
can be no assurance that the Company will be successful in upholding the
judgment in its favor or that such settlements and any remaining potential
liability will not have a materially adverse effect on its business, financial
condition or results of operations.
The Company's facilities have operated for many years and substances which
currently are or might be considered hazardous were used and disposed of at
some locations, which will or may require the Company to make expenditures for
remediation. In addition, the Company has agreed to indemnify parties to whom
it has sold facilities for certain environmental liabilities arising from acts
occurring before the dates those facilities were transferred. The Company is
aware of no manifestation by a potential claimant of an awareness by such
claimant of a possible claim or assessment and does not consider it to be
probable that a claim will be asserted which claim is reasonably possible to
have an unfavorable outcome, in each case, which would be material to the
Company with respect to the matters addressed in this paragraph. The Company
believes that any potential liability for these matters will not have a
materially adverse effect on its business, financial condition or results of
operations.
Along with multiple other parties, a subsidiary of the Company is currently
a PRP under CERCLA and analogous state laws at several sites as a generator of
wastes disposed of at such sites. While CERCLA imposes joint and several
liability on responsible parties, liability for each site is likely to be
apportioned among the parties. The Company believes that an estimate of the
possible loss or range of possible loss relating to such matters cannot be
made. While it is impossible at this time to determine with certainty the
outcome of such matters, and although no assurance can be given with respect
thereto, based on information currently available to the Company and based on
the Company's belief as to the reasonable likelihood of the outcomes of such
matters, the Company does not believe that its liability, if any, in
connection with these sites, either individually or in the aggregate, will
have a material adverse effect on its business, financial condition or results
of operations.
F-32
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
The Company does not anticipate incurring material capital expenditures for
environmental controls or for investigation or remediation of environmental
conditions during the current or succeeding fiscal year. Nevertheless, the
Company can give no assurance that it, or entities for which it may be
responsible, will not incur liability in connection with the investigation and
remediation of facilities it currently (or formerly) owns or operates or other
locations in a manner that could materially and adversely affect the Company.
Other Contingencies
In 1991, CBI Na-Con, Inc. ("CBI Na-Con"), a subsidiary of the Company,
installed a catalyst cooler bundle at Fina Oil & Chemical Company's ("Fina")
Port Arthur, Texas Refinery. In July 1991, Fina determined that the catalyst
cooler bundle was defective and had it replaced. Fina is seeking approximately
$20,000 in damages for loss of use of Fina's catalyst cracking unit and the
cost of replacement of the catalyst cooler bundle. On June 28, 1993, Fina
filed a complaint against CBI Na-Con before the District Court of Harris
County, Texas in Fina Oil & Chemical Company v. CBI Na-Con, Inc. et al. The
Company denies that it is liable.The Company believes that an estimate of the
possible loss or range of possible loss cannot be made. While the Company
believes that the claims are without merit and/or the Company has valid
defenses to such claims and that it is reasonably likely to prevail in
defending against such claims, there can be no assurance that if the Company
is finally determined to be liable for all or a portion of any damages
payable, that such liability will not have a materially adverse effect on the
Company's business, financial condition and results of operations.
The Company is a defendant in a number of other lawsuits arising in the
normal course of its business. The Company believes that an estimate of the
possible loss or range of possible loss relating to such matters cannot be
made. While it is impossible at this time to determine with certainty the
ultimate outcome of these lawsuits, and although no assurance can be given
with respect thereto, based on information currently available to the Company
and based on the Company's belief as to the reasonable likelihood of the
outcomes of such matters, the Company's management believes that adequate
provision has been made for probable losses with respect thereto as best as
can be determined at this time and that the ultimate outcome, after provisions
therefore, will not have a material adverse effect, either individually or in
the aggregate, on the Company's business, financial condition and results of
operations. The adequacy of reserves applicable to the potential costs of
being engaged in litigation and potential liabilities resulting from
litigation are reviewed as developments in the litigation warrant.
The Company is jointly and severally liable for certain liabilities of
partnerships and joint ventures. The Company has also given certain
performance guarantees, arising from the ordinary course of business for its
subsidiaries and unconsolidated affiliates.
The Company has elected to retain portions of anticipated losses through the
use of deductibles and self-insured retentions for its exposures related to
third party liability and workers' compensation. Liabilities in excess of
these amounts are the responsibilities of an insurance carrier. To the extent
the Company self- insures for these exposures, reserves have been provided for
based on management's best estimates with input from the Company's legal and
insurance advisors. Changes in assumptions, as well as changes in actual
experience, could cause these estimates to change in the near term. The
Company's management believes that the reasonably possible losses, if any, for
these matters, to the extent not otherwise disclosed and net of recorded
reserves will not be material to its financial position or its results of
operations.
F-33
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
8. EMPLOYEE BENEFIT PROGRAMS:
Health and Welfare Programs
The Company participated in various health and welfare programs for active
employees that were sponsored by Industries. These programs include medical,
life insurance and disability. The Company reimbursed Industries for its
proportionate cost of these programs based on historical experience and
relative headcount. The Company recorded expense related to the reimbursement
of these costs of approximately $8,585 and $9,048 in the years ended December
31, 1995 and 1994, respectively. The costs were charged to cost of revenues
and selling and administrative expenses based on the number of employees in
each of these categories. The Company believes its allocation of the
proportionate cost is reasonable. Effective January 1, 1997, the Company
intends to terminate participation in the Industries-sponsored plans and
initiate its own plans.
Stock Benefit Programs
The Company participated in an employee stock ownership plan, a restricted
stock award plan, employee stock purchase plans and a stock option plan
sponsored by Industries. The Company reimbursed Industries for its
proportionate cost of these programs based on an estimate of the proportionate
costs attributable to its employees. The Company recorded expense related to
the reimbursement of these costs of approximately $7,296 and $6,400 in the
years ended December 31, 1995 and 1994, respectively. The Company believes its
allocation of the proportionate cost was reasonable. As a result of the
acquisition of Industries by Praxair, these stock programs were terminated.
Pension and Defined Contribution Plans
The Company participates in a defined benefit plan sponsored by Industries
(the "CBI Pension Plan"), three defined benefit plans sponsored by the
Company's Canadian subsidiary, and makes contributions to union sponsored
multi-employer pension plans. The CBI Pension Plan, which is the principal
non-contributory tax qualified defined benefit plan, covers most U.S. salaried
employees. The Company's Canadian pension plans cover field, hourly, and
salaried employees. The Company made contributions of $2,863 and $4,641 in the
years ended December 31, 1995 and 1994, respectively, to the union sponsored
multi-employer pension plans. Benefits under these defined benefit plans are
based on years of service and compensation levels.
The Company's net pension expense amounted to $2,692, and $3,575 in 1995 and
1994, respectively. The Company reimburses Industries for its proportionate
cost of these programs and funds pension costs as required. Separate
calculations for the Company of the components of net pension cost and funded
status are not available for the U.S. plan. The following tables reflect the
components of net pension cost and the funded status of the Industries pension
plans, which include the Company and the Company's Canadian pension plans:
<TABLE>
<CAPTION>
1995 1994
----------------- ----------------
US CANADA US CANADA
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Pension Cost
Service cost............................. $ 4,326 $ 291 $ 5,096 $ 368
Interest cost............................ 6,803 1,218 6,467 1,223
Actual return on assets.................. (15,420) (1,515) (1,262) (1,742)
Net amortization and deferral............ 9,523 (239) (2,961) (472)
-------- ------- ------- -------
Net defined benefit pension plans
expense................................. $ 5,232 $ (245) $ 7,340 $ (623)
======== ======= ======= =======
Amount allocated to Company.............. $ 2,937 $ (245) $ 4,198 $ (623)
======== ======= ======= =======
</TABLE>
F-34
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
------------------- ------------------
US CANADA US CANADA
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Funded Status
Accumulated benefit obligation
including vested benefits of $85,378
in 1995 and $68,378 in 1994.......... $ (80,495) $(15,611) $(63,112) $(14,083)
Additional benefits based on projected
salary levels........................ (24,867) (2,682) (19,266) (3,085)
--------- -------- -------- --------
Projected benefit obligation.......... (105,362) (18,293) (82,378) (17,168)
Market value of plan assets........... 73,622 23,718 52,012 24,612
--------- -------- -------- --------
Projected benefit obligation over plan
assets............................... (31,740) 5,425 (30,366) 7,444
Unrecognized loss..................... 24,648 3,042 18,511 1,818
Unrecognized net transition asset..... (545) (3,622) (606) (4,887)
Unrecognized prior service cost....... 4,516 495 4,940 545
Additional minimum liability.......... (3,753) -- (3,579) --
--------- -------- -------- --------
Pension asset/(liability)............. $ (6,874) $ 5,340 $(11,100) $ 4,920
========= ======== ======== ========
Amount allocated to Company........... $ (3,003) $ 5,340 $ (3,173) $ 4,920
========= ======== ======== ========
</TABLE>
The principal defined benefit plan assets consist of long-term investments,
including equity and fixed income securities and cash. The significant
assumptions used in determining pension expense and the related pension
obligations were: discount rate of 7.25% and 8.5% in 1995 and 1994,
respectively; increase in compensation levels of 4.5% in 1995 and 1994; and
long-term rate of return on plan assets of 9.0% in 1995 and 1994.
The Company is the sponsor for several defined contribution plans which
cover salaried and hourly employees for which the Company does not provide
matching contributions. The cost of these plans to the Company was
insignificant in 1995 and 1994.
Effective January 1, 1997, the Company adopted a new tax-qualified defined
contribution plan ("New 401(k) Plan") for eligible employees. The New 401(k)
Plan consists of a voluntary pre-tax salary deferral feature under Sections
401(k) of the Internal Revenue Code, a Company matching contribution, and an
additional Company profit-sharing contribution to be determined annually by
the Company. The New 401(k) Plan substantially replaces the current
Industries-sponsored pension and 401(k) plans.
Benefit accruals under the CBI Pension Plan for current Company employees
were discontinued as of December 31, 1996. The Company's obligation to fund
its portion of the accumulated benefit obligation for its participants in
excess of plan assets was fixed at $17,270 as of December 31, 1996, as agreed
to by the Company and Praxair. This obligation is payable ratably to Praxair
over a twelve-year period beginning December 1, 1997 with interest at 7.5%.
Of the three previously mentioned Canadian plans, one was terminated in
December 1994. Since that time, all members who elected to transfer their
balance have been paid out, while the remaining members continue to have
benefits under the plan. The second plan is in the process of being
terminated. Curtailment gains and losses for these plans were insignificant.
F-35
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
Postretirement Health Care and Life Insurance Benefits
The Company participates in a health care and life insurance benefit program
sponsored by Industries. This program provides certain separate health care
and life insurance benefits for employees retiring under the principal non-
contributory defined benefit pension plan of Industries. Retiree health care
benefits are provided under an established formula which limits costs based on
prior years of service of retired employees. This plan may be changed or
terminated by Industries at any time.
The Company's net cost of providing postretirement benefits was $2,258 and
$2,326 in 1995 and 1994, respectively. The Company reimbursed Industries for
its proportionate cost of this program. Separate calculations of the
components of the net postretirement benefit cost for the Company and the
Company's funded status are not available. The following tables reflect the
components of the net cost of postretirement benefits and the funded status
for the entire Industries plan, which includes the Company:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Net Periodic Postretirement Benefit Cost
Service cost.............................................. $ 563 $ 683
Interest cost............................................. 2,572 2,582
Actual return on assets................................... 46 --
Net amortization and deferral............................. -- (23)
-------- --------
Postretirement health care and life insurance benefits
cost..................................................... $ 3,181 $ 3,242
======== ========
Amount allocated to the Company........................... $ 2,258 $ 2,326
======== ========
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Net Postretirement Liability
Accumulated postretirement benefit obligation applicable
to:
Retirees.................................................. $(25,136) $(24,553)
Active employees.......................................... (11,042) (11,535)
-------- --------
Projected benefit obligation.............................. (36,178) (36,088)
-------- --------
Plan assets............................................... -- --
Unrecognized (gain)/loss.................................. 2,757 (1,272)
Unrecognized prior service costs.......................... 530 577
-------- --------
Postretirement health care and life insurance liability... $(32,891) $(36,783)
======== ========
Amount allocated to the Company........................... $(24,069) $(27,367)
======== ========
</TABLE>
The significant assumptions used in determining other postretirement benefit
expense were: discount rate of 7.25% and 8.5% in 1995 and 1994, respectively;
and long-term rate of return on plan assets of 9.0% in 1995 and 1994.
Effective January 1, 1997, the Company terminated its participation in the
program sponsored by Industries. The Company's obligation with respect to
existing retirees under the program was fixed at $21,400 as of December 31,
1996, as agreed to by the Company and Praxair. This obligation is payable
ratably to Praxair over a twelve-year period beginning December 1, 1997 with
interest at 7.5%. The future obligation for the Company's active employees
under this program has been assumed by the Company.
F-36
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
9. INCOME TAXES:
The Company's results are included in the consolidated Federal income tax
return filed by Industries. The consolidated amount of current and deferred tax
expense is allocated among the members of the Industries group using the pro-
rata method, which assumes the Company's taxes would be filed as a part of
Industries' consolidated return.
The sources of income/(loss) before income taxes and minority interest are:
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
U.S. .................................................... $(25,387) $ (395)
Non-U.S. ................................................ (4,736) 21,271
-------- -------
$(30,123) $20,876
======== =======
The provision/(benefit) for income taxes consisted of:
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Current income taxes--
U.S. .................................................. $ (6,678) $ (913)
Non-U.S. .............................................. 1,586 6,399
-------- -------
(5,092) 5,486
-------- -------
Deferred income taxes--
U.S. .................................................. (1,469) (1,109)
Non-U.S. .............................................. (1,532) (1,303)
-------- -------
(3,001) (2,412)
-------- -------
Total provision/(benefit)................................ $ (8,093) $ 3,074
======== =======
The components of the deferred income tax provision/(benefit) are:
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Depreciation expense..................................... $ (586) $(1,225)
Non-U.S. activity........................................ (619) (1,966)
Employee and retiree benefits............................ (255) (540)
Special charges.......................................... 250 4,069
Insurance................................................ (2,583) (909)
Other, net............................................... 792 (1,841)
-------- -------
$ (3,001) $(2,412)
======== =======
</TABLE>
F-37
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
A reconciliation of income taxes at the U.S. statutory rate and the
provision/(benefit) for income taxes follows:
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Income/(loss) before income taxes and minority
interest............................................... $(30,123) $20,876
-------- -------
Tax provision/(benefit) at U.S. statutory rate.......... $(10,543) $ 7,307
State income taxes...................................... 82 389
Non-U.S. tax rate differential and losses without tax
benefit................................................ 1,610 (4,933)
Other, net.............................................. 758 311
-------- -------
Provision/(benefit) for income taxes.................... $ (8,093) $ 3,074
======== =======
Effective tax rates................................... (26.9)% 14.7%
======== =======
The principal temporary differences included in non-current deferred income
taxes reported on the balance sheets are:
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Depreciation expense.................................... $ (8,810) $(9,595)
Non-U.S. activity....................................... 10,541 8,652
Employee and retiree benefits........................... 9,384 9,901
Special charges......................................... 2,781 2,520
Insurance............................................... 10,654 7,922
Other, net.............................................. 3,855 3,503
-------- -------
$ 28,405 $22,903
======== =======
</TABLE>
Current deferred tax assets at December 31, 1995 of $7,369 consist of
temporary differences resulting from insurance, $4,089; employee and retiree
benefits, $2,141; and other items, net $1,139.
Realization of recognized tax assets is dependent on generating sufficient
future taxable income. Although realization is not assured, management
believes it is more likely than not that all of the tax assets will be
realized on a consolidated Industries basis. The amount of the tax asset
considered realizable, however, could be reduced in the near term if estimates
of future taxable income are reduced. The Company has not recorded any
additional U.S. deferred income taxes on indefinitely reinvested undistributed
earnings of non-U.S. subsidiaries and affiliates at December 31, 1995. If any
such undistributed earnings were distributed, foreign tax credits should
become available under current law to significantly reduce or eliminate any
resulting U.S. income tax liability.
10. OPERATIONS BY GEOGRAPHIC SEGMENT:
The Company operates in four major geographic business segments: North
America; Central and South America; Europe, Africa, the Middle East; and the
Asia Pacific Area. No customer accounted for more than 10% of revenues. Export
sales, to unrelated customers outside of the United States, were less than 10%
of revenues in each period reported. Transfers between geographic areas are
not material. Corporate costs were allocated to the segments based on their
relative revenues, assets or work force.
F-38
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
Revenues, income/(loss) from operations and assets by geographic area are:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Revenues
North America........................................... $317,698 $416,138
Central and South America............................... 54,605 118,616
Europe, Africa, Middle East............................. 110,775 112,973
Asia Pacific Area....................................... 138,860 115,076
-------- --------
$621,938 $762,803
======== ========
Income/(loss) from operations
North America........................................... $(37,623) $(11,579)
Central and South America............................... 8,511 11,368
Europe, Africa, Middle East............................. (5,527) 856
Asia Pacific Area....................................... 4,124 18,759
-------- --------
$(30,515) $ 19,404
======== ========
Assets
North America........................................... $190,187 $216,584
Central and South America............................... 14,997 21,332
Europe, Africa, Middle East............................. 73,322 63,677
Asia Pacific Area....................................... 77,619 58,319
-------- --------
$356,125 $359,912
======== ========
</TABLE>
11. SPECIAL CHARGES AND GAIN ON SALE OF ASSETS:
Special Charges
<TABLE>
<CAPTION>
1995 1994
------ -------
<S> <C> <C>
Litigation.................................................... $ -- $16,990
Restructuring................................................. 5,230 --
------ -------
Total....................................................... $5,230 $16,990
====== =======
</TABLE>
In the fourth quarter of 1995, the Company recorded a special charge of
$5,230 for restructuring costs, including $1,850 in non-cash provisions for
the write-down of a facility which has been closed and $3,380 in cash
provisions for workforce reductions of $750 and idle facility costs of $2,630.
The closed facility has been classified as assets held for sale at December
31, 1995. Workforce reductions consisted of approximately 80 hourly and
salaried personnel from a manufacturing facility. Substantially all of the
cash portion of the reserves established for these restructuring costs was
expended during 1996.
In 1994, the Company recorded a special charge of $16,990 to recognize
expense related to a major litigation settlement against the Company.
Approximately $12,500 of the litigation settlement costs were paid in 1994
with the balance of $4,500 payable over 5 years together with 8% interest
thereon.
F-39
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
Gain on Sale of Asset
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Gain on sale of property, plant and equipment............... $10,030 $ 4,360
Gain from affiliated entity transactions.................... -- 7,000
------- -------
Total..................................................... $10,030 $11,360
======= =======
</TABLE>
The gain on the sale of property, plant and equipment recorded in 1995
includes the gain on certain under-utilized facilities sold as a result of the
Company's restructuring program.
In 1994, the Company recognized $7,000 in gains from affiliated entity
transactions. These gains primarily represent the gains from the sale of the
Company's minority interest in a terminal in which the Company participated in
the construction thereof and also the sale of the Company's interest in a
fabrication facility.
12. SUBSEQUENT EVENTS:
In November 1996, Chi Bridge Holdings, Inc. ("Bridge Holdings"), a
subsidiary of Praxair, formed its wholly owned subsidiary, Chicago Bridge &
Iron Company N.V. (the "Issuer"), a corporation organized under the laws of
the Netherlands. In December 1996, the Issuer filed a registration statement
with the Securities and Exchange Commission for an initial public offering of
a majority of the Issuer's common shares (the "Offering"). Praxair and its
affiliates will own the balance of the Issuer's shares. The net proceeds of
the Offering will remain with Praxair or its affiliates and the Issuer will
not receive any of the proceeds from the sale of its common shares.
Prior to the consummation of the Offering, Bridge Holdings and certain of
its subsidiaries will consummate a reorganization. Pursuant to the
reorganization (i) the shares of substantially all of Chicago Bridge & Iron
Company's ("Old CBIC") non-U.S. subsidiaries will be transferred by dividend
to its parent corporation, Bridge Holdings, and contributed to Chicago Bridge
& Iron Company B.V. ("CBICBV") in exchange for newly issued common shares of
CBICBV; (ii) the shares of substantially all of Old CBIC's U.S. subsidiaries
will be transferred by dividend to Bridge Holdings and contributed to a wholly
owned subsidiary of Bridge Holdings ("New CBIC"), which will become a wholly
owned subsidiary of the Issuer in the reorganization, in exchange for newly
issued common stock of New CBIC; (iii) Bridge Holdings will contribute the
shares held by it of each of New CBIC and CBICBV to the Issuer in exchange for
additional Common Shares of the Issuer; and (iv) New CBIC will assume any
remaining assets and liabilities of Old CBIC. After the reorganization and
prior to the consummation of the Common Share Offering, Bridge Holdings will
be merged into Praxair such that Praxair will then directly own all of the
then outstanding Common Shares of the Issuer. This Reorganization will not
affect the carrying amounts of the Company's assets and liabilities, nor
result in any distribution of the Company's cash or other assets to Praxair.
Impact of Operating as a Stand-Alone Entity
The accompanying financial statements reflect the Company's costs of doing
business, including expenses incurred by Industries on the Company's behalf in
accordance with SEC Staff Accounting Bulletin No. 55. However, the Company
estimates it would have incurred increased expenses as a stand-
F-40
<PAGE>
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
alone company as well as other incremental public company expenses. These
additional costs would have increased pretax loss by approximately $1,900 for
the year ended December 31, 1995.
13. QUARTERLY OPERATING RESULTS:
As discussed in the Notes to Consolidated Financial Statements for the two
years ended December 31, 1995, the Company recorded special charges in 1995
and 1994 for a major litigation settlement and restructuring expenses. The
fourth quarter of 1995 was negatively impacted by approximately $15,000 for
significant losses on a few contracts and approximately $8,000 of
underabsorbed overhead costs.
The following table sets forth selected unaudited consolidated statement of
income information for the Company on a quarterly basis for the years ended
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
THREE MONTHS ENDED 1995
-------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues................................ $160,584 $156,385 $147,342 $157,627
Gross profit............................ 10,338 9,019 4,451 (16,100)
Special charges........................... 0 0 0 (5,230)
Income (loss) from operations........... 1,223 (32) (2,966) (28,740)
Net income (loss)....................... 1,164 2,022 (5,263) (23,529)
<CAPTION>
THREE MONTHS ENDED 1994
-------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues................................ $161,151 $190,942 $192,821 $217,889
Gross profit............................ 19,721 18,505 12,070 20,241
Special charges......................... 0 0 (16,990) 0
Income (loss) from operations........... 10,780 9,624 (14,898) 13,898
Net income (loss)....................... 7,286 6,677 (10,713) 13,193
</TABLE>
F-41
<PAGE>
CHICAGO BRIDGE & IRON COMPANY N.V.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants................................... F-43
Balance Sheet as of December 31, 1996...................................... F-44
Notes to Balance Sheet..................................................... F-45
</TABLE>
F-42
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of Chicago Bridge & Iron Company N.V.:
We have audited the accompanying balance sheet of Chicago Bridge & Iron
Company N.V. (a Netherlands corporation) as of December 31, 1996. This balance
sheet is the responsibility of the Company's management. Our responsibility is
to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the balance
sheet is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the balance sheet.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Chicago Bridge & Iron Company
N.V. as of December 31, 1996, in conformity with accounting principles
generally accepted in the United States.
Arthur Andersen LLP
Chicago, Illinois
February 7, 1997
F-43
<PAGE>
CHICAGO BRIDGE & IRON COMPANY N.V.
BALANCE SHEET
AS OF DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<S> <C>
ASSETS
Cash........................................................................ $59
---
Total Assets.............................................................. $59
===
LIABILITIES & SHAREHOLDER'S EQUITY
SHAREHOLDER'S EQUITY:
Common Stock (NLG .01 par value, 50,000,000 shares authorized;
10,000,000 issued and outstanding)......................................... $59
---
Total Shareholder's Equity................................................ $59
===
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-44
<PAGE>
CHICAGO BRIDGE & IRON COMPANY N.V.
NOTES TO BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
1. ORGANIZATION:
In November 1996, Chi Bridge Holdings, Inc. ("Bridge Holdings"), a
subsidiary of Praxair, Inc., formed its wholly owned subsidiary Chicago Bridge
& Iron Company N.V. (the "Issuer"), a corporation organized under the laws of
the Netherlands. The original $59 investment in exchange for common stock and
additional paid-in capital is the Company's only transaction for the year
ended December 31, 1996, and as such, no income or cash flow statements are
presented for the period.
2. SIGNIFICANT ACCOUNTING POLICIES:
The Issuer employs accounting policies that are in accordance with generally
accepted accounting principles in the United States. The functional currency
for the Issuer is the U.S. dollar. The translation from Dutch Guilders ("NLG")
to U.S. dollars is performed for balance sheet accounts using current exchange
rates in effect at the balance sheet date.
3. SUBSEQUENT EVENTS:
In December 1996, the Issuer filed a registration statement with the
Securities and Exchange Commission for an initial public offering of a
majority of the Issuer's common shares (the "Offering"). Praxair and its
affiliates will own the balance of the Issuer's shares. The net proceeds of
the Offering will remain with Praxair or its affiliates and the Issuer will
not receive any of the proceeds from the sale of its common shares.
Prior to the consummation of the Offering, Bridge Holdings and certain of
its subsidiaries will consummate a reorganization. Pursuant to the
reorganization (i) the shares of substantially all of Chicago Bridge & Iron
Company's ("Old CBIC") non-U.S. subsidiaries will be transferred by dividend
to its parent corporation, Bridge Holdings, and contributed to Chicago Bridge
& Iron Company B.V. ("CBICBV") in exchange for newly issued common shares of
CBICBV; (ii) the shares of substantially all of Old CBIC's U.S. subsidiaries
will be transferred by dividend to Bridge Holdings and contributed to a wholly
owned subsidiary of Bridge Holdings ("New CBIC"), which will become a wholly
owned subsidiary of the Issuer in the reorganization, in exchange for newly
issued common stock of New CBIC; (iii) Bridge Holdings will contribute the
shares held by it of each of New CBIC and CBICBV to the Issuer in exchange for
additional Common Shares of the Issuer; and (iv) New CBIC will assume any
remaining assets and liabilities of Old CBIC. After the reorganization and
prior to the consummation of the Common Share Offering, Bridge Holdings will
be merged into Praxair such that Praxair will then directly own all of the
then outstanding Common Shares of the Issuer.
F-45
<PAGE>
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDER OR ANY UN-
DERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICI-
TATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURIS-
DICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURIS-
DICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 12
The Company.............................................................. 21
Dividend Policy.......................................................... 22
Dilution................................................................. 23
Use of Proceeds.......................................................... 23
Capitalization........................................................... 24
Selected Consolidated Financial and Other Data........................... 25
Unaudited Pro Forma Consolidated Income Statement........................ 28
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 30
Business................................................................. 36
Certain Transactions; Relationship With Praxair.......................... 52
Principal and Selling Shareholders....................................... 55
Management............................................................... 57
Description of New Revolving Credit Facility............................. 68
Description of Share Capital............................................. 69
Share Certificates and Transfer.......................................... 74
Taxation................................................................. 77
Shares Eligible for Future Sale.......................................... 81
Underwriting............................................................. 83
Notice to Canadian Residents............................................. 86
Legal Matters............................................................ 87
Experts.................................................................. 87
Available Information.................................................... 87
Service of Process and Enforcement of
Civil Liabilities....................................................... 88
Index to Financial Statements............................................ F-1
</TABLE>
------------
UNTIL , (25 DAYS AFTER THE COMMENCEMENT OF THE COMMON SHARE OFFER-
ING) ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PRO-
SPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PRO-
SPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[COMPANY LOGO]
CHICAGO BRIDGE & IRON COMPANY N.V.
10,500,000 Common Shares
(NLG 0.01 par value)
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
UBS SECURITIES
- -------------------------------------------------------------------------------
<PAGE>
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH JURISDICTION.
SUBJECT TO COMPLETION, DATED MARCH 20, 1997
10,500,000 Shares
LOGO CHICAGO BRIDGE & IRON COMPANY N.V.
(A company incorporated in The Netherlands
with its registered seat in Amsterdam)
Common Shares
(NLG 0.01 par value)
--------
All of the Common Shares, NLG 0.01 par value (the "Common Shares"), of Chicago
Bridge & Iron Company N.V. (the "Issuer") offered hereby are being sold by
Praxair, Inc. (the "Selling Shareholder"). The Issuer will not receive any
of the proceeds from the sale of shares offered hereby. Of the 10,500,000
Common Shares being offered, 2,100,000 shares are initially being offered
outside the United States and Canada (the "International Shares") by the
Managers (the "International Offering") and 8,400,000 shares are
initially being concurrently offered in the United States and Canada
(the "U.S. Shares") by the U.S. Underwriters (the "U.S. Offering" and,
together with the International Offering, the "Common Share
Offering"). Prior to the Common Share Offering, the Issuer was a
wholly owned subsidiary of Praxair, Inc. Upon completion of the
Common Share Offering, the Issuer will no longer be a subsidiary
of Praxair, Inc., and Praxair, Inc. will continue to own
approximately 8% (and, if the Underwriters exercise their over-
allotment option in full, none) of the then outstanding Common
Shares. The offering price and underwriting discounts and
commissions of the International Offering and the U.S.
Offering are identical.
Prior to the offering, there has been no public market for the Common
Shares. It is anticipated that the initial public offering price
will be between $20 and $23 per share. For information
relating to the factors considered in determining the
initial offering price to the public, see
"Subscription and Sale."
The Issuer has applied to list the Common Shares in bearer form on the
Official Market of the AEX-Effectenbeurs nv (the "Amsterdam Stock
Exchange") under the symbol "CBI". The Common Shares have been approved
for listing on the New York Stock Exchange under the symbol "CBI,"
subject to notice of issuance. See "Share Certificates and Transfer."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON SHARES, SEE "RISK FACTORS" BEGINNING
ON PAGE 12.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS SHAREHOLDER(1)
-------- ------------- --------------
<S> <C> <C> <C>
Per Share(2).............................. $ $ $
Total(3).................................. $ $ $
</TABLE>
(1) Before deduction of expenses payable by the Issuer and the Selling
Shareholder estimated at $2,000,000 and $ , respectively.
(2) The price per Common Share in Dutch guilders will be the Dutch guilder
equivalent of the U.S. dollar price per Common Share based on the noon
buying rate in New York City for cable transfers into Dutch guilders as
certified for customs purposes by the Federal Reserve Bank of New York on
the pricing date.
(3) The Selling Shareholder has granted the Managers and the U.S. Underwriters
an option, exercisable by Credit Suisse First Boston Corporation for 30
days from the date of this Prospectus, to purchase a maximum of 1,000,000
additional shares to cover over-allotment of shares. If such option is
exercised in full, the total Price to Public will be $ , Underwriting
Discounts and Commissions will be $ and Proceeds to Selling Shareholder
will be $ .
The International Shares are offered by the several Managers when, as and if
delivered to and accepted by the Managers and subject to their right to reject
orders in whole or in part. It is expected that the International Shares will
be ready for delivery on or about , 1997, against payment in immediately
available funds in U.S. dollars through the book-entry facilities of The
Depository Trust Company and against payment therefor in immediately available
funds in Dutch guilders through NECIGEF, Euroclear and Cedel.
CREDIT SUISSE FIRST BOSTON
GOLDMAN SACHS INTERNATIONAL
SMITH BARNEY INC.
UBS LIMITED
ABN AMRO ROTHSCHILD CAZENOVE & CO. CREDIT LYONNAIS SECURITIES
DEUTSCHE MORGAN GRENFELL HSBC INVESTMENT BANKING SOCIETE GENERALE
Prospectus dated , 1997.
<PAGE>
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
[photos to come]
---------------
The Issuer, having made all reasonable inquiries, confirms that this
Prospectus contains all information with regard to the Issuer and the Common
Shares which is material in the context of the offer of the Common Shares,
that the information contained in this Prospectus is true and accurate in all
material respects and is not misleading, that the opinions and intentions
expressed herein are honestly held and that there are no facts the omission of
which would make misleading in any material respect any statement herein
whether of fact or opinion. The Issuer accepts responsibility accordingly.
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company, the Selling Shareholder or any
Manager. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy and of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction. Neither the delivery of this Prospectus nor any sales made
hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date hereof or
that there has been no change in the affairs of the Company since such date.
CREDIT SUISSE FIRST BOSTON CORPORATION ON BEHALF OF THE U.S. UNDERWRITERS
AND THE MANAGERS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR
OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED HEREBY, INCLUDING OVER-
ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING TRANSACTIONS AND
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "SUBSCRIPTION AND
SALE."
2
<PAGE>
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Principal and Selling Shareholders.... 55
Management............................ 57
Description of New Revolving Credit
Facility............................. 68
Description of Share Capital.......... 69
Share Certificates and Transfer....... 74
Taxation.............................. 77
Shares Eligible for Future Sale....... 81
Subscription and Sale................. 83
Notice to Canadian Residents.......... 86
Legal Matters......................... 87
Experts............................... 87
Available Information................. 87
Service of Process and Enforcement of
Civil Liabilities.................... 88
Index to Financial Statements......... F-1
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 12
The Company............................ 21
Dividend Policy........................ 22
Dilution............................... 23
Use of Proceeds........................ 23
Capitalization......................... 24
Selected Consolidated Financial and
Other Data............................ 25
Unaudited Pro Forma Consolidated Income
Statement............................. 28
Management's Discussion and Analysis of
FinancialCondition and Results of
Operations............................ 30
Business............................... 36
Certain Transactions; Relationship with
Praxair............................... 52
</TABLE>
---------------
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus. Unless the context
otherwise requires, all references to the "Issuer" herein refer to Chicago
Bridge & Iron Company N.V., a corporation organized under the laws of The
Netherlands, all references to the "Company" or "CB&I" herein refer to the
Issuer, together with its predecessors and subsidiaries, in each case after
giving effect to the Reorganization (as defined below), all references to
"Praxair" herein refer to Praxair, Inc. and its subsidiaries and all references
to the "Selling Shareholder" herein refer to Praxair, Inc. In this Prospectus,
references to "guilders" and "NLG" are to Dutch guilders, and references to
"dollars," "U.S. $" and "$" are to United States dollars. Unless otherwise
indicated, all data in this Prospectus assumes no exercise of the Underwriters'
over-allotment option.
THE COMPANY
CB&I is a global engineering and construction company specializing in the
engineering and design, materials procurement, fabrication, erection, repair
and modification of steel tanks and other steel plate structures and associated
systems such as petroleum terminals, refinery pressure vessels, low temperature
and cryogenic storage facilities and elevated water storage tanks. Based on its
knowledge of and experience in its industry, the Company believes it is the
leading provider of field erected steel tanks and other steel plate structures,
associated systems and related services in North America and one of the leading
providers of these specialized products and services in the world. CB&I seeks
to maintain its leading industry position by focusing on its technological
expertise in design, metallurgy and welding, along with its ability to complete
logistically and technically complex metal plate projects virtually anywhere in
the world. CB&I has been continuously engaged in the engineering and
construction industry since its founding in 1889. In 1996, the Company was
involved in over 500 projects for over 250 customers in 34 countries.
In 1996, the Company generated revenues of $663.7 million, and its project
backlog as of December 31, 1996 was $485.7 million. The Company's operating
income improved to $31.3 million in 1996 from a loss of $30.5 million in 1995.
CB&I primarily serves customers in the petroleum, petrochemical, chemical,
electric and gas utility, pulp and paper, and metals and mining industries,
both directly and through other companies which service these customers.
Approximately 60% of the Company's revenues during 1996 were attributable to
petroleum and petrochemical industry-related projects. The Company operates on
a global basis and has the supporting infrastructure to compete in key
geographic markets worldwide. In 1996, CB&I derived approximately one-half of
its revenues from operations outside of the United States. Demand for the
Company's products and services depends primarily on its clients' capital
expenditures for construction. The Company seeks to benefit from recently
higher levels of current and projected capital expenditures by its primary
customer base in the petroleum and petrochemical industries, which it believes
have resulted from increases in worldwide crude oil prices during 1996.
3
<PAGE>
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
RECENT DEVELOPMENTS
In the first quarter of 1996, Praxair acquired CBI Industries, Inc.
("Industries"), then the parent company of CB&I, for the purpose of owning its
industrial gas operations. At that time, Praxair announced its intention to
divest those businesses of Industries which were not strategic to Praxair,
including the Company. Praxair undertook to strategically reposition the
Company and, as part of this process, a new management team was assembled for
the Company, headed by Gerald M. Glenn as President and Chief Executive
Officer. Mr. Glenn has over 30 years of combined experience with Fluor
Corporation, the world's largest publicly-owned engineering and construction
company, and Daniel International Corporation, and from 1986 to 1994 served as
Group President of Fluor Corporation's principal operating subsidiary, Fluor
Daniel, Inc. The new management team has focused its efforts on (i) redirecting
and accelerating a restructuring program designed to increase the Company's
base profitability; (ii) implementing a new compensation program linking
management incentives to improvements in shareholder value; and
(iii) developing a business strategy to enhance CB&I's future growth and
profitability.
RESTRUCTURING PROGRAM
The comprehensive restructuring program (the "Restructuring Program")
currently being implemented by the Company's new management has achieved
estimated cost savings of approximately $10 million in 1996, and is expected to
result in estimated annual cost savings of approximately $21 million in 1997
and approximately $23 million in 1998, relative to the Company's 1995 cost
base. The benefits of the Restructuring Program have been an integral component
in the Company's recent improvement in operating income.
The Restructuring Program is based on initiatives begun in 1994, and was
significantly refocused and accelerated in 1996 following the appointment of
the new management team. The program is expected to be fully implemented by the
end of 1997. The Restructuring Program initially focused on consolidating the
Company's organizational structure from six separate, decentralized business
units into a single global business operation. On-going enhancements in
connection with such consolidation include centralization of procurement,
equipment and personnel mobilization, and certain financial functions, as well
as streamlining and consolidating administrative and engineering support. As
part of the program, seven fabrication plants or warehouses have been closed
and three administrative office sites have been downsized or relocated,
including the headquarters of the Company's United States operations. The
Company also has targeted a reduction of approximately 160 salaried positions,
of which approximately 147 had been eliminated as of December 31, 1996.
COMPENSATION PROGRAM
In order to more closely align the interests of the Company's management and
employees with those of its shareholders, CB&I is redesigning its compensation
program to include long-term, equity-based incentives. In addition, Praxair and
the Company have agreed to compensate approximately 40 to 60 officers and key
management employees of the Company for their services in connection with the
further development and implementation of the Restructuring Program and the
Company's initial public offering. As a result, on or immediately before the
consummation of the Common Share Offering, the Company will adopt the CB&I
Management Defined Contribution Plan (the "Management Plan") and upon
consummation of the Common Share Offering, contribute to the Management Plan
approximately 1,017,552 Common Shares (assuming an initial public offering
price of $21.50 per share) (the "Management Plan Shares"), representing
approximately 8% of the total number of Common Shares outstanding upon
consummation of the Common Share Offering. The Management Plan Shares will vest
three years (and with respect to one participant, two years) after the date of
the Common Share Offering.
4
<PAGE>
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
SUBSCRIPTION AND SALE
The institutions named below (the "Managers") have, pursuant to a
Subscription Agreement dated , 1997 (the "Subscription Agreement"),
severally and not jointly, agreed to purchase from the Selling Shareholder the
following respective numbers of International Shares as set forth opposite
their names:
<TABLE>
<CAPTION>
NUMBER OF
MANAGER INTERNATIONAL SHARES
------- --------------------
<S> <C>
Credit Suisse First Boston (Europe) Limited.............
Goldman Sachs International.............................
Smith Barney Inc........................................
UBS Limited.............................................
ABN AMRO Rothschild.....................................
Cazenove & Co. .........................................
Credit Lyonnais Securities..............................
Deutsche Morgan Grenfell................................
HSBC Investment Banking.................................
Societe Generale........................................
---------
Total................................................. 2,100,000
=========
</TABLE>
The Subscription Agreement provides that the obligations of the Managers are
such that, subject to certain conditions precedent, the Managers will be
obligated to purchase all the International Shares (other than those shares
covered by the over-allotment option described below) if any are purchased.
The Subscription Agreement provides that, in the event of a default by a
Manager, in certain circumstances the purchase commitments of non-defaulting
Managers may be increased or the Subscription Agreement may be terminated.
The Issuer and the Selling Shareholder have entered into an Underwriting
Agreement with the U.S. Underwriters of the U.S. Offering (the "U.S.
Underwriters") providing for the concurrent offer and sale of the U.S. Shares
in the United States and Canada. The closing of the U.S. Offering is a
condition to the closing of the International Offering and vice versa.
The Selling Shareholder has granted to the Managers and the U.S.
Underwriters an option, exercisable by Credit Suisse First Boston Corporation,
the representative of the U.S. Underwriters, expiring at the close of business
on the 30th day after the date of this Prospectus, to purchase up to 1,000,000
additional shares at the initial public offering price, less the underwriting
discounts and commission, all as set forth on the cover page of this
Prospectus. Such option may be exercised only to cover over-allotments, if
any, in the sale of the Common Shares offered hereby. To the extent that this
option to purchase is exercised, each Manager and each U.S. Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of additional shares being sold to the Managers and the U.S.
Underwriters as the number of International Shares set forth next to such
Manager's name in the preceding table and as the number set forth next to such
U.S. Underwriter's name in the corresponding table in the Prospectus relating
to the U.S. Offering bears to the sum of the total number of Common Shares in
such tables.
The Company and the Selling Shareholder have been advised by Credit Suisse
First Boston (Europe) Limited, on behalf of the Managers, that the Managers
propose to offer the International Shares outside the United States and Canada
to the public initially at the offering price set forth on the cover page of
this Prospectus and, through the Managers, to certain dealers at such price
less a commission of $ per share and that the Managers and such dealers may
reallow a commission of $ per share on sales to certain other dealers.
After the initial public offering, the public offering price and commission
and reallowance may be changed by the Managers.
83
<PAGE>
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
The offering price and the aggregate underwriting discounts and commissions
per share and per share commission and discount to dealers for the
International Offering and the concurrent U.S. Offering will be identical
except that, in accordance with customary practice with respect to initial
public offerings on the Amsterdam Stock Exchange, institutions admitted to the
AEX-Effectenbeurs N.V. who are not Managers may, in the International
Offering, be allowed a concession not in excess of NLG per share. Pursuant
to an Agreement between the U.S. Underwriters and Managers (the
"Intersyndicate Agreement") relating to the Common Share Offerings, changes in
the offering price, commission and reallowance to dealers will be made only
upon the mutual agreement of Credit Suisse First Boston (Europe) Limited, on
behalf of the Managers, and Credit Suisse First Boston Corporation, as
representative of the U.S. Underwriters.
Pursuant to the Intersyndicate Agreement, each of the Managers has agreed
that, as part of the distribution of the International Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any Common Shares or distribute any prospectus
relating to the Common Shares to any person in the United States or Canada or
to any other dealer who does not so agree. Each of the U.S. Underwriters has
agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold and may not offer or sell,
directly or indirectly, any Common Shares or distribute any prospectus
relating to the Common Shares to any person outside the United States and
Canada or to any other dealer who does not so agree. The foregoing limitations
do not apply to stabilization transactions or to transactions between the
Managers and the U.S. Underwriters pursuant to the Intersyndicate Agreement.
As used herein, "United States" means the United States of America (including
the States and the District of Columbia), its territories, possessions and
other areas subject to its jurisdiction, "Canada" means Canada, its provinces,
territories, possessions and other areas subject to its jurisdiction, and an
offer or sale shall be in the United States or Canada if it is made to (i) any
individual resident in the United States or Canada or (ii) any corporation,
partnership, pension, profit-sharing or other trust or other entity (including
any such entity acting as an investment adviser with discretionary authority)
whose office most directly involved with the purchase is located in the United
States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
Managers and the U.S. Underwriters of such number of Common Shares as may be
mutually agreed upon. The price of any shares so sold will be the public
offering price less such amount agreed upon by Credit Suisse First Boston
(Europe) Limited, on behalf of the Managers, and Credit Suisse First Boston
Corporation, as representative of the U.S. Underwriters, but not exceeding the
selling concession applicable to such shares. To the extent there are sales
between the Managers and the U.S. Underwriters pursuant to the Intersyndicate
Agreement, the number of shares of Common Shares initially available for sale
by the Managers or by the U.S. Underwriters may be more or less than the
amount appearing on the cover page of this Prospectus. Neither the Managers
nor the U.S. Underwriters are obligated to purchase from the other any unsold
Common Shares.
Each of the Managers and the U.S. Underwriters severally represents and
agrees that (i) it has not offered or sold, and prior to the date six months
after the date of issue of the Common Shares will not offer or sell any Common
Shares to persons in the United Kingdom, except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply
with all applicable provisions of the Financial Services Act of 1986 with
respect to anything done by it in relation to the Common Shares in, form or
otherwise involving the United Kingdom; and (iii) it has only issued or passed
on and will only issue and pass on in the United Kingdom any document received
by it in connection with the issue of the Common Shares to a person who is of
a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom
such document may otherwise lawfully be issued or passed on.
84
<PAGE>
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
The Company, its officers and directors, the Selling Shareholder and certain
other shareholders have agreed (subject to certain exceptions) that they will
not offer, sell, contract to sell, announce an intention to sell, pledge or
otherwise dispose of, directly or indirectly, or file or cause to be filed
with the Securities and Exchange Commission a registration statement under the
Securities Act relating to, any Common Shares or securities or other rights
convertible into or exchangeable or exercisable for Common Shares, without the
prior written consent of Credit Suisse First Boston Corporation, for a period
of 180 days after the date of this Prospectus.
The Company and the Selling Shareholder have agreed to indemnify the
Managers and the U.S. Underwriters against certain liabilities, including
civil liabilities under the Securities Act, or to contribute to payments that
the Managers and the U.S. Underwriters may be required to make in respect
thereof.
At the request of the Company, the Managers and the U.S. Underwriters have
reserved up to 525,000 Common Shares for sale at the initial offering price to
certain directors, officers and employees (current and former) of the Company
and its subsidiaries. The number of Common Shares available to the general
public will be reduced to the extent these persons purchase the reserved
shares. Any reserved shares that are not so purchased by such persons at the
closing of the Common Share Offerings will be offered by the Managers and the
U.S. Underwriters to the general public on the same terms as the other shares
offered by this Prospectus.
The Managers and the Representatives of the U.S. Underwriters have informed
the Company and the Selling Shareholder that they do not expect discretionary
sales by the Managers and the U.S. Underwriters to exceed 5% of the Common
Shares offered hereby.
The Issuer has applied to list the Common Shares in bearer form on the
Official Market of the Amsterdam Stock Exchange. The Common Shares have been
approved for listing on the New York Stock Exchange, subject to notice of
issuance.
Prior to the Common Share Offering, there has been no public market for the
Common Shares. The initial public offering price for the Common Shares will be
determined by negotiations among the Company, the Selling Shareholder and the
Representatives. In determining such price, consideration will be given to
various factors, including market conditions for initial public offerings, the
history of and prospects for the Company's business, the Company's past and
present operations, its past and present earnings and current financial
position, an assessment of the Company's management, the market of securities
of companies in businesses similar to those of the Company, the general
condition of the securities markets and other relevant factors. There can be
no assurance that the initial public offering price will correspond to the
price at which the Common Shares will trade in the public market subsequent to
the Common Share Offering or that an active trading market for the Common
Shares will develop and continue after the Common Share Offering.
Credit Suisse First Boston Corporation on behalf of the U.S. Underwriters
and the Managers, may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934 (the "Exchange Act"). Over-
allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed
a specified maximum. Syndicate covering transactions involve purchases of the
Common Shares in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when
the Common Shares originally sold by such syndicate member are purchased in a
syndicate covering transaction to cover syndicate short positions. Such
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the Common Shares to be higher than it would otherwise be
in the absence of such transactions. These transactions may be effected on The
New York Stock Exchange, the Amsterdam Stock Exchange or otherwise and, if
commenced, may be discontinued at any time.
Certain of the Managers and the U.S. Underwriters have from time to time
performed, and continue to perform, financial advisory, investment banking and
commercial banking services for the Company or Praxair, for which customary
compensation has been received.
85
<PAGE>
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of Chicago Bridge & Iron Company N.V.:
We have audited the accompanying balance sheet of Chicago Bridge & Iron
Company N.V. (a Netherlands corporation) as of December 31, 1996. This balance
sheet is the responsibility of the Company's management. Our responsibility is
to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the balance
sheet is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the balance sheet.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Chicago Bridge & Iron Company
N.V. as of December 31, 1996, in conformity with accounting principles
generally accepted in the United States.
Arthur Andersen & Co.
Amsterdam, The Netherlands
February 7, 1997
F-43
<PAGE>
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
[LOGO] CB&I
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 80,152
NASD filing fee.................................................. 26,950
New York Stock Exchange listing fees............................. 120,000
Amsterdam Stock Exchange listing fees and expenses............... 125,000
Printing and engraving expenses.................................. 300,000
Legal fees and expenses.......................................... 975,000
Accounting fees and expenses..................................... 550,000
Transfer agents fees and expenses................................ 20,000
Blue Sky fees and expenses (including counsel fees).............. 12,500
Directors' and officers' IPO insurance premium................... 350,350
Miscellaneous.................................................... 390,048
----------
Total.......................................................... $2,950,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Chicago Bridge & Iron Company N.V. (the "Issuer") is a Netherlands
corporation.
The Articles of Association of the Issuer, as amended, provide for
indemnification of directors and officers to the fullest extent permitted by
the law of The Netherlands.
The form of Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement will contain certain provisions for indemnification of directors and
officers of the Company and the Underwriters against civil liabilities under
the Securities Act.
The Issuer intends to enter into indemnification agreements with certain of
its directors providing for indemnification to the fullest extent permitted by
the law of The Netherlands. These agreements provide for specific procedures
to better assure the directors' rights to indemnification, including
procedures for directors to submit claims, for determination of directors'
entitlement to indemnification (including the allocation of the burden of
proof and selection of a reviewing party), and for enforcement of directors'
indemnification rights. The Company will also obtain officers' and directors'
liability insurance in amounts that it believes are reasonable under the
circumstances.
Article 25 of the Articles of Association of the registrant also provides
that, to the fullest extent permitted by the law of The Netherlands, directors
of the Issuer will not be personally liable for monetary damages for breach of
a director's fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its shareholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for any transaction from which
the director derived an improper personal benefit or (iv) for personal
liability which is imposed by the law of The Netherlands, as from time to time
amended.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since its inception on November 22, 1996, the Issuer has made the following
sales of unregistered securities:
On November 22, 1996, upon its formation, the Issuer issued 10,000,000
Common Shares to Chi Bridge Holdings, Inc. in exchange for a capital
contribution of NLG 100,000 (approximately $59,150, calculated on the basis
of the exchange rate published in The Wall Street Journal on November 22,
1996).
In March 1997, the Issuer issued 1,500,000 Common Shares to Chi Bridge
Holdings, Inc. in exchange for a capital contribution of shares of capital
stock of certain subsidiaries of Chi Bridge Holdings, Inc. and certain
other assets.
II-1
<PAGE>
All of the securities described above were issued without registration under
the Securities Act of 1933, as amended, in reliance upon the exemption
provided by Section 4(2) of that Act. No underwriting commissions were paid in
connection with such issuance.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following Exhibits are numbered in accordance with the Exhibit Table
of Item 601 of Regulation S-K.
<TABLE>
<C> <S>
1. Form of Underwriting Agreement.
3. Amended Articles of Association of the Issuer (English translation).
4.1 Specimen Stock Certificate.
5. Form of Opinion of Loeff Claeys Verbeke as to the validity of the
Common Shares being offered, including consent.
8.1 Form of Opinion of Cahill Gordon & Reindel as to certain U.S. tax
matters relative to the Common Shares, including consent.
8.2 Form of Opinion of Loeff Claeys Verbeke as to certain Netherlands tax
matters relative to the Common Shares, including consent.
10.1 Form of Indemnification Agreement between the Issuer and its
supervisory and managing directors.
10.2 The Company's Employee Stock Purchase Plan.
10.3 The Company's Bonus Plan.
10.4 The Company's Incentive Plan.
10.5 The Company's Deferred Compensation Plan.
10.6 The Company's Management Plan.
10.7 The Company's Excess Benefit Plan.
10.8 Form of The Company's Supplemental Executive Death Benefits Plan.
10.9 Employment Agreements including Special Stock-Based, Long-Term
Compensation Related to the Common Share Offering between the Company
and certain executive officers.
10.10 Form of Termination Agreements between the Company and certain
executive officers.
10.11 Separation Agreement.
10.12 Form of Amended and Restated Tax Disaffiliation Agreement.
10.13 Employee Benefits Separation Agreement.
10.14 Registration Rights Agreement.
10.15 Note of the Company regarding a debt owed to Praxair, Inc.
10.16 Conforming Agreement.
10.17 New Revolving Credit Facility.
21. List of subsidiaries of the Issuer.+
23.1.1 Consent of U.S. Independent Public Accountants.
23.1.2 Consent of Netherlands Independent Public Accountants.
23.2 Consents of Loeff Claeys Verbeke+ (certain consents included as part
of Exhibits 5 and 8.2).
23.3 Consent of Cahill Gordon & Reindel (included as part of Exhibit 8.1).
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
23.4 Consent of Director Nominee Gerald M. Glenn.+
23.5 Consent of Director Nominee John A. Clerico.+
23.6 Consent of Director Nominee Robert F.X. Fusaro.+
23.7 Consent of Director Nominee J. Dennis Bonney.+
23.8 Consent of Director Nominee Gary L. Neale.+
23.9 Consent of Director Nominee Vincent L. Kontny.+
23.10 Consent of Director Nominee J. Charles Jennett.+
23.11 Consent of Director Nominee Marsha Williams.+
23.12 Consent of Director Nominee L. Donald Simpson.+
23.13 Consent of Director Nominee Jerry H. Ballengee.
24. Powers of Attorney.+
27. Schedule of Summary Financial Information.+
</TABLE>
--------
* To be filed by amendment.
+ Previously filed.
(b) Financial Statement Schedules
Schedules are omitted because of the absence of conditions under which they
are required or because the required information is given in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
1. To provide to the Underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
2. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Issuer pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933, and is, therefore,
unenforceable. If a claim for indemnification against such liabilities
(other than payment by the Issuer of expenses incurred or paid by a
director, officer or controlling person of the Issuer in the successful
defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
3. That for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of Prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of Prospectus filed by the Issuer pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this registration statement as of the time it was declared
effective.
4. That for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
5. The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF DANBURY, STATE OF CONNECTICUT, ON MARCH 20, 1997.
CHICAGO BRIDGE & IRON COMPANY N.V.
/s/ James S. Sawyer
By: _________________________________
JAMES S. SAWYER
MANAGING DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Managing Director March 20, 1997
- ------------------------------------------------
ROBERT F.X. FUSARO
/s/ James S. Sawyer Managing Director March 20, 1997
- ------------------------------------------------
JAMES S. SAWYER
/s/ James S. Sawyer
*By: _____________________________________
JAMES S. SAWYER
ATTORNEY-IN-FACT
Registrant's Agent for
Service in the United States
/s/ Robert H. Wolfe March 20, 1997
- ------------------------------------------------
ROBERT H. WOLFE
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1. Form of Underwriting Agreement.
3. Amended Articles of Association of the Issuer (English translation).
4.1 Specimen Stock Certificate.
5. Form of Opinion of Loeff Claeys Verbeke as to the validity of the
Common Shares being offered, including consent.
8.1 Form of Opinion of Cahill Gordon & Reindel as to certain U.S. tax
matters relative to the Common Shares, including consent.
8.2 Form of Opinion of Loeff Claeys Verbeke as to certain Netherlands tax
matters relative to the Common Shares, including consent.
10.1 Form of Indemnification Agreement between the Issuer and its
supervisory and managing directors.
10.2 The Company's Employee Stock Purchase Plan.
10.3 The Company's Bonus Plan.
10.4 The Company's Incentive Plan.
10.5 The Company's Deferred Compensation Plan.
10.6 The Company's Management Plan.
10.7 The Company's Excess Benefit Plan.
10.8 Form of The Company's Supplemental Executive Death Benefits Plan.
10.9 Employment Agreements including Special Stock-Based, Long-Term
Compensation Related to the Common Share Offering between the Company
and certain executive officers.
10.10 Form of Termination Agreements between the Company and certain
executive officers.
10.11 Separation Agreement.
10.12 Form of Amended and Restated Tax Disaffiliation Agreement.
10.13 Employee Benefits Separation Agreement.
10.14 Registration Rights Agreement.
10.15 Note of the Company regarding a debt owed to Praxair, Inc.
10.16 Conforming Agreement.
10.17 New Revolving Credit Facility.
21. List of subsidiaries of the Issuer.+
23.1.1 Consent of U.S. Independent Public Accountants.
23.1.2 Consent of Netherlands Independent Public Accountants.
23.2 Consents of Loeff Claeys Verbeke+ (certain consents included as part of
Exhibits 5 and 8.2).
23.3 Consent of Cahill Gordon & Reindel (included as part of Exhibit 8.1).
23.4 Consent of Director Nominee Gerald M. Glenn.+
23.5 Consent of Director Nominee John A. Clerico.+
23.6 Consent of Director Nominee Robert F.X. Fusaro.+
23.7 Consent of Director Nominee J. Dennis Bonney.+
23.8 Consent of Director Nominee Gary L. Neale.+
23.9 Consent of Director Nominee Vincent L. Kontny.+
23.10 Consent of Director Nominee J. Charles Jennett.+
23.11 Consent of Director Nominee Marsha Williams.+
23.12 Consent of Director Nominee L. Donald Simpson.+
23.13 Consent of Director Nominee Jerry H. Ballengee.
24. Powers of Attorney.+
27. Schedule of Summary Financial Information.+
</TABLE>
- --------
* To be filed by amendment.
+ Previously filed.
<PAGE>
EXHIBIT 1
Draft of 3/17/97
10,500,000 SHARES
CHICAGO BRIDGE & IRON COMPANY N.V.
COMMON SHARES
(NLG 0.01 PAR VALUE)
UNDERWRITING AGREEMENT
----------------------
___________, 1997
Credit Suisse First Boston Corporation
Goldman, Sachs & Co.
Smith Barney Inc.
UBS Securities LLC
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629.
Dear Sirs:
1. Introductory. Praxair, Inc., a Delaware corporation (the "Selling
Shareholder"), proposes to sell ("U.S. Offering") an aggregate of 8,400,000
outstanding shares ("U.S. Firm Securities") of the common shares, par value NLG
0.01 per share (the "Securities") of Chicago Bridge & Iron Company N.V., a
Netherlands corporation (the "Company"), to the several underwriters named in
Schedule A hereto (the "U.S. Underwriters"), for whom Credit Suisse First
- ----------
Boston Corporation ("CSFBC"), Goldman, Sachs & Co., Smith Barney Inc. and UBS
Securities LLC are acting as Representatives.
It is understood that the Company and the Selling Shareholder are
concurrently entering into a Subscription Agreement, dated the date hereof
("Subscription Agreement"), with Credit Suisse First Boston (Europe) Limited
("CSFBL"), Goldman Sachs International, Smith Barney Inc., UBS Limited, and the
other managers named therein ("Managers") relating to the concurrent offering
and sale of 2,100,000 shares of Securities ("International Firm Securities")
outside the United States and Canada ("International Offering").
In addition, as set forth below the Selling Shareholder proposes to sell
(i) to the U.S. Underwriters, at the option of the U.S. Underwriters, an
aggregate of not more than 800,000 additional shares of Securities ("U.S.
Optional Securities") and (ii) to the Managers, at the option of the Managers,
an aggregate of not more than 200,000 additional shares of Securities
("International Optional Securities"). The U.S. Firm Securities and the U.S.
Optional Securities are hereinafter called the "U.S. Securities"; the
International Firm Securities and the International Optional Securities are
hereinafter called the "International Securities"; the U.S. Firm Securities and
the International Firm Securities are hereinafter called the "Firm Securities";
the U.S. Optional Securities and the International Optional Securities are
hereinafter called the "Optional Securities". The U.S. Securities and the
International Securities are collectively referred to as the "Offered
Securities". To provide for the coordination of their activities, the U.S.
Underwriters and the Managers have entered into an Agreement Between U.S.
Underwriters and Managers which permits them, among other things, to sell the
Offered Securities to each other for purposes of resale.
In connection with the offering of the Offered Securities, Chi Bridge
Holdings, Inc. ("Holdings"), a Delaware corporation which was a wholly-owned
subsidiary of the Selling Shareholder prior to being
<PAGE>
merged with and into the Selling Shareholder, has effected, through its
subsidiaries, a restructuring which is described in the Prospectuses and which
is hereinafter referred to as the "Reorganization."
The Company and the Selling Shareholder hereby agree with the several
U.S. Underwriters as follows:
2. Representations and Warranties of the Company and the Selling
Shareholder. (a) The Company represents and warrants to, and agrees with, the
several U.S. Underwriters that:
(i) A registration statement (No. 333-18065) relating to the
Offered Securities, including a form of prospectus relating to the U.S.
Securities and a form of prospectus relating to the International
Securities being offered in the International Offering, has been filed
with the Securities and Exchange Commission ("Commission") and either (A)
has been declared effective under the Securities Act of 1933 ("Act") and
is not proposed to be amended or (B) is proposed to be amended by
amendment or post-effective amendment. If such registration statement
(the "initial registration statement") has been declared effective,
either (I) an additional registration statement (the "additional
registration statement") relating to the Offered Securities may have been
filed with the Commission pursuant to Rule 462(b) ("Rule 462(b)") under
the Act and, if so filed, has become effective upon filing pursuant to
such Rule and the Offered Securities all have been duly registered under
the Act pursuant to the initial registration statement and, if
applicable, the additional registration statement or (II) such an
additional registration statement is proposed to be filed with the
Commission pursuant to Rule 462(b) and will become effective upon filing
pursuant to such Rule and upon such filing the Offered Securities will
all have been duly registered under the Act pursuant to the initial
registration statement and such additional registration statement. If
the Company does not propose to amend the initial registration statement
or if an additional registration statement has been filed and the Company
does not propose to amend it, and if any post-effective amendment to
either such registration statement has been filed with the Commission
prior to the execution and delivery of this Agreement, the most recent
amendment (if any) to each such registration statement has been declared
effective by the Commission or has become effective upon filing pursuant
to Rule 462(c) ("Rule 462(c)") under the Act or, in the case of the
additional registration statement, Rule 462(b). For purposes of this
Agreement, "Effective Time" with respect to the initial registration
statement or, if filed prior to the execution and delivery of this
Agreement, the additional registration statement means (I) if the Company
has advised the Representatives that it does not propose to amend such
registration statement, the date and time as of which such registration
statement, or the most recent post-effective amendment thereto (if any)
filed prior to the execution and delivery of this Agreement, was declared
effective by the Commission or has become effective upon filing pursuant
to Rule 462(c), or (II) if the Company has advised the Representatives
that it proposes to file an amendment or post-effective amendment to such
registration statement, the date and time as of which such registration
statement, as amended by such amendment or post-effective amendment, as
the case may be, is declared effective by the Commission. If an
additional registration statement has not been filed prior to the
execution and delivery of this Agreement but the Company has advised the
Representatives that it proposes to file one, "Effective Time" with
respect to such additional registration statement means the date and time
as of which such registration statement is filed and becomes effective
pursuant to Rule 462(b). "Effective Date" with respect to the initial
registration statement or the additional registration statement (if any)
means the date of the Effective Time thereof. The initial registration
statement, as amended at its Effective Time, including all information
contained in the additional registration statement (if any) and deemed to
be a part of the initial registration statement as of the Effective Time
of the additional registration statement pursuant to the General
Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("Rule
430A(b)") under the Act, is hereinafter referred to as the "Initial
Registration Statement". The additional registration statement, as amended
at its Effective Time, including the contents of the initial registration
statement incorporated by reference therein and including all information
(if any) deemed to be a part of the additional registration statement as
of its Effective Time pursuant to Rule 430A(b), is hereinafter referred to
as the "Additional Registration Statement". The Initial Registration
Statement and the Additional Registration Statement are hereinafter
referred to
2
<PAGE>
collectively as the "Registration Statements" and individually as a
"Registration Statement". The form of prospectus relating to the U.S.
Securities and the form of prospectus relating to the International
Securities, each as first filed with the Commission pursuant to and in
accordance with Rule 424(b) ("Rule 424(b)") under the Act or (if no such
filing is required) as included in the Registration Statement, are
hereinafter referred to as the "U.S. Prospectus" and the "International
Prospectus", respectively, and collectively as the "Prospectuses". No
document has been or will be prepared or distributed in reliance on Rule
434 under the Act.
(ii) If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement: (A) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement complied in all material respects with the
requirements of the Act and the rules and regulations of the Commission
thereunder ("Rules and Regulations") and did not include any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, (B) on the Effective Date of the Additional Registration
Statement (if any), each Registration Statement complied, or will comply,
in all material respects with the requirements of the Act and the Rules
and Regulations and did not include, or will not include, any untrue
statement of a material fact and did not omit, or will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and (C) on the date of this Agreement,
the Initial Registration Statement and, if the Effective Time of the
Additional Registration Statement is prior to the execution and delivery
of this Agreement, the Additional Registration Statement each conforms,
and at the time of filing of each of the Prospectuses pursuant to Rule
424(b) or (if no such filing is required) at the Effective Date of the
Additional Registration Statement in which the Prospectuses are included,
and on each Closing Date (as hereinafter defined), each Registration
Statement and each of the Prospectuses will conform, in all material
respects to the requirements of the Act and the Rules and Regulations,
and none of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectuses, in the light of the
circumstances under which they were made) not misleading. If the
Effective Time of the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement: (A) on the Effective Date of
the Initial Registration Statement, the Initial Registration Statement
and each of the Prospectuses will conform in all material respects to the
requirements of the Act and the Rules and Regulations, none of such
documents will include any untrue statement of a material fact or will
omit to state any material fact required to be stated therein or
necessary to make the statements therein (in the case of the
Prospectuses, in the light of the circumstances under which they were
made) not misleading, and no Additional Registration Statement has been
or will be filed and (B) on each Closing Date, the Initial Registration
Statement and each of the Prospectuses will conform in all material
respects to the requirements of the Act and the Rules and Regulations,
none of such documents will include any untrue statement of a material
fact or will omit to state any material fact required to be stated
therein or necessary to make the statements therein (in the case of the
Prospectuses, in the light of the circumstances under which they were
made,) not misleading, and no Additional Registration Statement has been
or will be filed. The two preceding sentences do not apply to statements
in or omissions from a Registration Statement or the U.S. Prospectus
based upon written information furnished to the Company by any U.S.
Underwriter through the Representatives specifically for use therein, it
being understood and agreed that the only such information is that
described as such in Section 7(c) hereof.
(iii) The Company has been duly incorporated and is validly
existing as a public company with limited liability (naamloze
vennootschap) under the laws of The Netherlands, with corporate power and
authority to own its properties and conduct its business as described in
the Prospectuses; and the Company is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its business
requires such qualification, except where the failure to be so qualified
would not have a material adverse effect on the condition (financial or
other), business, properties or results of operations of the Company and
its Subsidiaries (as hereinafter defined) taken as a whole.
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(iv) Each subsidiary of the Company (collectively, the
"Subsidiaries") is listed on Exhibit A hereto, together with its
---------
jurisdiction of incorporation and the beneficial ownership interest of
the Company therein. Exhibit B hereto sets forth all Subsidiaries of
---------
the Company which are, individually or on a consolidated basis, material
to the operations of the Company and its Subsidiaries and the conduct of
their respective businesses (collectively, the "Significant
Subsidiaries"). Each Significant Subsidiary has been duly incorporated
and is an existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with corporate power and authority to
own its properties and conduct its business as described in the
Prospectuses; and each Subsidiary is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its business
requires such qualification; all of the issued and outstanding capital
stock of each Subsidiary has been duly authorized and validly issued and
is fully paid and nonassessable; and, except as described in the
Prospectuses, the capital stock of each Subsidiary is owned by the
Company, directly or through Subsidiaries, free and clear of any
mortgage, pledge, lien, security interest, restriction upon voting or
transfer, claim or incumbency of any kind; and there are no rights
granted to or in favor of any third party (whether acting in an
individual, fiduciary or other capacity) to acquire any such capital
stock, any additional capital stock or any other securities of any
Subsidiary.
(v) The Offered Securities and all other outstanding shares of
capital stock of the Company have been duly authorized; all outstanding
shares of capital stock of the Company are, and, when the Offered
Securities have been delivered and paid for in accordance with this
Agreement and the Subscription Agreement on each Closing Date (as defined
below), such Offered Securities will have been, validly issued, fully
paid and nonassessable and will conform in all material respects to the
description thereof contained in the Prospectuses; and, except as
described in the Prospectuses, the stockholders of the Company have no
preemptive rights with respect to the Offered Securities which have not
been waived.
(vi) Except as described in the Prospectuses, there are no
contracts, agreements or understandings between the Company and any third
party that would give rise to a valid claim against the Company or any
U.S. Underwriter or Manager for a brokerage commission, finder's fee or
other like payment in connection with the transactions contemplated by
this Agreement or the Subscription Agreement.
(vii) Except as described in the Prospectuses, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the Company
to include such securities in the securities registered pursuant to a
Registration Statement or in any securities being registered pursuant to
any other registration statement filed by the Company under the Act; and
there are no legal or governmental proceedings, statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statements or Prospectuses or required to be filed as
exhibits to the Registration Statement that are not described or filed as
required.
(viii) The Offered Securities have been approved for listing on
the Official Market of the AEX-Effectenbeurs nv (the "Amsterdam Stock
Exchange"), subject to notice of issuance, and the Offered Securities in
the form of New York Shares (as defined in the Prospectuses) have been
approved for listing on the New York Stock Exchange (the "NYSE") subject
to notice of issuance.
(ix) No consent, approval or authorization, and no order,
registration or qualification of, or filing with, any third party
(whether acting in an individual, fiduciary or other capacity) or any
governmental or regulatory agency or body or any court is required for
the consummation of the transactions to be effected by the Company, the
Selling Shareholder and their respective subsidiaries contemplated by this
Agreement or the Subscription Agreement, except such as have been obtained
and made under the Act and such as may be required under state or foreign
securities laws in connection with the offer and sale of the Offered
Securities. The Reorganization has been completed, and no consent,
approval or authorization, and no order, registration or
4
<PAGE>
qualification of, or filing with, any third party (whether acting in an
individual, fiduciary or other capacity) or any governmental or regulatory
agency or body or any court which has not been obtained is required in
connection therewith.
(x) Except as described in the Prospectuses, under current laws
and regulations of The Netherlands and any political subdivision thereof,
all dividends and other distributions declared and payable on the Offered
Securities may be paid by the Company to the holder thereof in United
States dollars (including, without limitation, payments on any Offered
Securities in the form of New York Shares), and all such payments made to
holders thereof who are non-residents of The Netherlands will not be
subject to income, withholding or other taxes under laws and regulations
of The Netherlands and any political subdivision or taxing authority
thereof or therein and will otherwise be free and clear of any other tax,
duty, withholding or deduction in The Netherlands or any political
subdivision or taxing authority thereof or therein and without the
necessity of obtaining any governmental authorization in The Netherlands
or any political subdivision or taxing authority thereof or therein.
(xi) No stamp or other issuance or transfer taxes or duties and no
capital gains, income, withholding or other taxes are payable by or on
behalf of the U.S. Underwriters or Managers to The Netherlands or any
political subdivision or taxing authority thereof or therein in
connection with (A) the sale and delivery of the Offered Securities to or
for the respective accounts of the U.S. Underwriters and Managers or (B)
the sale and delivery outside The Netherlands by the U.S. Underwriters
and Managers of the Offered Securities to the initial purchasers thereof.
(xii) The execution, delivery and performance of this Agreement and
the Subscription Agreement, and the consummation of the transactions
herein and therein contemplated and of the Reorganization, will not
conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under (A) any statute, any rule,
regulation or order of any governmental agency or body or any court,
domestic or foreign, having jurisdiction over the Company or any
Subsidiary or any of their properties or operations, or any agreement or
instrument to which the Company or any Subsidiary is a party or by which
the Company or any Subsidiary is bound or to which any of the properties
or operations of the Company or any Subsidiary is subject, or (B) the
articles of association or the charter or by-laws of the Company or any
Subsidiary, as the case may be, except, in the case of clause (A), for
such conflicts, breaches, violations or defaults which could not
reasonably be expected to, individually or in the aggregate, have a
material adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its Subsidiaries
taken as a whole, or a material adverse effect on the consummation of the
transactions contemplated by this Agreement or the Subscription
Agreement; and the Company has full corporate power and authority to
consummate the Reorganization and perform its obligations as contemplated
by this Agreement and the Subscription Agreement.
(xiii) This Agreement and the Subscription Agreement have been
duly authorized, executed and delivered by the Company.
(xiv) Except as described in the Prospectuses, the Company and its
Significant Subsidiaries have good and marketable title to all material
real properties and all other material properties and material assets
described in the Prospectuses as being owned by them, in each case free
from liens, encumbrances and defects that would materially affect the
value thereof or materially interfere with the use made or to be made
thereof by them; and except as described in the Prospectuses, the Company
and its Significant Subsidiaries hold any material leased real or
personal property under valid and enforceable leases with no exceptions
that would materially interfere with the use made or to be made thereof by
them and neither the Company nor any Significant Subsidiary has been
notified of any material claim that has been asserted by anyone adverse to
the rights of the Company or any Significant Subsidiary under any of such
leases.
(xv) The Company and its Subsidiaries possess adequate
certificates, authorizations, licenses or permits issued by appropriate
governmental agencies or bodies necessary to conduct the
5
<PAGE>
business now operated by them and have not received any written notice of
threatened or actual proceedings (and are not aware of any facts that
would be expected to result in such proceeding) relating to the revocation
or modification of any such certificate, authorization, license or permit
that, if determined adversely to the Company or any of its Subsidiaries,
could reasonably be expected to, individually or in the aggregate, have a
material adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its Subsidiaries
taken as a whole. The Company and its Subsidiaries are in compliance with
their respective obligations under such certificates, authorizations,
licenses or permits and no event has occurred that allows, or after notice
or lapse of time would allow, revocation or termination of such
certificates, authorizations, licenses or permits or violation of such
laws or regulations, except for such non-compliance and events as could
not reasonably be expected to, individually or in the aggregate, have a
material adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its Subsidiaries
taken as a whole.
(xvi) No labor dispute with the employees of the Company or any
Subsidiary exists or, to the knowledge of the Company, is imminent that
could reasonably be expected to, individually or in the aggregate, have a
material adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its Subsidiaries,
taken as a whole.
(xvii) The Company and its Subsidiaries own or have obtained valid
and enforceable licenses for all material trademarks, trademark
registrations, service marks, service mark registrations, trade names,
copyrights, copyright registrations, computer software, trade secrets and
proprietary or other intellectual property owned, sold or used by or
licensed to or by the Company or any of its Subsidiaries or that are
necessary for the conduct of their businesses (collectively, the
"Intellectual Property"), and the Company and its Subsidiaries are not
aware of any claim or challenge by any third party to the rights of the
Company or its Subsidiaries with respect to any Intellectual Property or
to the validity or scope of the Intellectual Property and neither the
Company nor any Subsidiary has any claim against any third party with
respect to infringement of any Intellectual Property, which claims or
challenges, if adversely determined, could reasonably be expected to,
individually or in the aggregate, have a material adverse effect on the
condition (financial or other), business, properties or results of
operations of the Company and its Subsidiaries taken as a whole.
(xviii) Except as described in the Prospectuses and except as
could not reasonably be expected to, individually or in the aggregate,
have a material adverse effect on the condition (financial or other),
business, properties or results of operations of the Company and its
Subsidiaries, taken as a whole, the properties, assets and operations of
each of the Company and its Subsidiaries are in compliance with all
applicable federal, state, local and foreign laws, rules and regulations,
orders, decrees, judgments, permits and licenses relating to worker health
and safety, and to the protection and clean-up of the natural environment
and to the protection or preservation of natural resources, including,
without limitation, those relating to the processing, manufacturing,
generation, handling, disposal, transportation or release of hazardous
materials (collectively, "Environmental Laws"). With respect to such
properties, assets and operations, there are no events, conditions,
circumstances, activities, practices, incidents, actions or plans of the
Company or any of its Subsidiaries of which the Company is aware that may
interfere with or prevent compliance or continued compliance with
applicable Environmental Laws in a manner that could reasonably be
expected to, individually or in the aggregate, have a material adverse
effect on the condition (financial or other), business, properties or
results of operations of the Company and its Subsidiaries, taken as a
whole. Except as described in the Prospectuses and except as could not
reasonably be expected to, individually or in the aggregate, have a
material adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its Subsidiaries,
taken as a whole, (A) to the Company's knowledge, none of the Company or
any of its Subsidiaries is the subject of any federal, state, local or
foreign investigation pursuant to Environmental Laws, (B) none of the
Company or any of its Subsidiaries has received any written notice or
claim pursuant to Environmental Laws and (C) there are no pending, or, to
the knowledge of the Company, threatened actions, suits or proceedings
against the Company, any of its Subsidiaries or its properties, assets or
operations, in connection with any such Environmental
6
<PAGE>
Laws. The term "hazardous materials" shall mean those substances that are
regulated by or pursuant to any applicable Environmental Laws.
(xix) Each "employee benefit plan" within the meaning of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), in
which employees of the Company or any Subsidiary participate or as to
which the Company or any Subsidiary has any liability (the "ERISA Plans")
is in compliance with the applicable provisions of ERISA and the Internal
Revenue Code of 1986, as amended (the "Code"). Neither the
Company nor any Subsidiary has any liability with respect to the ERISA
Plans, nor does the Company expect that any such liability will be
incurred, that could reasonably be expected to, individually or in the
aggregate, have a material adverse effect on the condition (financial or
other), business, properties or results of operations of the Company and
its Subsidiaries taken as a whole. Except as described in the
Prospectuses, the value of the aggregate vested and nonvested benefit
liabilities under each of the ERISA Plans that is subject to Section 412
of the Code, determined as of the end of such ERISA Plan's most recent
ended plan year on the basis of the actuarial assumptions specified for
funding purposes in such Plan's most recent actuarial valuation report,
did not exceed the aggregate current value of the assets of such ERISA
Plan allocable to such benefit liabilities. Neither the Company nor any
Subsidiary has any liability, whether or not contingent, with respect to
any ERISA Plan that provides post-retirement welfare benefits that could
reasonably be expected to, individually or in the aggregate, have a
material adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its Subsidiaries
taken as a whole. The descriptions of the Company's stock option,
incentive compensation and other employee benefits plans or arrangements,
and the options or other rights granted and exercised thereunder, set
forth in the Prospectuses are accurate in all material respects.
(xx) (A) Neither the Company nor any of its Subsidiaries is in
violation of its articles of incorporation or of its charter or by-laws,
as the case may be, (B) neither the Company nor any of its Subsidiaries
is in violation of any applicable law, ordinance, administrative or
governmental rule or regulation, or any order, decree or judgment of any
court or governmental agency or body having jurisdiction over the Company
or any of its Subsidiaries and (C) no event of default or event that, but
for the giving of notice or the lapse of time or both, would constitute
an event of default exists, and the sale of the Offered Securities will
exist, under any indenture, mortgage, loan agreement, note, lease,
permit, license or other agreement or instrument to which the Company or
any of its Subsidiaries is a party or to which any of the properties,
assets or operations of the Company or any such Subsidiary is subject,
except, in the case of clauses (B) and (C), for such violations and
defaults that could not reasonably be expected, individually or in the
aggregate, to have a material adverse effect on the condition (financial
or other), business, properties or results of operations of the Company
and its Subsidiaries, taken as a whole.
(xxi) The Company and its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in
such amounts as are customary in the businesses in which they are
engaged; all material policies of insurance and material performance
bonds insuring the Company or any Subsidiary or their businesses, assets,
employees, officers and directors are in full force and effect; the
Company and its Subsidiaries are in compliance with such policies and
instruments in all material respects; and except as described in the
Prospectuses or as could not reasonably be expected, individually or in
the aggregate, to have a material adverse effect on the condition
(financial or other), business, properties or results of operations of the
Company and its Subsidiaries, taken as a whole, there are no claims by the
Company or a Subsidiary under any such policy or instrument as to which
any insurance company is denying liability or defending under a
reservation of rights clause.
(xxii) Except as described in the Prospectuses, there are no
pending actions, suits or proceedings against or, to the knowledge of the
Company, affecting the Company, any of its Subsidiaries or any of their
respective properties, assets or operations that, if determined adversely
to the Company or any of its Subsidiaries, could reasonably be expected
to, individually or in the aggregate, have a material adverse effect on
the condition (financial or other), business, properties or results of
operations of the Company and its Subsidiaries, taken as a whole, or
could materially
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<PAGE>
and adversely affect the ability of the Company to perform its obligations
under this Agreement or the Subscription Agreement; and no such actions,
suits or proceedings are, to the knowledge of the Company, threatened or
contemplated.
(xxiii) The financial statements, together with the related
schedules and notes, included in each Registration Statement and the
Prospectuses present fairly, in all material respects, the financial
position of the Company and its consolidated Subsidiaries as of the dates
shown and their results of operations and cash flows for the periods
shown, and have been prepared in conformity with the generally accepted
accounting principles in the United States applied on a consistent basis;
the pro forma financial information included in the Prospectuses has been
prepared in accordance with the Commission's rules and guidelines with
respect to pro forma financial information, the assumptions used in
preparing such pro forma financial information provide a reasonable basis
for presenting the effects directly attributable to the transactions or
events described therein, the related pro forma adjustments give
appropriate effect to those assumptions, and the pro forma columns
therein reflect the proper application of those adjustments to the
corresponding historical financial statement amounts. The other
financial and statistical information set forth in the Prospectuses
present fairly, in all material respects, the information shown therein
and have been compiled on a basis consistent with that of the audited
financial statements included in the Registration Statement.
(xxiv) Since the dates as of which information is given in the
Registration Statements and the Prospectuses, and except as has occurred
as described in the Prospectuses, (i) the Company and its Subsidiaries,
taken as a whole, have not incurred any material liability or obligation
(indirect, direct or contingent) or entered into any material verbal or
written agreement or other transaction that is not in the ordinary course
of business or that could result in a material reduction in the future
earnings of the Company and its Subsidiaries taken as a whole; (ii) the
Company and its Subsidiaries, taken as a whole, have not sustained any
material loss or interference with their business or properties from
fire, flood, windstorm, accident or other calamity (whether or not
covered by insurance); (iii) there has been no material change, except as
contemplated by the Prospectuses, in the indebtedness of the Company and
except as contemplated by the Prospectuses, no change in the capital
stock of the Company and except as contemplated by the Prospectuses, no
dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock; and (iv) there has been no
material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or
other), business, properties or results of operations of the Company and
its Subsidiaries taken as a whole.
(xxv) The Company is not and, after giving effect to the offering
and sale of the Offered Securities will not be, an "investment company"
or any entity "controlled" by an "investment company" as defined in the
Investment Company Act of 1940.
(xxvi) The Company has not taken and will not take, directly or
indirectly, any action designed to or that could reasonably be expected
to cause or result in stabilization or manipulation of the price of the
Offered Securities and the Company has not distributed and will not
distribute any offering material in connection with the offering and sale
of the Offered Securities other than any preliminary prospectus filed
with the Commission or the Prospectuses or other materials, if any,
permitted by the Act or the Rules and Regulations.
(xxvii) The Company has delivered as requested to the U.S.
Representatives and the Managers true and correct copies of all documents
executed in connection with the Reorganization and there have been no
amendments, alterations, modifications or waivers of any of the
provisions thereof.
(xxviii) Each of the Company and the Subsidiaries has timely filed
(or joined in the filing of) all material federal, state, local and
foreign tax reports and returns that it was required to file (or join in
the filing of) and such reports and returns are complete and correct in
all material respects. All material taxes shown to be due on such
reports and returns or otherwise relating to periods ending on or before
the Closing Date, owed by the Company or any of its Subsidiaries
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<PAGE>
(whether or not shown on any report or return) or to which the Company or
any of the Subsidiaries may be liable under the Treasury regulations
section 1.1502-6 (or analogous state or foreign law provisions) on account
of having been a member of an "affiliated group" as defined in section
1504 of the Code (or other group filing on a combined basis) at any time
on or prior to the Closing Date, if required to have been paid, have been
paid, except such tax assessments, if any, as are being contested in good
faith and as to which reserves have been provided which the Company
reasonably believes are adequate. To the Company's knowledge after due
inquiry, the charges, accruals and reserves on the books of the Company
and the Subsidiaries in respect of any tax liability for any year not
finally determined are adequate to meet any assessments or reassessments.
No tax deficiency has been asserted or threatened against the Company or
any of the Subsidiaries that could reasonably be expected to, individually
or in the aggregate, have a material adverse effect on the condition
(financial or otherwise), business, properties or results of operations of
the Company and the Subsidiaries taken as a whole.
(xxix) The Company is neither a foreign personal holding company
("FPHC") within the meaning of section 552 of the Code nor a passive
foreign investment company ("PFIC") within the meaning of section 1296 of
the Code, is not likely to become an FPHC, a PFIC or a controlled foreign
corporation ("CFC") (within the meaning of section 957 of the Code), and
the Company is not aware of any contemplated action by any shareholder or
shareholders of the Company that would be likely to cause the Company to
become an FPHC, PFIC or CFC.
(xxx) Arthur Andersen LLP are independent public accountants with
respect to the Company as required by the Securities Act.
(xxxi) The Company has obtained the written agreement of each
director and each officer of the Company, in form reasonably satisfactory
to the U.S. Underwriters, that such person will not, for a period of 180
days after the date of the initial public offering of the Offered
Securities, offer, sell, contract to sell, pledge or otherwise dispose
of, directly or indirectly, or request or demand the filing with the
Commission of a registration statement under the Act relating to, any
Securities or securities convertible into or exchangeable or exercisable
for any Securities, or publicly disclose the intention to make any such
offer, sale, pledge, disposition or filing, without the prior written
consent of CSFBC, other than the exercise of employee stock options
outstanding on the date hereof.
(b) The Selling Shareholder represents and warrants to, and agrees
with, the several U.S. Underwriters that:
(i) The Selling Shareholder has and on each Closing Date
hereinafter mentioned will have valid and unencumbered title to the
Offered Securities to be delivered by the Selling Shareholder hereunder
and under the Subscription Agreement on such Closing Date and full right,
power and authority to enter into this Agreement and the Subscription
Agreement and to sell, assign, transfer and deliver the Offered
Securities to be delivered by such Selling Shareholder on such Closing
Date hereunder and thereunder; and upon the delivery of and payment for
the Offered Securities on each Closing Date hereunder and thereunder the
U.S. Underwriters and Managers will acquire valid and unencumbered title
to the Offered Securities to be delivered by the Selling Shareholder
on such Closing Date, assuming each of the U.S. Underwriters and Managers
has purchased the Offered Securities purchased by it in good faith and
without notice of any adverse claim.
(ii) If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement: (A) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement did not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, (B) on the
Effective Date of the Additional Registration Statement (if any), each
Registration Statement did not include, or will not include, any untrue
statement of a material fact and did not omit, or will not omit, to state
any material fact required to be stated therein or necessary to make the
statement therein not misleading and (C) on the date of this Agreement,
and at the time of filing of the Prospectuses pursuant to Rule 424(b) or
(if no such filing is required)
9
<PAGE>
at the Effective Date of the Additional Registration Statement in which
the Prospectuses are included, and on each Closing Date, none of any
Registration Statement or the Prospectuses includes, or will include, any
untrue statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectuses, in the light of the
circumstances under which they were made) not misleading. If the Effective
Time of the Initial Registration Statement is subsequent to the execution
and delivery of this Agreement: on the Effective Date of the Initial
Registration Statement and on each Closing Date, none of the Initial
Registration or the Prospectuses will include any untrue statement of a
material fact or will omit to state any material fact required to be
stated therein or necessary to make the statements therein (in the case of
the Prospectuses, in the light of the circumstances under which they were
made) not misleading. The two preceding sentences shall apply solely to
statements in or omissions from a Registration Statement or either of the
Prospectuses based upon information relating to the Selling Shareholder or
contained in a representation or warranty given by the Selling Shareholder
in this Agreement.
(iii) Except as described in the Prospectuses, there are no
contracts, agreements or understandings between the Selling Shareholder
and any third party that would give rise to a valid claim against the
Selling Shareholder or any U.S. Underwriter or Manager for a brokerage
commission, finder's fee or other like payment in connection with the
transactions contemplated by this Agreement or the Subscription
Agreement.
(iv) This Agreement and the Subscription Agreement have been duly
authorized, executed and delivered by the Selling Shareholder.
(v) The execution, delivery and performance of this Agreement and
the Subscription Agreement by the Selling Shareholder and the
consummation of the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under (A) any statute, any rule,
regulation or order of any governmental agency or body or any court,
domestic or foreign, have jurisdiction over the Selling Shareholder or
any of its properties or operations, or any agreement or instrument to
which the Selling Shareholder is a party or by which the Selling
Shareholder is bound or to which any of the properties or operations of
the Selling Shareholder is subject, or (B) the charter or by-laws of the
Selling Shareholder, except, in the case of clause (A), for such
conflicts, breaches, violations or defaults which could not reasonably be
expected to, individually or in the aggregate, have a material adverse
effect on the consummation of the transactions contemplated by this
Agreement or the Subscription Agreement; and the Selling Shareholder has
full power and authority to sell or cause the sale of the Offered
Securities as contemplated by this Agreement and the Subscription
Agreement.
(vi) No consent, approval or authorization, and no order,
registration or qualification of, or filing with, or with any third party
(whether acting in an individual, fiduciary or other capacity) or any
court or governmental or regulatory agency or body, is required for the
performance by the Selling Shareholder of its obligations under this
Agreement or the Subscription Agreement, except such as have been obtained
under the Act and such as may be required under state or foreign
securities laws in connection with the offer and sale of the Offered
Securities.
(vii) The Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to or that could reasonably
be expected to cause or result in stabilization or manipulation of the
price of the Offered Securities and the Selling Shareholder has not
distributed and will not distribute any offering material in connection
with the offering and sale of the Offered Securities other than any
preliminary prospectus filed with the Commission or the Prospectuses or
other materials, if any, permitted by the Act or the Rules and
Regulations.
(viii) There are no pending (or, to the Selling Shareholder's
knowledge, threatened or contemplated) actions, suits or proceedings or
investigations against or affecting the Selling Shareholder or any of its
properties, assets or operations that could reasonably be expected to,
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individually or in the aggregate, have a material adverse effect on the
ability of the Selling Shareholder to perform its obligations under this
Agreement.
(ix) The Selling Shareholder is not a "foreign person" within the
meaning of section 1445 of the Code, and Selling Shareholder shall
furnish to you on or prior to the First Closing Date (as defined below) a
certification of the Selling Shareholder's non-foreign status, as set
forth in Treasury regulations section 1.1445-2(b).
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Selling Shareholder agrees to
sell to the U.S. Underwriters, and the U.S. Underwriters agree, severally and
not jointly, to purchase from the Selling Shareholder, at a purchase price of
U.S.$______ per share, the respective numbers of shares of U.S. Firm Securities
set forth opposite the names of the U.S. Underwriters in Schedule A hereto.
The Selling Shareholder will deliver the U.S. Firm Securities to the
Representatives for the accounts of the U.S. Underwriters, against payment of
the purchase price in Federal (same day) funds by wire transfer to an account
at a bank specified by the Selling Shareholder to, and reasonably acceptable
to, CSFBC, drawn to the order of the Selling Shareholder, at the office of
Dewey Ballantine, 1301 Avenue of the Americas, New York, New York 10019-6092,
at 10:00 A.M., New York time, on _____________, 1997, or at such other time not
later than seven full business days thereafter as CSFBC and the Selling
Shareholder agree (such time being herein referred to as the "First Closing
Date"). For purposes of Rule 15c6-1 under the Securities Exchange Act of 1934,
the First Closing Date (if later than the otherwise applicable settlement date)
shall be the settlement date for payment of funds and delivery of securities
for all the Offered Securities sold pursuant to the U.S. Offering and the
International Offering. The certificates for the U.S. Firm Securities so to be
delivered will be in definitive form, in such denominations and registered in
such names as CSFBC requests upon reasonable notice, and will be made available
for checking and packaging at the office of Credit Suisse First Boston
Corporation, New York, New York, at least 24 hours prior to the First Closing
Date.
In addition, upon written notice from CSFBC given to the Company and the
Selling Shareholder from time to time not more than 30 days subsequent to the
date of the Prospectuses, the U.S. Underwriters may purchase all or less than
all of the U.S. Optional Securities at the purchase price per Security to be
paid for the U.S. Firm Securities. The U.S. Optional Securities to be purchased
by the U.S. Underwriters on any Optional Closing Date shall be in the same
proportion to all the Optional Securities to be purchased by the U.S.
Underwriters and the Managers on such Optional Closing Date as the U.S. Firm
Securities bear to all the Firm Securities. The Selling Shareholder agrees to
sell to the U.S. Underwriters such U.S. Optional Securities and the U.S.
Underwriters agree, severally and not jointly, to purchase such U.S. Optional
Securities. Such U.S. Optional Securities shall be purchased for the account
of each U.S. Underwriter in the same proportion as the number of shares of U.S.
Firm Securities set forth opposite such U.S. Underwriter's name bears to the
total number of shares of U.S. Firm Securities (subject to adjustment by CSFBC
to eliminate fractions) and may be purchased by the U.S. Underwriters only for
the purpose of covering over-allotments made in connection with the sale of the
U.S. Firm Securities. No Optional Securities shall be sold or delivered unless
the U.S. Firm Securities and the International Firm Securities previously have
been, or simultaneously are, sold and delivered. The right to purchase the
Optional Securities or any portion thereof may be exercised from time to time
and to the extent not previously exercised may be surrendered and terminated at
any time upon notice by CSFBC on behalf of U.S. Underwriters and the Managers to
the Selling Shareholder. It is understood that CSFBC is authorized to make
payment for and accept delivery of such Optional Securities on behalf of the
U.S. Underwriters and Managers pursuant to the terms of CSFBC's instructions to
the Selling Shareholder.
Each time for the delivery of and payment for the U.S. Optional
Securities, being herein referred to as an "Optional Closing Date", which may
be the First Closing Date (the First Closing Date and each Optional Closing
Date, if any, being sometimes referred to as a "Closing Date"), shall be agreed
by CSFBC and the Selling Shareholder but shall be not later than five full
business days after written notice of election to purchase Optional Securities
is given. The Selling Shareholder will deliver the U.S. Optional Securities
being purchased on each Optional Closing Date to the Representatives for the
accounts of the several U.S.
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Underwriters, against payment of the purchase price in Federal (same day) funds
by wire transfer to an account specified by the Selling Shareholder reasonably
acceptable to CSFBC, at the above office of Dewey Ballantine. The certificates
for the U.S. Optional Securities will be in definitive form, in such
denominations and registered in such names as CSFBC requests upon reasonable
notice prior to such Optional Closing Date and will be made available for
checking and packaging at the above office of CSFBC, at a reasonable time in
advance of such Optional Closing Date.
4. Offering by U.S. Underwriters. It is understood that the several
U.S. Underwriters propose to offer the U.S. Securities for sale to the public
as set forth in the U.S. Prospectus.
It is further understood that, at the request of the Company, up to an
aggregate of 525,000 Firm Securities will be reserved for offering and sale, at
the initial public offering price, to certain officers, directors and employees
(current and former) of the Company who have heretofore delivered to CSFBC, in
a timely manner and in form satisfactory to CSFBC and its counsel, written
indications of interest to purchase the Offered Securities. Under no
circumstances shall you or any U.S. Underwriter or Manager be liable to the
Company or any of such persons for any action taken or omitted in good faith in
connection with such offering and sale to such persons. Any Offered Securities
not purchased by such persons at the First Closing Date will be offered to the
public by the U.S. Underwriters and the Managers on the same terms as the other
Offered Securities offered by the Prospectuses.
5. Certain Agreements of the Company and the Selling Shareholder. (A)
The Company agrees with the several U.S. Underwriters that:
(a) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, the Company will
file each of the Prospectuses with the Commission pursuant to and in
accordance with subparagraph (1) (or, if applicable and if consented to
by CSFBC, subparagraph (4)) of Rule 424(b) not later than the earlier of
(A) the second business day following the execution and delivery of this
Agreement or (B) the fifteenth business day after the Effective Date of
the Initial Registration Statement.
The Company will advise CSFBC promptly of any such filing pursuant to
Rule 424(b). If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement and an
additional registration statement is necessary to register a portion of
the Offered Securities under the Act but the Effective Time thereof has
not occurred as of such execution and delivery, the Company will file the
additional registration statement or, if filed, will file a
post-effective amendment thereto with the Commission pursuant to and in
accordance with Rule 462(b) on or prior to 10:00 P.M., New York time, on
the date of this Agreement or, if earlier, on or prior to the time either
Prospectus is printed and distributed to any U.S. Underwriter or Manager,
or will make such filing at such later date as shall have been consented
to by CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration statement
as filed or either of the related prospectuses or the Initial Registration
Statement, the Additional Registration Statement (if any) or either of the
Prospectuses and will not effect such amendment or supplementation without
CSFBC's prior consent (which consent shall not be unreasonably withheld);
and the Company will also advise CSFBC promptly of the effectiveness of
each Registration Statement (if its Effective Time is subsequent to the
execution and delivery of this Agreement) and of any amendment or
supplementation of a Registration Statement or either of the Prospectuses
and of the institution by the Commission of any stop order proceedings in
respect of a Registration Statement and will use its best efforts to
prevent the issuance of any such stop order and to obtain as soon as
possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any U.S. Underwriter, Manager or dealer, any event occurs as a
result of which either or both of the Prospectuses as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they
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<PAGE>
were made, not misleading, or if it is necessary at any time to amend
either or both of the Prospectuses to comply with the Act, the Company
will promptly notify CSFBC of such event and will promptly prepare and
file with the Commission, at its own expense, an amendment or supplement
which will correct such statement or omission or an amendment which will
effect such compliance. Neither CSFBC's consent to, nor the U.S.
Underwriters' delivery of, any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 6
hereof.
(d) As soon as practicable, but not later than the Availability
Date (as defined below), the Company will make generally available to its
securityholders an earnings statement covering a period of at least 12
months beginning after the Effective Date of the Initial Registration
Statement (or, if later, the Effective Date of the Additional
Registration Statement) which will satisfy the provisions of Section
11(a) of the Act. For the purpose of the preceding sentence,
"Availability Date" means the 45th day after the end of the fourth fiscal
quarter following the fiscal quarter that includes such Effective Date,
except that, if such fourth fiscal quarter is the last quarter of the
Company's fiscal year, "Availability Date" means the 90th day after the
end of such fourth fiscal quarter.
(e) The Company will furnish to the Representatives copies of the
Registration Statement (five of which will be signed and will include all
exhibits), each preliminary prospectus relating to the U.S. Securities,
and, so long as a prospectus relating to the Offered Securities is
required to be delivered under the Act in connection with sales by any
U.S. Underwriter or dealer, the U.S. Prospectus and all amendments and
supplements to such documents, in each case in such quantities as CSFBC
reasonably requests. The U.S. Prospectus shall be so furnished on or
prior to 3:00 P.M., New York time, on the business day following the
later of the execution and delivery of this Agreement or the Effective
Time of the Initial Registration Statement. All other such documents
shall be so furnished as soon as available. The Company will pay the
expenses of printing and distributing to the U.S. Underwriters all such
documents.
(f) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions as CSFBC
reasonably designates and will continue such qualifications in effect so
long as required for the distribution; provided that the Company
--------
shall not be required to qualify to do business in any jurisdiction where
it is not now qualified or to file a general consent to service of
process in any jurisdiction.
(g) During the period of three years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
U.S. Underwriters, as soon as practicable after the end of each fiscal
year, a copy of its annual report to stockholders for such year; and the
Company will furnish to the Representatives (i) as soon as available, a
copy of each report and any definitive proxy statement of the Company
filed with the Commission under the Securities Exchange Act of 1934 or
mailed to stockholders, and (ii) from time to time, such other public
information concerning the Company as CSFBC may reasonably request.
(h) For a period of 180 days after the date of the initial public
offering of the Offered Securities, the Company will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly,
or file with the Commission a registration statement under the Act
relating to, any Securities or securities convertible into or
exchangeable or exercisable for any Securities, or publicly disclose the
intention to make any such offer, sale, pledge, disposition or filing,
without the prior written consent of CSFBC, except: (i) the contribution
by the Company to the Management Plan (as defined in the Prospectuses) of
________ shares of Securities immediately prior to the consummation of
the U.S. Offering, as described in the Prospectuses and (ii) grants of
employee stock options pursuant to the terms of a plan in effect on the
date hereof, issuances of Securities pursuant to the exercise of such
options or the exercise of any other employee stock options outstanding
on the date hereof.
(i) The Company agrees with the several U.S. Underwriters and the
Selling Shareholder that the Company will pay all expenses incident to
the performance of the obligations of the
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<PAGE>
Selling Shareholder and the obligations of the Company under this
Agreement for any filing fees and other expenses (including fees and
disbursements of counsel not to exceed $12,500) in connection with
qualification of the Offered Securities for sale under the laws of such
jurisdictions as CSFBC designates and the printing of memoranda relating
thereto, for the filing fee incident to, and the reasonable fees and
disbursements of counsel to the U.S. Underwriters in connection with, the
review by the National Association of Securities Dealers, Inc. of the
Offered Securities, for any travel expenses of the Company's officers and
employees and any other expenses of the Company in connection with
attending or hosting meetings with prospective purchasers of the Offered
Securities, for the fees and expenses in connection with qualification of
the Offered Securities for listing on the NYSE and the Amsterdam Stock
Exchange, for any transfer taxes on the sale of the Offered Securities to
the U.S. Underwriters and for expenses incurred in distributing
preliminary prospectuses and the Prospectuses (including any amendments
and supplements thereto) to the U.S. Underwriters. The agreement in this
paragraph (i) shall not modify the separate agreement between the Selling
Shareholder and the Company regarding the payment of expenses set forth in
the Registration Rights Agreement (as defined in the Prospectuses) between
such parties dated March __, 1997.
(B) The Selling Shareholder agrees with the several U.S.
Underwriters that:
(a) The Selling Shareholder will indemnify and hold harmless the
U.S. Underwriters against any documentary, stamp or similar issuance tax,
including any interest and penalties, on the sale of the Offered
Securities and on the execution and delivery of this Agreement. All
payments to be made by the Selling Shareholder hereunder shall be made
without withholding or deduction for or on account of any present or
future taxes, duties or governmental charges whatsoever unless the
Selling Shareholder is compelled by law to deduct or withhold such taxes,
duties or charges. In that event, the Selling Shareholder shall pay such
additional amounts as may be necessary in order that the net amounts
received after such withholding or deduction shall equal the amounts that
would have been received if no withholding or deduction had been made.
(b) The Selling Shareholder agrees to deliver to CSFBC, Attention:
Transactions Advisory Group, on or prior to the First Closing Date a
properly completed and executed United States Treasury Department Form
W-9 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof).
(c) The Selling Shareholder agrees, for a period of 180 days after
the date of the initial public offering of the Offered Securities, not to
offer, sell, contract to sell, pledge or otherwise dispose of, directly
or indirectly or request or demand the filing with the Commission of a
registration statement under the Act relating to, any Securities of the
Company or securities convertible into or exchangeable or exercisable for
any Securities, or publicly disclose the intention to make any such offer,
sale, pledge, disposition or filing, without the prior written consent of
CSFBC, except the sale of Offered Securities to the U.S. Underwriters and
the Managers pursuant to this Agreement and the Subscription Agreement.
6. Conditions of the Obligations of the U.S. Underwriters. The
obligations of the several U.S. Underwriters to purchase and pay for the U.S.
Firm Securities on the First Closing Date and the U.S. Optional Securities to
be purchased on each Optional Closing Date will be subject to the accuracy of
the representations and warranties on the part of the Company and the Selling
Shareholder, to the accuracy of the statements of Company and Selling
Shareholder officers made pursuant to the provisions hereof, to the performance
by the Company and the Selling Shareholder of their respective obligations
hereunder and to the following additional conditions precedent:
(a) The Representatives shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if the
Effective Time of the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement, shall be prior to the filing of
the amendment or post-effective amendment to the registration statement
to be filed shortly prior to such Effective Time), of Arthur Andersen LLP
14
<PAGE>
confirming that they are independent public accountants within the
meaning of the Act and the applicable published Rules and Regulations
thereunder and stating to the effect that:
(i) in their opinion the financial statements examined by
them and included in the Registration Statements comply as to form
in all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations;
(ii) at the date of the latest available balance sheet read
by such accountants, or at a subsequent specified date not more
than three business days prior to the date of this Agreement, there
was any change in the capital stock or any increase in short-term
indebtedness or long-term debt of the Company and its consolidated
subsidiaries or, at the date of the latest available balance sheet
read by such accountants, there was any decrease in consolidated
net assets, as compared with amounts shown on the latest balance
sheet included in the Prospectuses, except in all instances for
changes, increases or decreases that the Registration Statement
discloses have occurred or may occur;
(iii) for the period from the closing date of the latest
income statement included in the Prospectus to the closing date of
the latest available income statement read by such accountants
there were any decreases, as compared with the corresponding period
of the previous year and with the period of corresponding length
ended the date of the latest income statement included in the
Prospectus, in consolidated net sales, income from operations,
income before extraordinary items or net income, except in all
instances for changes, increases or decreases that the Registration
Statement discloses have occurred or may occur;
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Registration Statements with the
results obtained from inquiries, a reading of general accounting
records and other procedures specified in such letter and have
found such dollar amounts, percentages and other financial
information to be in agreement with such results, except as
otherwise specified in such letter; and
(v) (A) they have read the unaudited pro forma income
statement and other pro forma financial information included in the
Registration Statements (collectively, the "Pro Forma
Information");
(B) they have made inquiries of certain officials of
the Company who have responsibility for financial and
accounting matters about (i) the basis for the
determination of the pro forma adjustments , and (ii) whether
the unaudited pro forma consolidated income statement
complies as to form in all material respects with the
applicable accounting requirements of Rule 11-02 of
Regulation S-X under the Act;
(C) they have proved the arithmetic accuracy of the
application of the pro forma adjustments to the historical
amounts in the Pro Forma Information; and
(D) on the basis of such procedures, and such other
inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe
that the Pro Forma Information does not comply as to form in
all material respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X under the Act or
that the pro forma adjustments have not been properly applied
to the historical amounts in the compilation of such Pro
Forma Information.
For purposes of this subsection, (i) if the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of
this Agreement, "Registration Statements" shall mean
15
<PAGE>
the initial registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed shortly prior to its
Effective Time, (ii) if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement but the
Effective Time of the Additional Registration is subsequent to such
execution and delivery, "Registration Statements" shall mean the Initial
Registration Statement and the additional registration statement as
proposed to be filed or as proposed to be amended by the post-effective
amendment to be filed shortly prior to its Effective Time, and (iii)
"Prospectuses" shall mean the prospectuses included in the Registration
Statements.
(b) If the Effective Time of the Initial Registration Statement is
not prior to the execution and delivery of this Agreement, such Effective
Time shall have occurred not later than 10:00 P.M., New York time, on the
date of this Agreement or such later date as shall have been consented to
by CSFBC. If the Effective Time of the Additional Registration Statement
(if any) is not prior to the execution and delivery of this Agreement,
such Effective Time shall have occurred not later than 10:00 P.M., New
York time, on the date of this Agreement or, if earlier, the time either
Prospectus is printed and distributed to any U.S. Underwriter or Manager,
or shall have occurred at such later date as shall have been consented to
by CSFBC. If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, each of the
Prospectuses shall have been filed with the Commission in accordance with
the Rules and Regulations and Section 5(a) of this Agreement. Prior to
such Closing Date, no stop order suspending the effectiveness of a
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Company,
the Selling Shareholder or the Representatives, shall be contemplated by
the Commission.
(c) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred (i) any change, or any development or event
involving a prospective change, in the condition (financial or other),
business, properties or results of operations of the Company or its
Subsidiaries which, in the judgment of a majority in interest of the U.S.
Underwriters including the Representatives, is material and adverse and
makes it impractical or inadvisable to proceed with completion of the
public offering or the sale of and payment for the U.S. Securities; (ii)
any downgrading in the rating of any debt securities of the Company by
any "nationally recognized statistical rating organization" (as defined
for purposes of Rule 436(g) under the Act), or any public announcement
that any such organization has under surveillance or review its rating of
any debt securities of the Company (other than an announcement with
positive implications of a possible upgrading, and no implication of a
possible downgrading, of such rating); (iii) any suspension or limitation
of trading in securities generally on the NYSE or the Amsterdam Stock
Exchange or any setting of minimum prices for trading on any such
exchange, or any suspension of trading of any securities of the Company on
any exchange or in the over-the-counter market; (iv) any banking
moratorium declared by either U.S. Federal or New York authorities or in
Amsterdam declared by the relevant authorities in The Netherlands; or (v)
any outbreak or escalation of major hostilities in which the United States
or The Netherlands is involved, any declaration of war by Congress or any
other substantial national or international calamity or emergency if, in
the judgment of a majority in interest of the U.S. Underwriters including
the Representatives, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable to
proceed with completion of the public offering or the sale of and payment
for the U.S. Securities.
(d) The Representatives shall have received an opinion, dated such
Closing Date, of Cahill, Gordon & Reindel, United States counsel for the
Company and the Selling Shareholder, to the effect that:
(i) There are no contracts, agreements or understandings
known to such counsel between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the
Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered
pursuant to the Registration Statement;
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<PAGE>
(ii) The Company is not and, after giving effect to the
offering and sale of the Offered Securities will not be, an
"investment company" or an entity "controlled" by an "investment
company" as defined in the Investment Company Act of 1940;
(iii) To the knowledge of such counsel, no consent, approval
or authorization and no order, registration or qualification of, or
filing with, any third party (whether acting in an individual
fiduciary or other capacity) or any governmental or regulatory
agency or body or any court is required to be obtained or made by
the Company or the Selling Shareholder for the consummation of the
transactions to be effected by the Company or the Selling
Shareholder contemplated by this Agreement or the Subscription
Agreement, except such as have been obtained and made under the Act
and such as may be required under state securities laws in
connection with the offer and sale of the Offered Securities; and
to the knowledge of such counsel, the execution, delivery and
performance of this Agreement and the Subscription Agreement and
the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any statute, any rule, regulation or order of any
governmental agency or body or any court having jurisdiction over
the Company or any Subsidiary of the Company or the Selling
Shareholder or any of their properties or operations, or any
material agreement or instrument identified to such counsel to
which any of them is a party or by which any of them is bound or to
which any of their properties is subject, or the charter or by-laws
of any such Subsidiary or the Selling Shareholder, and the Selling
Shareholder has full power and authority to consummate the
transactions to be effected by it contemplated by this Agreement
and the Subscription Agreement;
(iv) To the knowledge of such counsel, the Selling
Shareholder had valid and unencumbered title to the Offered
Securities delivered by such Selling Shareholder on such Closing
Date and had full corporate power and authority to sell, assign,
transfer and deliver the Offered Securities delivered by the
Selling Shareholder on such Closing Date hereunder; and, assuming
each of the U.S. Underwriters and Managers has purchased the
Offered Securities purchased by it in good faith and without notice
of any adverse claim, the several U.S. Underwriters have acquired
valid and unencumbered title to the Offered Securities purchased by
them on such Closing Date hereunder;
(v) The Initial Registration Statement was declared
effective under the Act as of the date and time specified in such
opinion, the Additional Registration Statement (if any) was filed
and became effective under the Act as of the date and time (if
determinable) specified in such opinion, each of the Prospectuses
either were filed with the Commission pursuant to the subparagraph
of Rule 424(b) specified in such opinion on the date specified
therein or were included in the Initial Registration Statement or
the Additional Registration Statement (as the case may be), and, to
the knowledge of such counsel, no stop order suspending the
effectiveness of a Registration Statement or any part thereof has
been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Act, and each
Registration Statement and each amendment or supplement thereto, as
of their respective effective or issue dates, complied as to form
in all material respects with the requirements of the Act and the
Rules and Regulations; the descriptions in the Registration
Statements and the Prospectuses of statutes, contracts and other
documents and, to the knowledge of such counsel, legal and
governmental proceedings, are accurate in all material respects and
fairly present the information required to be shown with respect to
such statutes, proceedings, contracts and other documents;
(vi) This Agreement and the Subscription Agreement have been
duly authorized, executed and delivered by the Company and the
Selling Shareholder;
(vii) The statements made in the U.S. Prospectuses under
"Taxation - United States Federal Income Taxes", insofar as they
relate to provisions of U.S. federal tax law
17
<PAGE>
therein described, have been reviewed by such counsel and fairly
present the information disclosed therein in all material respects;
(viii) Except as described in the Prospectuses, the
stockholders of the Company have no preemptive rights with respect
to the Offered Securities; and
(ix) Such counsel has participated in conferences with
officers and other representatives of the Company and the Selling
Shareholder, counsel for the Company, representatives of the
independent public accountants of the Company and representatives
of the U.S. Underwriters and Managers at which the contents of the
Registration Statement and the Prospectuses and related matters
were discussed and, although such counsel is not passing upon and
does not assume any responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration
Statement and the Prospectuses (except to the extent described in
(v) and (vii) above), such counsel shall advise that, on the basis
of the foregoing (relying as to materiality to a large extent upon
the opinions of officers and other representatives of the Company
and the Selling Shareholder), no facts have come to the attention
of such counsel that lead it to believe that the Registration
Statement, at the time it became effective, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectuses, as of their dates
and as of such Closing Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading (it being understood that such counsel need not express
any comment with respect to the financial statements and schedules
and other financial and statistical data contained in the
Registration Statement and the Prospectuses).
In giving such opinions, such counsel may limit its opinion to laws
of the State of New York, the General Corporation Law of the State of Delaware
and the Federal laws of the United States of America, and matters specifically
governed thereby.
(e) The Representatives shall have received an opinion, dated such
Closing Date, of Robert H. Wolfe, General Counsel of the Company, to the effect
that:
(i) Each of the Company's Significant Subsidiaries has been
duly incorporated and is a validly existing corporation in good
standing under the laws of the jurisdiction of its incorporation,
with corporate power and authority to own, lease and operate its
properties and conduct its business as described in the
Prospectuses; and each of the Company and its Subsidiaries is duly
qualified to transact business as a foreign corporation in good
standing in all other jurisdictions in which it owns, leases or
operates properties or in which the conduct of its business or its
ownership, leasing or operation of property requires such
qualification, except to the extent that the failure to be so
qualified or in good standing could not reasonably be expected to
have a material adverse effect on the Company and its Subsidiaries,
taken as a whole; and all of the outstanding shares of capital stock
of the Significant Subsidiaries have been duly authorized and
validly issued, are fully paid and non-assessable and all such
shares shown on Exhibit A hereof are owned by the Company, directly
---------
or through Subsidiaries, free and clear of any mortgage, pledge,
lien, security interest, restriction upon voting or transfer, claim
or encumbrance of any kind; and there are no rights granted to or in
favor of any third party (whether acting in an individual, fiduciary
or other capacity) to acquire any such capital stock, any additional
capital stock or any other securities of any Subsidiary;
(ii) No consent, approval or authorization and no order,
registration or qualification of, or filing with, any third party
(whether acting in an individual fiduciary or other capacity) or any
governmental or regulatory agency or body or, any court is required
to be obtained or made by the Company for the consummation of the
transactions to be effected by the Company or its Subsidiaries
contemplated by this Agreement or the
18
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Subscription Agreement, except such as have been obtained and made
under the Act and such as may be required under state or foreign
securities laws in connection with the offer and sale of the Offered
Securities; the execution, delivery and performance of this
Agreement and the Subscription Agreement and the consummation of the
transactions herein and therein contemplated and of the
Reorganization will not conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a
default under (A) any statute, any rule, regulation or order of any
governmental agency or body or any court having jurisdiction over
the Company or any Subsidiary of the Company or any of their
properties, or any agreement or instrument to which the Company or
any such Subsidiary is a party or by which the Company or any such
Subsidiary or the Selling Shareholder is bound or to which any of
the properties of the Company or any such Subsidiary is subject, or
(B) the charter or by-laws of the Company or any such Subsidiary,
except, in the case of clause (A), for such conflicts, breaches,
violations, or defaults which could not reasonably be expected to,
individually or in the aggregate, have a material adverse effect on
the condition (financial or other), business, properties or results
of operations of the Company and its Subsidiaries, taken as a whole,
or a material adverse effect on the consummation of the transactions
contemplated by this Agreement or the Subscription Agreement; and
the Company has full power and authority to consummate the
transactions to be effected by it contemplated by this Agreement,
the Subscription Agreement and the Reorganization;
(iii) The Company and its Subsidiaries possess adequate
certificates, authorizations, licenses or permits issued by
appropriate governmental agencies or bodies necessary to conduct the
business now operated by them and to such counsel's knowledge have
not received any written notice of threatened or actual proceedings
relating to the revocation or modification of any such certificate,
authorization, license or permit that, if determined adversely to
the Company or any of its Subsidiaries, could reasonably be expected
to, individually or in the aggregate, have a material adverse effect
on the condition (financial or other), business, properties or
results of operations of the Company and its Subsidiaries taken as a
whole. To the knowledge of such counsel, the Company and its
Subsidiaries are in compliance with their respective obligations
under such certificates, authorizations, licenses or permits and to
such counsel's knowledge no event has occurred that allows, or after
notice or lapse of time would allow, revocation or termination of
such certificates, authorizations, licenses or permits or violation
of such laws or regulations, except for such non-compliance and
events as could not reasonably be expected to, individually or in
the aggregate, have a material adverse effect on the condition
(financial or other), business, properties or results of operations
of the Company and its Subsidiaries taken as a whole;
(iv) Except as described in the Prospectuses, to the
knowledge of such counsel, there are no pending actions, suits or
proceedings against or affecting the Company, any of its
Subsidiaries or any of their respective properties, assets or
operations that, if determined adversely to the Company or any of
its Subsidiaries, could reasonably be expected to, individually or
in the aggregate, have a material adverse effect on the condition
(financial or other), business, properties or results of operations
of the Company and its Subsidiaries taken as a whole, or could
materially and adversely affect the ability of the Company to
perform its obligations under this Agreement or the Subscription
Agreement; and, to the knowledge of such counsel, no such actions,
suits or proceedings are threatened or contemplated;
(v) To the knowledge of such counsel, except as described in
the Prospectuses and except as could not reasonably be expected,
individually or in the aggregate, to have a material adverse effect
on the condition (financial or other), business, properties or
results of operations of the Company and its Subsidiaries taken as a
whole, the properties, assets and operations of the Company and its
Subsidiaries are in compliance with all applicable Environmental
Laws. To the knowledge of such counsel, except as described in the
Prospectuses and except as could not reasonably be expected,
individually or in the
19
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aggregate, to have a material adverse effect on the condition
(financial or other), business, properties or results of operations
of the Company and its Subsidiaries taken as a whole, none of the
Company or any of its Subsidiaries is the subject of any federal,
state, local or foreign investigation pursuant to Environmental
Laws, and none of the Company or any of its Subsidiaries has
received any written notice or claim pursuant to Environmental Laws.
For the purpose of this opinion, "Environmental Laws" means all
federal, state, local and foreign laws, statutes, codes, ordinances,
rules, regulations, directives, permits, licenses, or orders
relating to the natural environment, or employee health or safety,
including, but not limited to, any law, statute, code, ordinance,
rule, regulation, directive, permit, license or order relating to
(1) the release, discharge or emission of any pollutant into the
natural environment, (2) damage to any natural resource, (3) the
use, handling or disposal of any chemical substance or (4) workplace
or worker safety and health, as such requirements are promulgated by
the specifically authorized governmental authority responsible for
administering such requirements, or imposed by judicial order or
fiat;
(vi) Such counsel does not know of any legal or governmental
proceedings required to be described in a Registration Statement or
the Prospectuses which are not described as required or of any
contracts or documents of a character required to be described in a
Registration Statement or the Prospectuses or to be filed as
exhibits to a Registration Statement which are not described or
filed as required; and
(vii) Such counsel has participated in conferences with
officers and other representatives of the Company and the Selling
Shareholder, counsel for the Company, representatives of the
independent public accountants of the Company and representatives of
the U.S. Underwriters and Managers at which the contents of the
Registration Statement and the Prospectuses and related matters were
discussed and, although such counsel is not passing upon and does
not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement
and the Prospectuses (except to the extent described in (vi) above),
such counsel shall advise that, on the basis of the foregoing, no
facts have come to the attention of such counsel that lead it to
believe that the Registration Statement, at the time it became
effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectuses, as of their dates and as of such Closing Date,
contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading (it being understood that such
counsel need not express any comment with respect to the financial
statements and schedules and other financial data contained in the
Registration Statement and the Prospectuses).
In giving such opinions, such counsel may limit its opinion to laws
of the State of Illinois, the General Corporation Law of the State of Delaware
and the Federal laws of the United States of America, and matters specifically
governed thereby, except that such counsel shall make such investigations of
law in such other jurisdictions in which the Company does business, as is
appropriate to render such opinions.
(f) The Representatives shall have received an opinion, dated such
Closing Date, of Loeff Claeys Verbeke, Netherlands counsel for the Company and
the Selling Shareholder, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a company limited by shares (naamloze vennootschap)
under the laws of The Netherlands, with corporate power and
authority to own its properties and conduct its business as
described in the Prospectuses; and the Company is duly qualified to
do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification;
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<PAGE>
(ii) Chicago Bridge & Iron Company B.V. ("CBICBV") has been
duly incorporated and is an existing corporation in good standing
under the laws of The Netherlands with corporate power and
authority to own its properties and conduct its business as
described in the Prospectuses, and CBICBV is duly qualified to do
business as a foreign corporation in good standing in all other
jurisdictions in which the ownership of or lease of property or the
conduct of its business requires such qualification; all of the
outstanding capital stock of CBICBV has been duly authorized and
validly issued and is fully paid and non-assessable and are owned
directly by the Company, free from liens, encumbrances and defects;
(iii) The Offered Securities delivered on such Closing Date
and all other outstanding Securities of the Company have been duly
authorized and validly issued, are fully paid and nonassessable and
the stockholders of the Company have no preemptive rights with
respect to the Offered Securities;
(iv) According to the Shareholders Register of the Company,
the Offered Securities are free of rights of pledge ("pandrecht")
and rights of usufruct ("vruchtgebruik");
(v) By the due execution by the Selling Shareholder and the
U.S. Underwriters and Managers of a Deed of Transfer relating to
the Offered Securities sold by such Selling Shareholder to the U.S.
Underwriters and Managers pursuant to this Agreement and the
Subscription Agreement and the written acknowledgement of such
transfer by the Company, title to such Offered Securities will
under Netherlands law validly have been transferred to the U.S.
Underwriters and Managers, free from all liens, encumbrances and
defects;
(vi) The filing of the Registration Statements with the
Commission has been duly authorized by the Company and the
Registration Statements has been duly signed on behalf of the
Company;
(vii) To the knowledge of such counsel, no consent, approval
or authorization and no order, registration, qualification of, or
filing with, any third party (whether acting in an individual,
fiduciary or other capacity) or any governmental or regulatory
agency or body or any court, in each case of The Netherlands, is
required for the consummation of the Reorganization or the
transactions contemplated by this Agreement or the Subscription
Agreement and for the listing of the Offered Securities on the
Amsterdam Stock Exchange;
(viii) To the knowledge of such counsel, the execution,
delivery and performance of this Agreement and the Subscription
Agreement and the consummation of the transactions herein and
therein contemplated and of the Reorganization, will not conflict
with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any
rule, regulation or order of any governmental agency or body or any
court, in each case of the Netherlands, having jurisdiction over
the Company or any Subsidiary of the Company or any of their
properties, or any agreement or instrument to which the Company or
any such Subsidiary is a party or by which the Company or any such
Subsidiary is bound or to which any of the properties of the
Company or any such Subsidiary is subject, or the charter or
by-laws of the Company or any such Subsidiary, and the Company has
full power and authority to consummate the transactions
contemplated by this Agreement, the Subscription Agreement and the
Reorganization;
(ix) The Company has the power to submit, and, insofar as
the law of The Netherlands is concerned, has taken all necessary
corporate action to submit, to the jurisdiction of any United
States federal or state courts in the State of New York, County of
New York, and irrevocably to appoint ____________ as the authorized
agent of the
21
<PAGE>
Company for the purpose described in Section 15 hereof; judgments
obtained in any such courts arising out of or in relation to the
obligations of the Company under this Agreement and the Subscription
Agreement would be enforceable against the Company in the courts of
the Netherlands;
(x) The Company is not entitled to any immunity on the basis
of sovereignty or otherwise in respect of its obligations under
this Agreement or the Subscription Agreement and could not
successfully interpose any such immunity as a defense to any suit
or action brought or maintained in respect of its obligations under
this Agreement or the Subscription Agreement; and the waiver by the
Company of immunity to jurisdiction (including the waiver of
sovereign immunity to which the Company may become entitled
subsequent to the date of this Agreement or the Subscription
Agreement) and immunity to prejudgment attachment, post-judgment
attachment and execution in any suit, action or proceeding against
it arising out of or based on this Agreement or the Subscription
Agreement is a valid and binding obligations of the Company under
Netherlands law;
(xi) Under the laws of The Netherlands currently in force,
the U.S. Underwriters and the Managers would be permitted to
commence proceedings against the Company in the competent
Netherlands courts based upon this Agreement and the Subscription
Agreement. Such competent Netherlands courts would accept
jurisdiction over any such action or proceedings and would give
effect to the choices of New York law as the proper law of this
Agreement and the Subscription Agreement;
(xii) The statements made in the Prospectuses under
"Dividend Policy", "Management", "Description of Share Capital",
"Share Certificates and Transfer" and "Service of Process and
Enforcement of Civil Liabilities", to the extent that they
constitute summaries of Netherlands law and the Company's Articles
of Association, have been reviewed by such counsel and fairly and
accurately present the information disclosed therein in all material
respects; the Offered Securities and the Company's Articles of
Association conform in all material respects to the descriptions
thereof contained in the Prospectuses;
(xiii) Except as described in the Prospectuses, under
current laws and regulation of The Netherlands and any political
subdivision or taxing authority thereof, all dividends and other
distributions declared and payable on the Offered Securities
(including, without limitation, dividend payments on any Offered
Securities in the form of New York Shares) may be paid by the
Company to the holder thereof in United States dollars; all such
payments made to holders thereof who are non-residents of The
Netherlands will not be subject to income, withholding or other
taxes under laws and regulations of The Netherlands or any
political subdivision or taxing authority thereof or therein and
will otherwise be free and clear of any other tax, duty,
withholding or deduction in The Netherlands or any political
subdivision or taxing authority thereof or therein and without the
necessity of obtaining any governmental authorization in The
Netherlands or any political subdivision or taxing authority
thereof or therein;
(xiv) The opinions of such counsel set forth in the
Prospectuses under the caption "Taxation - Netherlands Taxes" are
confirmed as of such Closing Date;
(xv) No stamp or other issuance or transfer taxes of duties
and no capital gains, income, withholding or other taxes are
payable by or on behalf of the U.S. Underwriters or the Managers to
The Netherlands or to any political subdivision or having authority
thereof or therein in connection with (A) the sale and delivery by
the Company of the Offered Securities to or for the respective
accounts of the U.S. Underwriters or the Managers or (B) the sale
and delivery outside The Netherlands by the U.S. Underwriters or
the Managers of the Offered Securities to the initial purchasers
thereof in the manner contemplated herein and in the Subscription
Agreement; and
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<PAGE>
(xvi) Although such counsel does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or Prospectuses
(other than as set forth in (xii) and (xiv) above), such counsel
has no reason to believe that any part of a Registration Statement
or any amendment thereto, as of its effective date or as of such
Closing Date , contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that
either of the Prospectuses or any amendment or supplement thereto,
as of its issue date or as of such Closing Date, contained any
untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; it being understood that such counsel need express no
opinion as to the financial statements or other financial data
contained in the Registration Statement or Prospectuses.
In giving such opinion, such counsel may rely on the opinions of
Cahill, Gordon & Reindel and Robert H. Wolfe, Esq. referred to above as to
matters of laws other than the laws of The Netherlands.
(g) The Representatives shall have received from Dewey Ballantine,
counsel for the U.S. Underwriters, such opinion or opinions, dated such
Closing Date, with respect to the validity of the Offered Securities
delivered on such Closing Date, the Registration Statements, the
Prospectuses and other related matters as the Representatives may
reasonably require, and the Company shall have furnished to such counsel
such documents as they reasonably request for the purpose of enabling
them to pass upon such matters. In rendering such opinion, Dewey
Ballantine may rely as to all matters governed by Netherlands law upon
the opinion of Loeff Claeys Verbeke referred to above.
(h) The Representatives shall have received a certificate, dated
such Closing Date, of Gerald M. Glenn, President and Chief Executive
Officer of the Company, and Timothy J. Wiggins, Vice President -
Treasurer and Chief Financial Officer of the Company, in which they shall
state that, to the best of their knowledge after reasonable
investigation: the representations and warranties of the Company in this
Agreement and the Subscription Agreement are true and correct; the
Company has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied hereunder and under the
Subscription Agreement at or prior to such Closing Date; no stop order
suspending the effectiveness of any Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
contemplated by the Commission; the Additional Registration Statement (if
any) satisfying the requirements of subparagraphs (1) and (3) of Rule
462(b) was filed pursuant to Rule 462(b), including payment of the
applicable filing fee in accordance with Rule 111(a) or (b) under the
Act, prior to the time either Prospectus was printed and distributed to
any U.S. Underwriter or Manager; and, subsequent to the dates of the most
recent financial statements in the Prospectuses, there has been no
material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or
other), business, properties or results of operations of the Company and
its Subsidiaries taken as a whole except as set forth in or contemplated
by the Prospectuses or as described in such certificate.
(i) The Representatives shall have received a letter, dated such
Closing Date, of Arthur Andersen LLP which meets the requirements of
subsection (a) of this Section, except that the specified date referred
to in such subsection will be a date not more than three business days
prior to such Closing Date for the purposes of this subsection.
(j) The Representatives shall have received a certificate, dated
such Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Selling Shareholder in which such
officers shall state that, to the best of their knowledge after
reasonable investigation: the representations and warranties of the
Selling Shareholder in this Agreement and the Subscription Agreement are
true and correct; and the Selling Shareholder has complied with
23
<PAGE>
all agreements and satisfied all conditions on its part to be performed or
satisfied hereunder and under the Subscription Agreement at or prior to
such Closing Date.
(k) The Offered Shares have been approved for listing on the NYSE
and the Amsterdam Stock Exchange, in each case, subject to notice of
issuance.
(l) On such Closing Date, the Managers shall have simultaneously
purchased the International Firm Securities or the International Optional
Securities, as the case may be, pursuant to the Subscription Agreement.
(m) The Reorganization shall have been consummated; all actions
required in connection with the Reorganization shall have been taken; no
material consent, approval or authorization of, notice to, or
registration with, any person or entity which shall not have been
obtained prior to the Closing Date shall be necessary in connection with
the Reorganization, and there shall not be any pending or threatened
legal or governmental proceedings with respect thereto; the Company shall
have provided to the U.S. Underwriters and Managers copies of all
documents with respect thereto as they may reasonably request.
[(n) The $100 million bank credit facility of the Company
contemplated by the Prospectuses shall have been executed and delivered
and be in full force and effect and all conditions to borrowing
thereunder shall have been satisfied, and the Company shall have provided
to the U.S. Underwriters and Managers copies of all documents with
respect thereto as they may reasonably request.]
The Company will furnish the Representatives with such conformed copies of such
opinions, certificates, letters and documents as the Representatives reasonably
request. CSFBC may in its sole discretion waive on behalf of the U.S.
Underwriters compliance with any conditions to the obligations of the U.S.
Underwriters hereunder, whether in respect of an Optional Closing Date or
otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify
and hold harmless each U.S. Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such U.S. Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, either of the Prospectuses, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse each U.S. Underwriter for any legal or other
expenses reasonably incurred by such U.S. Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company will
-------- -------
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement in or omission or alleged omission from any of such documents
in reliance upon and in conformity with written information furnished to the
Company by any U.S. Underwriter through the Representatives specifically for
use therein, it being understood and agreed that the only information furnished
by any U.S. Underwriter consists of the information described as such in
subsection (c) below; and provided, further, that with respect to any
-------- -------
untrue statement or alleged untrue statement in or omission or alleged omission
from any preliminary prospectus the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any U.S. Underwriter from whom
the person asserting any such losses, claims, damages or liabilities purchased
the Offered Securities concerned, to the extent that a prospectus relating to
such Offered Securities was required to be delivered by such U.S. Underwriter
under the Act in connection with such purchase and any such loss, claim, damage
or liability of such U.S. Underwriter results from the fact that there was not
sent or given to such person, at or prior to the written confirmation of the
sale of such Offered Securities to such person, a copy of the U.S. Prospectus
if the Company had previously furnished a sufficient quantity of copies thereof
to such U.S. Underwriter.
(b) The Selling Shareholder will indemnify and hold harmless each U.S.
Underwriter against any losses, claims damages or liabilities, joint or
several, to which such U.S. Underwriter may become subject,
24
<PAGE>
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, either of the Prospectuses, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each U.S. Underwriter for any legal or other
expenses reasonably incurred by such U.S. Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Selling Shareholder will
-------- -------
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement in or omission or alleged omission from any of such documents
in reliance upon and in conformity with written information furnished to the
Company by any U.S. Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information furnished
by any U.S. Underwriter consists of the information described as such in
subsection (c) below; and provided, further, that the Selling Shareholder shall
-------- -------
only be subject to such liability to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission is based upon
information relating to the Selling Shareholder or contained in a representation
or warranty given by the Selling Shareholder in this Agreement.
(c) Each U.S. Underwriter will severally and not jointly indemnify and
hold harmless the Company and the Selling Shareholder against any losses,
claims, damages or liabilities to which the Company or the Selling Shareholder
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement, either of the Prospectuses, or
any amendment or supplement thereto, or any related preliminary prospectus, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such U.S. Underwriter through the
Representatives specifically for use therein, and will reimburse any legal or
other expenses reasonably incurred by the Company and the Selling Shareholder in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred, it being understood and
agreed that the only such information furnished by any U.S. Underwriter consists
of the following information in the U.S. Prospectus furnished on behalf of each
U.S. Underwriter: the last paragraph at the bottom of the cover page concerning
the terms of the offering by the U.S. Underwriters, the legends concerning over-
allotments and stabilizing on the inside front cover page, the concession and
reallowance figures appearing in the fifth paragraph under the caption
"Underwriting," the last sentence of the sixth paragraph under the caption
"Underwriting," and the seventh, eighth and twelfth paragraphs under the caption
"Underwriting."
(d) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action or proceeding (including any
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under subsection (a), (b)
or (c) above, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a), (b) or (c) above. In case any such action or proceeding
is brought against any indemnified party and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such
25
<PAGE>
settlement includes an unconditional release of such indemnified party from all
liability on any claims that are the subject matter of such action.
(e) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of the losses, claims, damages
or liabilities referred to in subsection (a), (b) or (c) above (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Shareholder on the one hand and the U.S. Underwriters
on the other from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Selling Shareholder on the one hand and the U.S. Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Shareholder on the one hand and the U.S. Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the U.S. Securities (before deducting expenses) received by the Selling
Shareholder bear to the total underwriting discounts and commissions received
by the U.S. Underwriters. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Shareholder or the
U.S. Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
subsection (e) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any action or claim which is the subject of this subsection (e). Notwithstanding
the provisions of this subsection (e), no U.S. Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the U.S. Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such U.S.
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The U.S. Underwriters' obligations in this
subsection (e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Shareholder under
this Section shall be in addition to any liability which the Company and the
Selling Shareholder may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any U.S. Underwriter
within the meaning of the Act; and the obligations of the U.S. Underwriters
under this Section shall be in addition to any liability which the respective
U.S. Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each director of the Company, to each officer or managing
director of the Company who has signed a Registration Statement and to each
person, if any, who controls the Company within the meaning of the Act.
8. Default of U.S. Underwriters. If any U.S. Underwriter or U.S.
Underwriters default in their obligations to purchase U.S. Securities hereunder
on either the First or any Optional Closing Date and the number of shares of
U.S. Securities that such defaulting U.S. Underwriter or U.S. Underwriters
agreed but failed to purchase does not exceed 10% of the total number of shares
of U.S. Securities that the U.S. Underwriters are obligated to purchase on such
Closing Date, CSFBC may make arrangements satisfactory to the Selling
Shareholder for the purchase of such U.S. Securities by other persons,
including any of the U.S. Underwriters, but if no such arrangements are made by
such Closing Date the non-defaulting U.S. Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the U.S. Securities that such defaulting U.S. Underwriters agreed but failed to
purchase on such Closing Date. If any U.S. Underwriter or U.S. Underwriters so
default and the aggregate number of shares of U.S. Securities with respect to
which such default or defaults occur exceeds 10% of the total number of shares
of U.S. Securities that the U.S. Underwriters are obligated to purchase on such
Closing Date and arrangements satisfactory to CSFBC and the Selling Shareholder
for the purchase of such U.S. Securities by other persons are not made within
36 hours after such default, this Agreement will terminate without
26
<PAGE>
liability on the part of any non-defaulting U.S. Underwriter, the Company or the
Selling Shareholder except as provided in Section 9 (provided that if such
default occurs with respect to U.S. Optional Securities after the First Closing
Date, this Agreement will not terminate as to the U.S. Firm Securities or any
U.S. Optional Securities purchased prior to such termination). As used in this
Agreement, the term "U.S. Underwriter" includes any person substituted for an
Underwriter under this Section. Nothing herein will relieve a defaulting U.S.
Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of
the Company, the Selling Shareholder, and their respective officers and of the
several U.S. Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation, or statement
as to the results thereof, made by or on behalf of any U.S. Underwriter, the
Company or the Selling Shareholder, or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the U.S. Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the U.S. Securities by the
U.S. Underwriters is not consummated, the Company shall remain responsible for
the expenses to be paid or reimbursed by it pursuant to Section 5 and the
respective obligations of the Company, the Selling Shareholder and the U.S.
Underwriters pursuant to Section 7 shall remain in effect and if any U.S.
Securities have been purchased hereunder the representations and warranties in
Section 2 and all obligations under Section 5 shall also remain in effect. If
the purchase of the U.S. Securities by the U.S. Underwriters is not consummated
for any reason other than solely because of the termination of this Agreement
pursuant to Section 8 or the occurrence of any event specified in clause (iii),
(iv), or (v) of Section 6(c), the Company will reimburse the U.S. Underwriters
for all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) reasonably incurred by them in connection with the offering of the
U.S. Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the U.S. Underwriters, will be mailed, delivered or telegraphed and
confirmed to the Representatives c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment
Banking Department - Transactions Advisory Group, or, if sent to the Company,
will be mailed, delivered or telegraphed and confirmed to it at Chicago Bridge
& Iron Company N.V., P.O. Box 74658, 1070 BR Amsterdam, The Netherlands,
Attention:____________, with a copy to Chicago Bridge & Iron Company, 1501
North Division Street, Plainfield, IL 60544-8929, Attention: General Counsel or
if sent to Praxair, will be mailed, delivered or telegraphed and confirmed to
it at Praxair, Inc., 39 Old Ridgebury Road, Danbury, CT 06810-5113, Attention:
Vice President and Treasurer; provided, however, that any notice to an
-------- -------
Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed and
confirmed to such U.S. Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 7, and no
other person will have any right or obligation hereunder.
12. Representation of U.S. Underwriters. The Representatives will act
for the several U.S. Underwriters in connection with this financing, and any
action under this Agreement taken by the Representatives jointly or by CSFBC
will be binding upon all the U.S. Underwriters.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
15. Submission to Jurisdiction. The Company and the Selling Shareholder
each hereby submit to the non-exclusive jurisdiction of the Federal and state
courts in the Borough of Manhattan in The City of New York in any suit or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. The Company irrevocably appoints Robert H. Wolfe, c/o
Chicago Bridge & Iron Company, 1501 North Division Street, Plainfield, IL 60544-
8929, as its authorized agent in the
27
<PAGE>
United States upon which process may be served in any such suit or proceeding
and agrees that service of process upon such agent by registered mail, return
receipt requested, and written notice of said service to the Company by the
person serving the same to the address provided in Section 10, shall be deemed
in every respect effective service of process upon the Company in any such suit
or proceeding; provided, however, that if service is effected upon such agent,
-------- -------
the Company agrees to waive any defense based upon insufficient or improper
service of process, improper venue or forum non coveniens. The Company further
----- --- ---------
agrees to take any and all action as may be necessary to maintain such
designation and appointment of such agent in full force and effect for a period
of seven years from the date of this Agreement.
16. Foreign Currency Judgments. The obligation of the Company in
respect of any sum due to any U.S. Underwriter shall, notwithstanding any
judgment in a currency other than United States dollars, not be discharged
until the first business day, following receipt by such U.S. Underwriter of any
sum adjudged to be so due in such other currency, on which (and only to the
extent that) such U.S. Underwriter may in accordance with normal banking
procedures purchase United States dollars with such other currency; if the
United States dollars so purchased are less than the sum originally due to such
U.S. Underwriter hereunder, the Company agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify such U.S. Underwriter against
such loss. If the United States dollars so purchased are greater than the sum
originally due to such U.S. Underwriter hereunder, such Underwriter agrees to
pay to the Company an amount equal to the excess of the dollars so purchased
over the sum originally due to such U.S. Underwriter hereunder.
28
<PAGE>
If the foregoing is in accordance with the Representatives' understanding
of our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement among the Company, the
Selling Shareholder and the several U.S. Underwriters in accordance with its
terms.
Very truly yours,
CHICAGO BRIDGE & IRON COMPANY N.V.
By.........................................
Name:
Title:
PRAXAIR, INC.
By.........................................
Name:
Title:
The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
UBS SECURITIES LLC
Acting on behalf of themselves and
as the Representatives of the
several Underwriters.
By CREDIT SUISSE FIRST BOSTON CORPORATION
By................................................
Name:
Title:
29
<PAGE>
SCHEDULE A
NUMBER OF
U.S. FIRM SECURITIES
U.S. UNDERWRITER TO BE PURCHASED
---------------- ---------------
Credit Suisse First Boston Corporation.............
Goldman, Sachs & Co................................
Smith Barney Inc...................................
UBS Securities LLC.................................
-------------
Total........................... 8,400,000
=========
30
<PAGE>
EXHIBIT 3
English Translation of
ARTICLES OF ASSOCIATION
CHICAGO BRIDGE & IRON COMPANY N.V.
INCORPORATION OF A PUBLIC COMPANY
This twenty-second day of November nineteen hundred ninety-six appeared
before me, Robert Jan Jozef Lijdsman, civil law notary, officiating in
Rotterdam: Mr. "Mr." Hendrikus Johannes Portengen, deputy civil law notary,
residing at (3056 JV) Rotterdam, Terbregseweg 91, born in Zevenaar on the
twentieth day of February nineteen hundred and sixty-nine, married, and of Dutch
nationality, whose identity has been established from his passport, number
X908582, for the purposes hereof acting as attorney in writing of Chi Bridge
Holdings, Inc., a company incorporated under the law of the State of Delaware,
with its principal office at 39 Old Ridgebury Road, Danbury, CT 06851-5113,
United States of America.
The appearer has declared that he hereby incorporates a public company
with the following articles of association:
CHAPTER I
Definitions
-----------
Article 1.
In the articles of association the following expressions shall have the
following meanings:
a. the general meeting: the body of the company formed by shareholders,
and other persons entitled to vote;
b. the general meeting of shareholders: the meeting of shareholders, and
other persons entitled to attend the general meetings;
c. the distributable part of the net assets: that part of the company's
net assets which exceeds the aggregate of the part of the capital which has been
paid and called up and the reserves which must be maintained by virtue of the
law;
<PAGE>
-2-
d. the annual accounts: the balance sheet and profit and loss account
with the explanatory notes;
e. the accountant: a registered accountant or other accountant referred
to in Section 393 of Book 2 of the Civil Code;
f. the annual meeting: the general meeting of shareholders held for the
purpose of discussion and adoption of the annual accounts.
CHAPTER II
Name, Seat, Objects
-------------------
Article 2. Name and Seat.
-------------
1. The name of the company is: Chicago Bridge & Iron Company N.V.
2. The official seat of the company is in Amsterdam.
Article 3. Objects.
-------
The objects of the company are:
a. to incorporate, to own, to participate in any way whatsoever, to
manage, to supervise, to operate and to promote enterprises, companies and
businesses;
b. to perform any and all activity of an industrial, financial or
commercial nature;
c. to design, develop, manufacture, market, sell and service
products of any nature, including without limitation any hardware and/or
software;
d. to develop and trade in patents, trademarks, copyrights,
licenses, know-how and other intellectual property rights;
<PAGE>
-3-
e. to borrow, to lend and to raise funds, including the issuance of
bonds, promissory notes or other securities or evidence of indebtedness, as
well as to enter into agreements in connection with the aforementioned;
f. to furnish advice and to render services to enterprises and
companies with which the company forms a group and to third parties;
g. to render guarantees, to bind the company and to pledge its
assets for obligations of the companies and enterprises with which it forms
a group, including its subsidiaries, and on behalf of third parties;
h. to obtain, alienate, manage and exploit real estate and items of
property in general;
i. to trade in securities and items of property in general; as well
as everything pertaining to the foregoing, relating thereto or in furtherance
thereof, all in the widest sense of the word.
CHAPTER III
Capital and Shares. Register.
------------------------------
Article 4. Authorized Capital.
------------------
1. The authorized capital amounts to five hundred thousand Dutch
guilders (NLG 500,000.--).
2. The authorized capital is divided into [fifty million (50,000,000)]
shares of [one cent (NLG 0.01) each].
3. All shares are at the option of the shareholder, either registered
shares or bearer shares.
<PAGE>
-4-
Article 5. Certificates of shares.
----------------------
1. For bearer shares, share certificates shall be issued. Share
certificates may, at the request of a shareholder, also be issued for registered
shares. Share certificates shall be numbered in the manner to be determined by
the management board.
2. Multiple certificates shall be issued at a shareholder's request
for such numbers of shares as shall be determined by the management board. At
the holder's request, a multiple certificate shall be exchanged for certificates
of single shares up to the same nominal amount.
3. The share certificates shall be signed by a member of the
management board or by both a member of the supervisory board and a member of
the management board and such signatures will be valid if reproduced on the
certificates in print. One or, as the case may be, both of these signatures may
also be replaced by a distinctive company stamp, provided by the company under
its supervision. If there is at least one original signature, then no company
stamp described hereinabove is required.
4. The company shall not charge any fee for the issuance and
exchange of share certificates.
Article 5.A. CF-certificates; K-certificates.
-------------------------------
1. A share certificate relating to one or more bearer shares shall
be provided with a simplified dividend sheet, without dividend coupons and
voucher. Such share certificates shall be referred to hereinafter as
CF-certificates.
2. A simplified dividend sheet (hereinafter referred to as a
CF-dividend sheet) may only be issued by the company to a custodian to be
designated by the shareholder. This custodian may only be designated from a
group of custodians which are accepted as such by the company and who provide
for the custody of the CF-dividend sheets to be administered by an organisation
independent of the company but accepted by it. These custodians shall
undertake not to issue the CF-dividend sheets in their charge to any persons
other than custodians accepted by the company or the company itself.
3. For all dividends and other distributions relating to a share for
which a CF certificate has been issued, the company shall be released towards
the person entitled thereto by placing those dividends or distributions at the
disposal of, or at the instruction of the independent organisation referred to
in paragraph 2.
4. A share certificate relating to one or more bearer shares may
have a dividend sheet annexed, consisting of dividend coupons and a voucher.
Such share certificates shall be referred to hereinafter as K-certificates.
The management board decides whether or not K-certificates shall
be issued. A decision of the management board to issue K-certificates is
subject to the approval of the supervisory board.
5. The management board has the right to draw up further rules
governing the issuance of K-certificates, CF-certificates and the conversion of
K-certificates into CF-certificates and vice versa.
Article 5.B. Conversion of shares.
--------------------
1. Bearer shares may, at the shareholder's request, be converted
into registered shares and vice versa.
2. Conversion of bearer shares into registered shares shall be
effected by the surrendering share certificates and simultaneous entry in the
register referred to in article 5.D. The dividend sheets belonging thereto
must also be surrendered.
3. Conversion of registered shares into bearer shares shall be
effected at the written request of the shareholder. If a life interest or a
right of pledge is created in a share, the cooperation of the beneficiary of the
life interest or pledgee shall be required. At the issuance of bearer share
certificates the entry in the register shall be deleted.
4. The company shall not charge any fee for conversion.
Article 5.C. Duplicate certificates.
----------------------
1. In the event of the loss, theft or destruction of share
certificates, coupon sheets, dividend coupons or vouchers relating to bearer
shares, the management board can issue duplicates. The management, board may
attach conditions to the issuance of duplicates, including the provision of
security and the payment of costs by the applicant.
2. The issuance of a duplicate shall render the original document of
no value with regard to the company.
3. The new document shall clearly state that it is a duplicate.
Article 5.D. Register of shareholders.
------------------------
1. The management board shall keep a register containing the names
and addresses of all holders of registered shares.
2. Every holder of one or more registered shares and any person
having a life interest or a right of pledge over one or more such shares shall
be obliged to provide the company in writing with their address.
3. All entries and notes in a register shall be signed by a member
of the management board or by a person authorised thereto by a member of the
management board.
4. Furthermore, article 85, Book 2 of the Civil Code applies to the
register.
5. Extracts from the register are not transferable.
<PAGE>
-5-
CHAPTER IV
Issuance of Shares. Own shares.
--------------------------------
Article 6. Issuance of Shares.
Body Competent To Issue Shares.
------------------------------
1. The issuance of shares shall be effected pursuant to a resolution
of the supervisory board provided that the supervisory board has been designated
by the general meeting as authorized body for this purpose. Such authorization
of the supervisory board shall only take place for a specific period of no more
than five years and may not be extended by more than five years on each
occasion.
2. The provisions of paragraph 1 of this article shall also apply to
the issuance of options to subscribe for new shares.
3. In case the supervisory board is no longer authorized to issue
shares, the general meeting shall be authorized to issue shares upon the
proposal of the supervisory board.
4. The supervisory board is authorized, provided that the
supervisory board has been designated by the general meeting as the body
authorized to issue shares, to issue, at the expense of a reserve of the
company, with due observance of the provisions of Article 31, paragraph 3,
shares and options to subscribe for new shares, provided that such shares and
options are issued to employees of the company under a valid employee option
scheme of the company.
Article 7. Conditions of Issuance.
Rights of Pre-emption.
-----------------------
1. A resolution for the issuance of shares shall stipulate the price
and further conditions of issuance.
2. On the issuance of shares, each shareholder shall have a right of
pre-emption in proportion to the aggregate nominal value of his shares. No pre-
emptive rights shall exist with regard to shares issued against a contribution
other than cash nor with regard to shares issued to employees of the company or
employees of group companies.
3. Shareholders shall have a similar right of pre-emption if options
are granted to subscribe for shares.
4. The company shall inform the shareholders of the issuance of
shares in respect of which there is a right of pre-emption, or, as the case may
be, the granting of options to subscribe for shares in respect of which there is
a right of
<PAGE>
-6-
pre-emption, as well as the period of time during which the right of pre-emption
may be exercised, with due observance of the applicable provisions of Dutch law.
5. The right of pre-emption may, subject to due observance of the
relevant provisions of the law, be limited or excluded by the supervisory board
provided the supervisory board is designated as the authorized body in this
respect by resolution of the general meeting for a fixed period of time not
exceeding five years. Article 6 paragraph 3 shall apply correspondingly.
Article 8. Payment for Shares.
------------------
1. The full nominal amount of each share must be paid in on issue,
as such as, if a share is subscribed for at a higher price, the balance of these
amounts.
2. Payment for a share must be made in cash insofar as no other
manner of payment has been agreed on. Payment in foreign currency can be made
only after approval by the company, which approval shall be deemed given upon
acceptance of foreign currency by the company.
3. The management board shall be authorized to enter into
transactions concerning non-monetary contributions on common shares, and the
other transactions referred to in Article 94 paragraph 1, Book 2 of the Civil
Code, without the prior approval of the general meeting.
Article 9. Own Shares.
----------
1. When issuing shares the company shall not be entitled to
subscribe for its own shares.
2. The company shall be entitled to acquire its own fully paid up
shares or depository receipts in respect thereof, provided either no valuable
consideration is given or provided that:
a. the distributable part of the net assets is at least equal to the
purchase price; and
b. the nominal value of the shares or the depository receipts in
respect thereof to be acquired by the company itself, already held by the
company or pledged for the benefit of the company, or which are held by a
subsidiary, does not exceed one tenth of the issued share capital.
<PAGE>
-7-
3. The validity of the acquisition shall be determined by the amount
of the net assets according to the latest adopted balance sheet, decreased by
the consideration for shares in the company's capital or depository receipts in
respect thereof and distributions of profits or by the charge of any reserve to
third parties which have fallen due by the company and its subsidiaries after
the balance sheet date. If more than six months of a financial year have elapsed
and the annual accounts have not been adopted, any acquisition in conformity
with paragraph 2 shall not be permitted.
4. An acquisition for valuable consideration shall be permitted only
if the general meeting has authorized the management board in this respect and
after approval of the supervisory board. The authorization by the general
meeting shall be valid for a period not exceeding eighteen months. The general
meeting shall stipulate in the authorization how many shares or depositary
receipts in respect thereof may be acquired, how they may be acquired, and
between what limits the price must be.
5. An acquisition of shares in contravention of paragraphs 2-4 shall
be void. Depository receipts in respect of shares acquired by the company in
contravention of paragraphs 2-4 shall be transferred to all members of the
management board by operation of law.
6. The transfer of shares owned by the company or depositary
receipts in respect thereof held by the company shall be effected by virtue of a
resolution of the management board after approval of the supervisory board. The
resolution to such transfer shall also stipulate the conditions thereof.
7. No voting rights can be exercised in the general meeting in
respect of any share belonging to the company or to any subsidiary of the
company; the same applies to any share in respect of which either the company or
any subsidiary holds depositary receipts. The beneficiary of a life interest in
respect of a share held by the company itself or a subsidiary company is,
however, not excluded from exercising the right to vote if the life interest was
created before the share was held by the company or one of its subsidiaries. The
company or its subsidiary may not exercise voting rights in respect of shares of
which the company has a life interest.
8. In establishing to what extent shareholders exercise voting
rights, are present or are represented, shares
<PAGE>
-8-
for which no voting rights can be exercised shall not be taken into
consideration.
9. The company may take its own shares or depositary receipts in
respect thereof as pledge only if:
a. the shares to be pledged are fully paid up;
b. the aggregate nominal value of the shares and depositary receipts
in respect thereof to be pledged and already held or held in pledge does not
exceed one tenth of the issued capital, and
c. the general meeting has approved the pledge agreement.
10. Upon the proposal of the management board --which proposal must
have prior approval from the supervisory board -- the general meeting shall have
the power to decide to cancel shares acquired by the company in its own share
capital, subject, however, to the statutory provisions relating hereto.
CHAPTER V
Transfer of shares, rights "in rem".
-----------------------------------
Article 10. Transfer of Shares.
Life Interest ("Vruchtgebruik").
Pledging ("Pandrecht").
Depositary Receipts.
-------------------------------
1. The transfer of shares and the creation and transfer of limited
rights thereon shall take place in accordance with the provisions of Dutch law
applicable thereto.
2. The shareholder shall have the voting rights in respect of the
shares in which a life interest has been created. However, the voting rights
shall accrue to the beneficiary of a life interest if it was so stipulated at
the creation of the life interest. The shareholder who holds no voting rights
and the beneficiary of a life interest who does hold voting rights, shall have
the rights which the law attributes to holders of depository receipts issued
with the company's co-operation. The rights referred to in the
<PAGE>
-9-
preceding sentence shall not accrue to the beneficiary of the life interest who
holds no voting rights.
3. The shareholder shall have the rights resulting from a share in
which a life interest has been created relating to the acquisition of newly
issued shares, such as stock dividends, it being understood that he/she shall
have to compensate the beneficiary of the life interest for the value of these
rights insofar as the latter is entitled thereto by virtue of his/her life
interest.
4. When shares are pledged, the voting rights cannot be assigned to
the pledgee. He shall not have the rights which the law attributes to holders of
depository receipts issued with the company's co-operation.
5. The company shall not co-operates with the issuance of depository
receipts in respect of its shares.
CHAPTER VI
Management
----------
Article 11. Management Board.
----------------
1. The management of the company shall be constituted by a
management board consisting of one or more members.
2. The number of members shall be determined by the supervisory
board.
Article 12. Appointment.
-----------
1. The members of the management board shall be appointed by the
general meeting from a nomination of at least two persons for every position to
be filled, which has been drawn up by the supervisory board.
2. The general meeting shall be free to make the appointment if the
supervisory board has not made any nomination within, on or before the date
which is three months after the vacancy occurs.
<PAGE>
-10-
3. Every nomination made by the supervisory board shall be binding
if made on or before the date which is three months after the vacancy occurs.
The general meeting can only disturb the binding character of the nomination by
resolution passed by a majority of at least two thirds of the votes cast, which
two thirds of the votes represents more than half of the issued share capital.
Article 13. Suspension and Dismissal.
------------------------
1. A member of the management board may at any time be suspended or
dismissed by the general meeting.
2. With respect to any suspension or dismissal other than on the
proposal of the supervisory board, the general meeting can only pass a
resolution based on a majority of at least two thirds of the votes cast which
two thirds of the votes represent more than half of the issued share capital.
3. A member of the management board may at any time be suspended by
the supervisory board. Such suspension may be discontinued by the general
meeting at any time.
4. Any suspension may be extended one or more times, but may not
last longer than three months in the aggregate. If at the end of that period no
decision has been take on termination of the suspension, or on dismissal, the
suspension shall cease.
Article 14. Remuneration.
------------
The remuneration and further conditions of employment of every member
of the management board shall be determined by the supervisory board.
Article 15. Duties of the Management Board.
Decision-making Process.
Allocation of Duties.
-------------------------------
1. Subject to the restrictions imposed by these articles of
association, the management board shall be entrusted with the management of the
company.
<PAGE>
-11-
2. The management board may lay down rules regarding its own
decision-making process. These rules shall be subject to the approval of the
supervisory board.
3. Meetings of the management board shall only be held in the
Netherlands, except that the management board may decide to have telephonic
meetings. The management board may adopt resolutions without a meeting, provided
the proposal concerned is submitted to all members of the management board and
none of them objects to this manner of adopting resolutions.
4. The management board may determine which duties in particular
each member of the management board will be charged with. The allocation of
duties shall be subject to the approval of the supervisory board.
Article 16. Representation.
--------------
1. The management board as such is authorized to represent the
company. Each member of the management board shall also be authorized to
represent the company.
2. The management board may appoint staff members with general or
limited power to represent the company. Each of these staff members shall be
authorized to represent the company with due observance of any restrictions
imposed on him/her. The management board shall determine such staff members'
titles.
3. In the event of a conflict of interest between the company and a
member of the management board, the company shall be represented by a member of
the management board or another person, as the supervisory board shall designate
for this purpose.
Article 17. Approval of Decisions
of the Management Board.
-----------------------
1. The supervisory board is entitled to require such resolutions of
the management board to be subject to its approval as the supervisory board
shall decide. Such resolutions shall be clearly specified and notified to the
management board in writing.
<PAGE>
-12-
2. The supervisory board is authorized to give the management board
instructions concerning the general policy of the company for financial, social
and economic matters. The management board shall act in accordance with such
instructions.
3. The lack of approval referred to in this Article 17 does not
affect the authority of the management board or its members to represent the
company.
Article 18. Absence or Prevention.
---------------------
If a member of the management board is absent or is prevented from
performing his duties, the remaining members or member of the management board
shall be temporarily entrusted with the entire management of the company. If all
members of the management board or the sole member of the management board
are/is absent or are/is prevented from performing their duties, the management
of the company shall be temporarily entrusted to the supervisory board, which
shall then be authorized to entrust the management temporarily to one or more
persons, whether or not from among its members.
CHAPTER VII
Supervisory Board.
-----------------
Article 19. Number of Members.
-----------------
1. The company shall have a supervisory board, consisting of at
least six and a maximum of nine members.
2. With due observance of the provisions of paragraph 1., the number
of members of the supervisory board shall be determined by the supervisory
board.
3. Where the number of members of the supervisory board falls below
six, measures shall be taken forthwith to fill the number of members. In the
meantime, the supervisory board shall keep all its powers.
Article 20. Appointment.
-----------
1. Two members of the supervisory board shall be appointed by
Praxair, Inc., a company organised under the laws of Delaware, so long as
Praxair, Inc. owns, directly, or indirectly through a wholly owned subsidiary
("dochtermaatschappij"), at least twenty percent (20%) of the company's issued
share capital. In case Praxair, Inc. owns at least ten percent (10%) of the
issued share capital but less than twenty percent (20%) it shall appoint one
member of the supervisory board.
2. All members of the supervisory board which shall not be appointed
by Praxair, Inc. in accordance with paragraph 1., shall be appointed by the
general meeting from a nomination of at least two persons for every position to
be filled, which has been drawn up by the supervisory board.
<PAGE>
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3. The provisions in paragraph 2 and 3 of Article 12 shall likewise
apply to an appointment by the general meeting.
4. No person who has reached the age of seventy-two may be appointed
as a supervisory board member.
Article 21. Suspension and Dismissal. Retirement.
-------------------------------------
1. A member of the supervisory board who was appointed by Praxair,
Inc. may at any time be suspended or dismissed by Praxair, Inc. This authority
ceases to exist if the authority to appoint such members will cease to exist in
accordance with article 20 paragraph 1. At the time the shareholding of Praxair,
Inc. in the company falls below twenty percent (20%) of the issued share
capital, Praxair Inc. shall inform the company for which member of the
supervisory board it will remain the authority to suspend or dismiss such
member.
2. A member of the supervisory board appointed by Praxair, Inc. with
respect to whom Praxair, Inc. no longer has the authority to suspend or dismiss,
shall retire no later than ninety (90) days after Praxair, Inc. has lost the
authority to suspend or dismiss such member, unless the chairman decides within
such period of ninety (90) days that this clause shall not apply.
3. Every member of the supervisory board who can not be suspended or
dismissed by Praxair, Inc. may be suspended or dismissed by the general meeting
at any time.
4. The provisions in paragraph 2 of Article 13 shall similarly apply
to the suspension and dismissal of supervisory board members by the general
meeting.
5. A supervisory board member shall retire no later than at the next
annual meeting held after a period of three years following his appointment. A
so-retired member of the supervisory board may be immediately re-elected.
6. Every member of the supervisory board shall retire no later than
on the day on which the annual meeting is held in the financial year in which he
reaches the age of seventy-two.
7. With due observance of the preceding paragraphs the supervisory
board shall draw up a rotation plan.
Article 22. Remuneration.
------------
The general meeting shall determine the remuneration for every member
of the supervisory board.
Article 23. Duties and Powers.
-----------------
1. It shall be the duty of the supervisory board to supervise the
activities of the management board and the general course of affairs in the
company and in the business connected therewith. It shall assist the management
board with advice. In performing their duties, the supervisory board members
shall act in accordance with the interests of the company and of the business
connected therewith.
<PAGE>
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2. The management board shall supply the supervisory board, in due
time, with the information required for the performance of its duties.
3. The supervisory board may delegate any of its powers to
committees consisting of such member or members of its body as it thinks fit;
any committee so formed shall, in the exercise of the power so delegated,
conform to any regulations that may be imposed on it by the supervisory board.
Article 24. Proceedings and Decision-Making Process.
---------------------------------------
1. The supervisory board shall elect a chairman from among its
members, and a vice chairman who shall take the place of the chairman in the
latter's absence. It shall appoint a secretary, who need not be a member of the
supervisory board, and shall make arrangements for his/her substitution in case
of absence.
2. In the absence of the chairman and the vice chairman at a
meeting, the board members in attendance shall designate a chairman therefor.
3. The supervisory board shall meet whenever the chairman, or two
other supervisory board members, or the management board, deem(s) such
necessary, but if the supervisory board has not met for six months, any
supervisory board member may call a meeting.
4. The secretary shall keep minutes of the proceedings at meetings
of the supervisory board. The minutes shall be adopted in the same meeting or in
the following meeting of the supervisory board and shall be signed by the
chairman and the secretary as evidence thereof.
5. All resolutions of the supervisory board shall be adopted by a
majority of the votes cast.
6. With the exception of Article 25 paragraph 4 under a.,
resolutions of the supervisory board shall only be valid if passed at a meeting
at which the majority of the supervisory board members are present or
represented. The supervisory board may also adopt resolutions in a telephone
meeting or without a meeting, provided the proposal concerned is submitted to
all supervisory board members and none of them objects to this manner of
adopting resolutions. The secretary
<PAGE>
-15-
shall draw up a report regarding a resolution thus adopted and shall attach the
replies received to the report, which shall be signed by the chairman and the
secretary.
7. A supervisory board member may be represented by a co-member of
the supervisory board authorized in writing. The expression "in writing" shall
include any message transmitted by current means of communication and received
in writing. A supervisory board member may not act as representative for more
than one co-member.
8. The supervisory board shall meet together with the management
board as often as the supervisory board or management board deems necessary.
Article 25. Indemnification. Limited Liability.
-----------------------------------
1. The company shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the company) by reason of the fact
that he is or was a supervisory director, member of the management board,
officer, employee or agent of the company, or is or was serving at the request
of the company as a supervisory director, member of the management board,
officer, director, employee, trustee or agent of another company, a partnership,
joint venture, trust or other enterprise or entity, against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the company, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful or outside of his mandate. The termination of any action,
suit or proceeding by a judgment, order, settlement, conviction, or upon a plea
of nolo contendre or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and not in a manner which he
reasonably could believe to be in or not opposed to the best interest of the
company, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
<PAGE>
-16-
2. The company shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or proceeding by or in the right of the company to procure a judgment in its
favor, by reason of the fact that he is or was a supervisory director, member of
the management board, officer or agent of the company, or is or was serving at
the request of the company as a supervisory director, member of the management
board, officer, director, employee, trustee or agent of another company, a
partnership, joint venture, trust or other enterprise or entity, against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
company, except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for gross negligence or willful misconduct in the performance of his duty to the
company, unless and only to the extent that the court in which such action or
proceeding was brought or any other court having appropriate jurisdiction shall
determine upon application that, despite the adjudication of liability but in
view of all of the circumstances of the case, such person is fairly and
reasonably entitled to indemnification against such expenses which the court in
which such action or proceeding was brought or such other court having
appropriate jurisdiction shall deem proper.
3. To the extent that a supervisory director, member of the
management board, officer, employee or agent of the company has been successful
on the merits or otherwise in defense of any action, suit or proceeding referred
to in paragraphs 1 and 2, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
4. Any indemnification by the company referred to in paragraphs 1
and 2 shall (unless ordered by a court) only be made upon a determination that
indemnification of the supervisory director, member of the management board,
officer, director, employee, trustee or agent is proper under the circumstances
because he had met the applicable standard of conduct set forth in paragraph 1
and 2 of this Article 25. Such determination shall be made:
<PAGE>
-17-
a. by a majority of supervisory directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or;
b. if there are no supervisory directors who are not named as
parties to such action, suit or proceeding or if the supervisory directors
who are not named as parties to such action, suit or proceeding so direct,
by independent legal counsel in a written opinion; or
c. by the general meeting of shareholders.
5. Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the company in advance of the final disposition of
such action, suit or proceeding upon a resolution of the supervisory board with
respect to the specific case upon receipt of an undertaking by or on behalf of
the supervisory director, member of the management board, officer, director,
employee, trustee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the company as authorized in
this article.
6. The indemnification provided for by this article shall not be
deemed exclusive of any other right to which a person seeking indemnification
may be entitled under the laws of the Netherlands as from time to time amended
or under any by-laws, agreement, resolution of the general meeting of
shareholders or of the disinterested members of the supervisory board or
otherwise, both as to actions in his official capacity and as to actions in
another capacity while holding such position, and shall continue as to a person
who has ceased to be a supervisory director, member of the management board,
officer, director, employee, trustee or agent and shall also inure to the
benefit of the heirs, executors and administrators of such a person.
7. The company shall have the power to purchase and maintain
insurance on behalf of any person who is or was a supervisory director, member
of the management board, officer, employee or agent of the company, or is or was
serving at the request of the company as a supervisory director, member of the
management board, officer, director, employee, trustee or agent of another
company, a partnership, joint venture, trust or other enterprise or entity,
against any liability asserted against him and incurred by him in any such
capacity or arising out of his capacity as such, whether or not the company
would
<PAGE>
-18-
have the power to indemnify him against such liability under the provisions of
this Article.
8. Whenever in this article reference is made to the company, this
shall include, in addition to the resulting or surviving company also any
constituent company (including any constituent company of a constituent company)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had the power to indemnify its supervisory directors,
members of the management board, officers, employees and agents, so that any
person who is or was a supervisory director, member of the management board,
officer, employee or agent of such constituent company, or is or was serving at
the request of such constituent company as a supervisory director, member of the
management board, officer, director, employee, trustee or agent of another
company, a partnership, joint venture, trust or other enterprise or entity,
shall stand in the same position under the provisions of this article with
respect to the resulting or surviving company as he would have with respect to
such constituent company if its separate existence had continued.
9. No person shall be personally liable to the company or its
stockholders for monetary damages for breach of fiduciary duty as a supervisory
director or member of the management board; provided, however, that the
foregoing shall not eliminate or limit the liability of a supervisory director
or member of the management board (1) for any breach of such individual's duty
of loyalty to the company or its stockholders, (2) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (3) for any transactions from which the director derived an improper
personal benefit or (4) for personal liability which is imposed by Dutch law, as
from time to time amended. Any amendment, repeal or modification of this Article
25 shall not adversely affect any right or protection of any person with respect
to any act or omission occurring prior to such amendment, repeal or
modification.
<PAGE>
-19-
CHAPTER VIII
Annual Accounts. Profits.
-------------------------
Article 26. Financial Year.
Drawing up the Annual Accounts.
Deposition for Inspection.
-------------------------------
1. The fiscal year of the Company shall be the calendar year.
2. Annually, and not later than five months after the end of the
fiscal year, the management board shall draw up the annual accounts, unless, by
reason of special circumstances, this period is extended with a maximum
extension of six months by the general meeting.
3. Within the period referred to in paragraph 2, the annual accounts
shall be deposited at the office of the company for inspection by the
shareholders. Within this period of time, the management board shall also submit
the annual report. The statement of the accountant, as mentioned in Article 29,
and the additional information required by virtue of the law shall be added to
the annual accounts.
4. The annual accounts shall be signed by all the members of the
management board; if the signature of one or more of the members is lacking,
this shall be stated and reasons given.
Article 27. Accountant.
----------
1. The Company shall appoint an accountant to audit the annual
accounts.
2. Such appointment shall be made by the general meeting. This
resolution of the general meeting shall require the approval of the supervisory
board. If the general meeting fails to make an appointment, the supervisory
board shall be competent to do so or, in the absence of the supervisory board
members or in the event the supervisory board fails to do so, the management
board shall be competent to do so. The appointment of an accountant shall not be
limited by virtue of any nomination; the appointment may, at all times, be
revoked
<PAGE>
-20-
by the general meeting or by the supervisory board or management board if either
of the latter boards has appointed the accountant.
3. The accountant shall issue a report on his audit examination to
the supervisory board and the management board.
4. The accountant shall give the results of his investigations in a
declaration as to the faithfulness of the annual accounts.
Article 28. Submission to the Supervisory Board.
-----------------------------------
1. The management board shall submit simultaneously the annual
accounts and the annual report to the supervisory board.
2. The annual accounts shall be signed by the members of the
supervisory board; if the signature of one or more of them is lacking, this
shall be stated and reasons given.
3. The supervisory board shall present a report on the annual
accounts to the general meeting.
Article 29. Adoption.
--------
1. The Company shall ensure that the annual accounts, the annual
report and the information to be added by virtue of the law are kept at its
office as of the date on which the annual meeting is convened. Shareholders, and
beneficiaries of a life interest in shares to whom the right to vote the shares
accrue, may inspect the documents at such place and obtain a copy thereof, free
of charge.
2. The general meeting shall adopt the annual accounts. The annual
accounts may not be adopted in the event that the general meeting has been
unable to inspect the accountant's declaration referred to in Article 27,
paragraph 4, unless a legal ground is given in the information required to be
added by law for the lack of the accountant's declaration referred to in Article
27, paragraph 4.
3. The unconditional adoption of the annual accounts by the general
meeting shall serve to constitute a
<PAGE>
-21-
discharge of the management board members for their management and for the
supervisory board members for their supervision insofar as such management
supervision is apparent from the annual accounts.
Article 30. Publication.
-----------
1. The Company shall publish the annual accounts within eight days
following the adoption thereof. The publication shall be effected by the deposit
of a complete copy in the Dutch language or, if such copy was not prepared, a
copy in the French, German or English language, at the offices of the Trade
Register in whose district the Company has its official seat according to these
articles of association. The date of adoption must be stated on the copy.
2. If the annual accounts are not adopted within seven months of the
termination of the fiscal year, in accordance with the legal requirements, then
the management board shall, without further delay, publish the prepared annual
accounts in the manner prescribed in paragraph 1; it shall be noted on the
annual accounts that they have not yet been adopted.
3. In the event that the general meeting shall have extended the
period for the preparation of the annual accounts in accordance with Article 28
paragraph 2, then the last preceding paragraph shall apply with effect from the
date falling two months from the termination of such period.
4. A copy of the annual report, produced in the same language or in
Dutch, shall, together with the additional information required by virtue of
law, be published at the same time and in the same manner as the annual
accounts. Insofar as the law permits, the foregoing shall not apply if copies of
those documents are held at the office of the company for inspection by any
person and, upon request, full or partial copies thereof are supplied at a price
not exceeding the cost; the company shall make an official return thereof for
filing in the Trade Register.
5. The publication shall be effected with due observance of the
applicable legal exemptions.
<PAGE>
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Article 31. Profits. Distribution.
----------------------
1. From the profits appearing from the annual accounts as adopted,
such an amount shall be reserved by the company as shall be determined by the
management board, which resolution requires the approval of the supervisory
board. The profits remaining thereafter shall be treated in accordance with the
provisions of the following paragraphs of this article.
2. The profits remaining after the reservation referred to in
paragraph 1 are at the disposal of the general meeting for distribution on the
shares equally and proportionally and/or for reservation.
3. A distribution can only take place up to the distributable part
of the net assets.
4. Distributions of profits shall take place after adoption of the
annual accounts from which it shall appear that approval of such accounts has
been given.
5. The management board may, subject to due observance of the
provisions of Article 31, paragraph 3, and with the approval of the supervisory
board, resolve to pay an interim dividend in anticipation of the final
dividends.
6. On the proposal of the management board, which proposal shall
require the prior approval of the supervisory board, subject to the due
observance of the provisions of Article 31, paragraph 3, the general meeting may
resolve to make distributions at the expense of any reserve.
7. The supervisory board or -- in case the supervisory board is no
longer authorized to issue shares in accordance with Article 6 -- the general
meeting, may determine to distribute stock dividends.
Article 32. Date on which Distributions
Become Payable Currency.
---------------------------
1. The date on which dividends and other payments become payable
shall be announced in accordance with Article 43. Such date may differ for
shares for which share
<PAGE>
-23-
certificates are issued and shares for which no share certificates are issued.
2. The management board may resolve to make payments in the currency
of the country where these payments are made payable.
3. Any claim of a shareholder for payment shall be barred after five
years have elapsed.
CHAPTER IX
General Meetings of Shareholders.
--------------------------------
Article 33. Annual Meeting.
--------------
1. Annually, and not later than six months after the end of the
fiscal year, the annual meeting shall be held.
2. The agenda for such meeting shall set forth, inter alia, the
following points for discussion:
a. the annual report;
b. adoption of the annual accounts;
c. appropriation of profits;
d. filling of any vacancies in the management board and/or
supervisory board and, if necessary, the appointment of the accountants;
e. other proposals put forward for discussion and announced with due
observance of Article 35 by the supervisory board, the management board or by
the shareholders and beneficiaries of a life interest to whom the voting right
has been granted, representing, in the aggregate, at least one tenth of the
issued capital.
<PAGE>
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Article 34. Other Meetings.
--------------
1. Other general meetings of shareholders shall be held as often as
the management board or the supervisory board deems such necessary.
2. Shareholders, and beneficiaries of a life interest to whom the
voting right has been granted, representing in the aggregate at least one tenth
of the issued capital, may request the management board to convene a general
meeting of shareholders, stating the subjects to be discussed. If the management
board has not convened a meeting within four weeks in such a manner that the
meeting can be held within six weeks after the request has been made, the
persons who have made the request shall be authorized to convene a meeting
themselves.
Article 35. Convocation. Agenda.
--------------------
1. General meetings of shareholders shall be convened by the
management board.
2. The convocation shall be given no later than on the fifteenth day
prior to the date of the meeting.
3. The convocation shall specify the subjects to be discussed.
Subjects that were not specified in the notification may be announced at a later
date, subject to due observance of the requirements set out in this article.
4. The convocation shall be made in the manner stated in Article 43.
Article 36. The Entire Capital Is Represented.
---------------------------------
As long as the entire issued capital is represented at a general
meeting of shareholders, valid resolutions can be adopted on all subjects
brought up for discussion, even if the formalities prescribed by law or by the
articles of association for the convocation and holding of meetings have not
been complied with, provided such resolutions are adopted unanimously.
<PAGE>
-25-
Article 37. Place of the Meetings.
---------------------
The general meetings of shareholders shall be held in Amsterdam,
Rotterdam, The Hague or Schiphol Airport (municipality Haarlemmermeer). In
meetings held elsewhere, resolutions can be validly adopted provided the entire
issued capital is present.
Article 38. Chairmanship.
------------
1. The general meetings of shareholders shall be presided over by
the chairman of the supervisory board or, in his absence, by the vice chairman
of the supervisory board; in the event that the latter is also absent, the
supervisory board members present shall elect a chairman from their midst. The
supervisory board may designate another person to act as chairman of a general
meeting of shareholders.
2. If the chairman has not been appointed in accordance with
paragraph 1, the shareholders present at such meeting shall, themselves, choose
a chairman.
Article 39. Minutes. Records.
-----------------
1. Minutes of the proceedings at any general meeting of shareholders
shall be kept by a secretary to be designated by the chairman. The minutes shall
be confirmed by the chairman and the secretary and shall be signed by them as
proof thereof.
2. The supervisory board, the chairman or the person who has
convened the meeting may determine that notarial minutes of the proceedings of
the meeting shall be drawn up. The notarial minutes shall be co-signed by the
chairman.
3. The management board shall keep a record of the resolutions made
at this general meeting. If the management board is not represented at a general
meeting, the chairman of the meeting shall provide the management board with a
transcript of the resolutions made as soon as possible after the meeting. The
records shall be deposited at the offices of the company for inspection by the
shareholders and the holders of depositary receipts. Upon request, each of them
shall be provided with a copy or an extract of such record at not more
<PAGE>
-26-
than the actual cost thereof. Shareholders in this respect shall include
beneficiaries of a life interest who hold voting rights.
Article 40. Meetings rights. Admittance.
----------------------------
1. Each shareholder entitled to vote and each beneficiary of a life
interest or pledgee to whom the voting rights accrue shall be entitled to attend
the general meeting of shareholders, to address the meeting and to exercise his
voting rights. Where it concerns registered shares, the management board must be
notified in writing of the intention to attend the meeting. Such notice must be
received by the management board not later than on the date mentioned in the
notice of the meeting. Where it concerns bearer shares the share certificates
must be lodged not later than on the date mentioned in the notice of the
meeting, at the place mentioned therein.
2. The right to take part in the meeting in accordance with
paragraph 1 may be exercised by a proxy authorised in writing, provided that the
power of attorney has been received by the management board not later than on
the date mentioned in the notice of the meeting.
3. The date mentioned in the notice of the meeting, referred to in
paragraphs 1 and 2, cannot be prior than the seventh day prior to the date of
the meeting.
4. If the voting rights on a share accrue to the beneficiary of a
life interest or to a pledgee, instead of to the shareholder, the shareholder is
also authorised to attend the general meeting of shareholders and to address the
meeting, provided that, where it concerns registered shares, the management
board has been notified of the intention to attend the meeting in accordance
with paragraph 1, and, where it concerns bearer shares, the lodging as
prescribed by paragraph 1 has taken place. Paragraph 2 applied accordingly.
5. Each share confers the right to cast one vote.
6. Each person entitled to vote or his proxy shall sign the
attendance list.
7. The members of the supervisory board and of the management board
shall, as such, have the right to advise the general meeting of shareholders.
8. The chairman shall decide whether persons other than those who
shall be admitted in accordance with the above provisions of this article shall
be admitted to the meeting.
Article 41. Votes.
-----
1. Insofar as no greater majority is prescribed by law or these
articles of association, all resolutions of the general meeting shall be adopted
by a majority of the votes cast.
2. If, in an election of persons, a majority is not obtained, a
second vote shall be taken. If, again, a majority
<PAGE>
-27-
is not obtained, further votes shall be taken until either one person obtains
the absolute majority or the election is between two persons who have received
an equal number of votes. In the event of a further election (not including the
second free vote), the election shall be between the persons who participated in
the preceding election, with the exception of the person who received the
smallest number of votes in that preceding election. If, in that preceding
election, more than one person received the smallest number of votes, it shall
be decided by lot who of these persons shall no longer participate in the new
election. If the votes are equal in the election between the two, it shall be
decided by lot who is to be chosen. If there is a tie vote in a vote for the
election of persons out of a binding list of nominees, the first person on that
list shall be elected.
3. If there is a tie vote on a matter other than a vote for the
election of persons, the proposal shall be rejected.
4. Votes need not be held in writing. The chairman is, however,
entitled to decide that a vote shall be by secret ballot. If the vote concerns
an election of persons, any person present at the meeting and entitled to vote
can also demand a vote by a secret ballot.
5. Abstentions and invalid votes shall not be counted as votes that
have been cast.
6. Voting by acclamation shall be allowed if none of the persons
present and entitled to vote objects to it.
7. The chairman's decision at the meeting about the outcome of a
vote shall be final and conclusive. The same shall apply to the contents of an
adopted resolution regarding the voting on an unwritten proposal. If, however,
the correctness of that decision is challenged immediately after its
pronouncement, a new vote shall be taken if either the majority of the persons
present and entitled to vote so requests, or, if the original voting was taken
by roll call or in writing, any person present and entitled to vote so requests.
As a result of the new vote, the original vote shall have no legal consequence
and shall be cancelled.
<PAGE>
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CHAPTER X
Convocation and Notification
----------------------------
1. All announcements for the general meetings of shareholders, all
notifications concerning dividend and other payments and all other
communications to holders of registered shares shall be effected by means of
letters mailed to the addresses as shown in the register of shareholders.
In case there are bearer shares issued any outstanding announcements,
notifications and other communications to shareholders shall also be effected by
means of a notice in a national daily paper and, in case of a listing on the
Amsterdam Stock Exchange, in the Official Price List, without prejudice to the
provisions of article 96a paragraph 4, Book 2 of the Civil Code.
2. The expression "shareholders" in paragraph ? shall include the beneficiaries
of a life interest and pledgees to which the voting rights on shares accrue.
CHAPTER XI
Amendment of the Articles of Association and
Dissolution. Liquidation.
--------------------------------------------
Article 43. Amendment of the Articles of
Association and Dissolution.
----------------------------
1. When a proposal to amend the articles of association or to dissolve the
company is to be submitted to the general meeting, such must be mentioned in the
notice of the general meeting of shareholders and, if an amendment to the
articles of association is to be discussed, a copy of the proposal, setting
forth the text of the proposed amendment verbatim, shall at the same time be
deposited at the company's office and, if shares are listed on the Amsterdam
Stock Exchange, at the office of a member of the Amsterdam Stock Exchange to be
designated in the notice of the meeting or another payment office as referred to
in the relevant Rules of the Amsterdam Stock Exchange for inspection and shall
be held available for shareholders as well as for beneficiaries of a life
interest and pledgees to which the voting rights on shares accrue, free of
charge until the end of the meeting.
<PAGE>
-29-
2. A proposal to amend the articles of association, to legally
merge or to dissolve the company shall require prior approval of the
supervisory board.
Article 44. Liquidation.
-----------
1. In the event of dissolution of the company by virtue of a
resolution of the general meeting, the members of the management board shall be
charged with the liquidation of the business of the company, and the members of
the supervisory board with the supervision thereof.
2. During liquidation, the provisions of these articles of
association shall remain in force to the extent possible.
3. The balance remaining after payment of creditors shall be
transferred to the shareholders.
4. The liquidation shall take place in accordance with the
provisions of Section 1 of Volume 2 of the Civil Code.
Final Statements.
----------------
Finally the appearer has declared:
a. at the incorporation the issued share capital amounts to one
hundred thousand Dutch guilders (NLG 100,000.--). The incorporator participates
in the issued capital for all ten million (10,000,000) shares. The issuance
takes place at par value. The issued share capital has been paid up in cash.
Payment in foreign currency is permitted. The documents which must be attached
by virtue of Section 93a Book 2 of the Civil Code have been attached to this
instrument. The Company accepts the payments on the shares issued at the
incorporation;
b. the first members of the management board are:
Mr. Robert Francis Xavier Fusaro, residing at 8 Rebel
Road, Westport, Connecticut, United States of America,
<PAGE>
-30-
born at New York, United States of America, on the twenty-second day of
November, nineteen hundred forty-one; and
Mr. James Shiels Sawyer, residing at 10 Ben Court, Old Greenwich,
Connecticut, United States of America, born at Connecticut, United States of
America, on the third day of November nineteen hundred fifty-six.
c. the provisions in these articles with respect to the supervisory
board shall only come into effect as per the moment that at least one
supervisory director has been appointed by the general meeting and has been
filed with the Trade Register of the Chamber of Commerce and Industry.
The authority and powers of the supervisory board pursuant to Article
17 and 18 of these articles shall until such time be exercised by the general
meeting;
The ministerial declaration of no objections was granted on the
twentieth day of November nineteen hundred ninety-six, under number N.V.
579.328, as stated in the certified draft of this instrument, which has been
attached to this instrument.
The appearer is known to me, notary.
THIS DEED, drawn up to be kept in the notary's custody, was executed
in Rotterdam on the date first above written.
Before reading out, a concise summary of the contents of this
instrument was given to the appearer. He then declared that he had noted the
contents and did not want a full reading thereof. Thereupon, after limited
reading, this instrument was signed by the appearer and by me, notary.
---------------------------------------
END OF TEXT
---------------------------------------
The foregoing represents, to the best of the Company's knowledge, a
fair and accurate translation from Dutch of the Articles of Association of
Chicago Bridge & Iron Company N.V.
CHICAGO BRIDGE & IRON COMPANY N.V.
<PAGE>
By: /s/ Robert F.X. Fusaro
--------------------------------
Robert F.X. Fusaro
Managing Director
<PAGE>
EXHIBIT 4.1
SPECIMEN
CERTIFICATE NUMBER COMMON SHARES
CHICAGO BRIDGE & IRON COMPANY N.V.
INCORPORATED UNDER THE CUSIP
LAWS OF THE NETHERLANDS SEE REVERSE FOR CERTAIN
WITH ITS SEAT AT DEFINITIONS
AMSTERDAM, THE
NETHERLANDS
(Commercial Register
Number 286.441)
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE COMMON SHARES OF THE PAR VALUE OF NLG 0.01
(NETHERLANDS GUILDER) OF
CHICAGO BRIDGE & IRON COMPANY N.V. (the "Company") transferable on the
books of the Company by the holder hereof in person or by duly authorized
attorney upon surrender of this share certificate properly endorsed. This
certificate and the shares represented hereby are issued and shall be subject to
all of the provisions of the laws of The Netherlands, to the Articles of
Association of the Company, if and as amended (copies of which are available at
the office of the Company at Amsterdam, The Netherlands and at the office of the
Transfer Agent and Registrar in New York), and to all provisions whereof the
holder hereof hereby asserts and is bound. The Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile signatures of the duly authorized officers of the
Company
Dated: Countersigned and Registered
HARRIS TRUST AND SAVINGS BANK,
New York Transfer Agent
- ----------------------- ----------------------- --------------------------
Managing Director Managing Director Authorized Signature
<PAGE>
CHICAGO BRIDGE & IRON COMPANY N.V.
Transfers of Common Shares may only be made in accordance with Article [ ] of
the Articles of Association of the Company. The undersigned Assignor hereby
certifies that all requirements relating to the transfer of Common Shares have
been complied with. The Company will furnish without charge to each shareholder
who so requests information about the designations, preferences and relative,
participating, optional or other special rights of each class of shares or
series thereof of the Company, and about the qualifications, limitations or
restrictions of such preferences and/or rights. Such request may be made to the
office of the Company at Amsterdam, The Netherlands, or to the office of the
Transfer Agent and Registrar in New York. Keep this Certificate in a safe
place. If it is lost, stolen or destroyed the Company may require a bond and/or
indemnity as a condition to the issuance of a replacement certificate. The
share(s) represented by this Certificate have been issued by CHICAGO BRIDGE &
IRON COMPANY N.V., a company organized and existing under the laws of The
Netherlands (the "Company"). The Company has authorized the Transfer Agent to
acknowledge the transfer of share(s) on its behalf, which acknowledgment is
required by Netherlands law.
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in UNIF GIFT MIN ACT _______ Custodian _______
common (Cust.) (Minor)
TEN ENT - as tenants by under Uniform Gifts to
the entireties Minors
JT TEN - as joint tenants with Act ___________________
right of ownership and (State)
not as tenants in common
Additional abbreviations may also be used though not listed.
_____________________________________
TRANSFER FORM
For value received _________________________________________ hereby sell and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
Please print or type name and address including postage zip code of Assignee
________________________________________________________________________________
________________________________________________________________ Common Shares
of the Company represented by the within Certificate, and do hereby irrevocably
constitute and appoint _________________________________________________________
to transfer the said shares on the books of the within named Company with full
power of substitution in the premises.
Such transferee accepts title to _______ shares each with a nominal value of
0.01 Dutch Guilder (NLG 0.01) in the share capital of the Company, represented
by this Certificate. The parties waive their right to invoke a rescission of
this agreement on any ground whatsoever. This agreement is governed by the laws
of The Netherlands.
Date ______________
X_____________________________
(Signature)
X_____________________________
(Signature)
ACKNOWLEDGMENT
The undersigned selling on behalf of the Company, hereby acknowledges the
transfer of the Common Shares (as described above) and confirms that entry
hereof has been made in the Company's shareholders' register as of ________
CHICAGO BRIDGE & IRON COMPANY N.V.
By: ____________________________
Date: __________________________
DRAFT: 3/16/97 8:23 PM #25666 v1 (JSY01!.DO
<PAGE>
EXHIBIT 5
[Letterhead of Loeff Claeys Verbeke]
[Form of Opinion]
Chicago Bridge & Iron Company N.V.
P.O. Box 74658
1070 RR Amsterdam
The Netherlands
Re: Chicago Bridge & Iron Company N.V.
Offer of Common Shares
----------------------------------
Dear Sirs:
We have acted as special counsel on matters of Netherlands law to
Chicago Bridge & Iron Company N.V. (the "Company") in connection with the offer
for sale by Praxair, Inc. of Common Shares, par value NLG 0.01 (the "Shares"),
in the capital of the Company.
In rendering this opinion, we have examined and relied upon the
following documents:
1. The Articles of Association (statuten) of the Company as currently in
effect, dated [ ] March 1997 (the "Articles of Association");
2. An excerpt dated [ ] March 1997 of the registration of the Company in the
Trade Register of the Chamber of Commerce of Amsterdam;
3. A copy of the Registration Statement on Form S-1 of the Company relating to
the offering (the "Registration Statement"), filed with the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended;
and such other documents and such other laws, rules, regulations, and the like,
as we have deemed necessary as a basis for the opinions hereinafter expressed.
- ---------------------
In the Amsterdam and Rotterdam offices the practice is conducted by Loeff Claeys
Verbeke (Nederland), a professional partnership consisting of private limited
liability companies and individuals. A list of partners is available on
request. The general conditions of Loeff Claeys Verbeke (Nederland), which
provide for limitation of liability, are applicable.
<PAGE>
-2-
Capitalized terms used but not defined herein are used as defined in
the Registration Statement.
For the purpose of the opinion expressed herein, we have assumed the
conformity to the originals of all documents submitted to us as copies.
Subject to the foregoing, we are of the opinion that the Common Shares
are validly issued, fully paid and non-assessable.
In this opinion Netherlands legal concepts are expressed in English
terms and not in their original Dutch terms. The concepts concerned may not be
identical to the concepts described by the same English term as they exist under
the laws of other jurisdictions. This opinion may, therefore, only be relied
upon under the express condition that any issues of interpretation or liability
arising thereunder will be governed by Netherlands law and be brought before a
Netherlands court.
This opinion is strictly limited to the matters stated herein and may
not be read as extending by implication to any matters not specifically referred
to. Nothing in this opinion should be taken as expressing an opinion in respect
of any representations or warranties, or other information, contained in the
Registration Statement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us in the prospectus in the
Registration Statement. In giving such consent, we do not thereby admit that we
are within the category of persons whose consent is required under the
Securities Act, or the rules and regulations of the SEC thereunder.
Yours faithfully
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF CAHILL GORDON & REINDEL]
Chicago Bridge & Iron Company N.V.
P.O. Box 74658
1070 BR Amsterdam
The Netherlands
Gentlemen:
We hereby confirm the discussion set forth in the Prospectuses for
Chicago Bridge & Iron Company N.V. (the "Company") dated ________, 1997,
contained in the Registration Statement on Form S-1 of the Company, which
discussion is set forth under the heading "Taxation-United States Federal Income
Taxes."
We hereby consent to the filing of this opinion as an exhibit to such
Registration Statement and the reference to the above-mentioned opinion under
"Taxation-United States Federal Income Taxes." In giving such consent, we do
not admit that we are within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
<PAGE>
EXHIBIT 8.2
[Letterhead of Loeff Claeys Verbeke]
[Form of Opinion]
Chicago Bridge & Iron Company N.V.
P.O. Box 74658
1070 RR Amsterdam
The Netherlands
Re: Registration Statement on Form S-1 of
Chicago Bridge & Iron Company N.V.
(Registration No. 333-18065)
------------------------------------
Dear Sirs:
We have acted as your special tax counsel in The Netherlands in
connection with the Registration Statement on Form S-1 as filed by you with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), in relation to the proposed public offering of Common Shares of
Chicago Bridge & Iron Company N.V. (the "Issuer") to be sold by underwriters
represented by Credit Suisse First Boston Corporation, Goldman, Sachs & Co.,
Smith Barney Inc. and UBS Securities LLC. Capitalized terms to which no meaning
is assigned herein have the meaning assigned thereto in the Prospectus.
We have advised the Issuer in connection with the description of the
material Netherlands tax consequences to an owner of Common Shares who is not,
or is not deemed to be, a resident of The Netherlands for purposes of the
relevant tax codes (a "Netherlands Shareholder") that appears under the heading
"Taxation - Netherlands Taxes" in the Prospectus included in the Registration
Statement (the "Netherlands Tax Description") and we confirm that the
Netherlands Tax Description is accurate in all material respects. While the
Netherlands Tax Description discusses the material Netherlands tax consequences
of the purchase, ownership and disposition of the Common Shares by a Nonresident
Shareholder, it does not purport to discuss all Netherlands tax considerations
and consequences and
- ---------------------
In the Amsterdam and Rotterdam offices the practice is conducted by Loeff Claeys
Verbeke (Nederland), a professional partnership consisting of private limited
liability companies and individuals. A list of partners is available on
request. The general conditions of Loeff Claeys Verbeke (Nederland), which
provide for limitation of liability, are applicable.
<PAGE>
-2-
our opinion is limited to those Netherlands tax consequences specifically
discussed therein.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and further consent to the reference to our firm under
the heading "Taxation - Netherlands Taxes" in the Prospectus forming a part of
the Registration Statement. This consent is not to be construed as an admission
that we are a person whose consent is required to be filed with the Registration
Statement under the provisions of the Act.
Very truly yours,
<PAGE>
EXHIBIT 10.1
FORM OF INDEMNIFICATION AGREEMENT
---------------------------------
This Indemnification Agreement is dated [ ] between:
Chicago Bridge & Iron Company N.V., a public company with limited
liability, with its statutory seat and offices at Koningslaan 34, 1075 AD,
Amsterdam, registered with the Trade Register in Amsterdam under number:
[ ] (the "Company"); and
[ ] (the "Indemnitee").
WHEREAS:
A. It is essential to the Company to retain and attract as [supervisory
directors / members of the management board / officers / employees] the most
capable persons available;
B. Indemnitee is a [supervisory director / member of the management board /
officer / employee] of the Company;
C. Article 25 of the Articles of Association of the Company provides for an
indemnification of, among others, supervisory board directors and members of the
management board of the Company;
D. The Company and the Indemnitee wish to confirm and supplement the
indemnification referred to above in C. as follows;
NOW THEREFORE IT IS AGREED AS FOLLOWS:
1. The Company shall indemnify Indemnitee if he was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(together: "Proceedings")( (other than an action by or in the right of the
Company) by reason of the fact that he is or was a [supervisory director /
member of the management board / officer / employee] of the Company, or is or
was serving at the request of the Company as a supervisory di-
<PAGE>
-2-
rector, member of the management board, officer, director, employee, trustee or
agent of another company, a partnership, joint venture, trust or other
enterprise or entity, against all expenses (including attorneys' fees),
judgements, fines and amounts paid in settlement (together: "Expenses") actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful or outside of his mandate. The termination of any
Proceeding by a judgement, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the Indemnitee did not act in good faith and not in a manner which he reasonably
could believe to be in or not opposed to the best interest of the Company, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
2. The Company shall indemnify the Indemnitee if he was or is a party or is
threatened to be made a party to any Proceeding by or in the right of the
Company to procure a judgement in its favour, by reason of the fact that he is
or was a [supervisory director / member of the management board / officer/
employee] of the Company, or is or was serving at the request of the Company as
a supervisory director, member of the management board, officer, director,
employee, trustee or agent of another company, a partnership, joint venture,
trust or other enterprise or entity, against all Expenses actually and
reasonably incurred by him in connection with such Proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for gross negligence or wilful misconduct in the
performance of his duty to the Company, unless and only to the extent that the
court in which such action or proceeding was brought or any other court having
appropriate jurisdiction shall determine upon application that, despite the
adjudication of liability but in view of all of the circumstances of the case,
such person is fairly and reasonably entitled to indemnification against such
Expenses which the court in which such action or proceeding was brought or such
other court having appropriate jurisdiction shall deem proper.
<PAGE>
-3-
3. To the extent that the Indemnitee has been successful on the merits or
otherwise in defense of any Proceeding, referred to in Articles 1. and 2., or in
defense of any claim, issue or matter therein, he shall be indemnified against
Expenses actually and reasonably incurred by him in connection therewith.
4. Any indemnification by the Company referred to in Articles 1. and 2. shall
(unless ordered by a court) only be made upon a determination that
indemnification of the Indemnitee is proper under the circumstances because he
had met the applicable standard of conduct set forth in Articles 1. and 2. of
this Agreement. Such determination shall be made:
a. by a majority of supervisory directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or;
b. if there are no supervisory directors who are not named as parties to such
action, suit or proceeding or if the supervisory directors who are not named as
parties to such action, suit or proceeding so direct, by independent legal
counsel in a written opinion; or
c. by the general meeting of shareholders of the Company .
5. The indemnification provided for by this Agreement shall not be deemed
exclusive of any other right to which the Indemnitee may be entitled under the
laws of the Netherlands as from time to time amended or under any by-laws,
agreement, resolution of the general meeting of shareholders of the Company or
of the disinterested members of the supervisory board of the Company or
otherwise, both as to actions in his official capacity and as to actions in
another capacity while holding such position, and shall continue after the
Indemnitee has ceased to be a [supervisory director / member of the management
board / officer / employee] and shall also inure to the benefit of the heirs,
executors and administrators of the Indemnitee.
6. Expenses incurred by the Indemnitee pursuant to Articles 1. and 2. in any
Proceeding shall be paid by the Company in advance as soon as practicable but
not later than three business days after receipt of the written request of the
Indemnitee provided that Indemnitee shall
<PAGE>
-4-
(i) affirm in such written request that he acted in good faith and in a manner
which he reasonably believed to be (in the case of conduct in his official
capacity) in the best interests of the Company or (in all other cases) not
opposed to the best interests of the Company and (ii) undertake to repay such
amount to the extent that it is ultimately determined that Indemnitee is not
entitled to indemnification, and further provided that a determination has been
made that the facts then known would not preclude indemnification pursuant to
the terms of this Agreement.
7. (a) The Company shall from time to time make the good faith determination
whether or not it is practicable for the Company to obtain and maintain a policy
or policies of insurance with reputable insurance companies providing the
officers and directors with coverage for losses from wrongful acts, or to insure
the Company's performance of its indemnification obligations under this
Agreement. Among other considerations, the Company will weigh the costs of
obtaining such insurance against the protection afforded by such coverage.
(b) Indemnitee hereby releases the Company and its respective authorized
representatives from any claims for indemnification hereunder if and to the
extent that Indemnitee receives proceeds from any liability insurance policy or
other third-party source in payment or reimbursement for such claims. Indemnitee
hereby agrees to assign to the Company all proceeds Indemnitee receives under
any such insurance policy or third-party agreement to the extent of the amount
of indemnification made to Indemnitee under the terms of this Agreement.
Finally, Indemnitee shall cause each insurance policy or other third-party
agreement by which the Indemnitee may be entitled to payment or reimbursement to
provide that the insurance company or the third-party agreement by which the
Indemnitee may be entitled to payment or reimbursement to provide that the
insurance company or the third party waives all right of recovery by way of
subrogation against the Company in connection with any claim for indemnification
under this Agreement. If such waiver of subrogation cannot be obtained except
with the payment of additional sums in premiums or otherwise, the Indemnitee
shall notify the Company of this fact. The Company shall then have ten (10) days
after re-
<PAGE>
-5-
ceiving such notice to agree to pay such additional sums. If a waiver of
subrogation rights is not obtainable at any price or if the Company shall fail
to agree to pay such additional sums, Indemnitee shall be relieved of the
obligation to obtain the waiver of subrogation rights with respect to any
particular insurance policy or third-party agreement.
8. Whenever in this Agreement reference is made to the Company, this shall
include, in addition to the resulting or surviving company also any constituent
company (including any constituent company of a constituent company) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had the power to indemnify Indemnitee, so that Indemnitee shall stand in
the same position under the provisions of this article with respect to the
resulting or surviving company as he would have with respect to such constituent
company if its separate existence had continued.
9. Indemnitee shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a [supervisory
director / member of the management board]; provided, however, that the
foregoing shall not eliminate or limit his liability (1) for any breach of
Indemnitee's duty of loyalty to the Company or its stockholders, (2) for acts or
omissions not in good faith or which involved intentional misconduct or a
knowing violation of law, (3) for any transaction from which the director
derived an improper personal benefit or (4) for personal liability which is
imposed by Dutch law, as from time to time amended.
10. Nothing in this Agreement is intended to require or shall be construed as
requiring the Company to do or fail to do any act in violation of applicable
law. The provisions of this Agreement (including any provision within a single
section, paragraph or sentence) shall be severable in accordance with this
Article 11. If this Agreement or any portion thereof shall be invalidated on
any ground by any court of competent jurisdiction, the Company shall
nevertheless indemnify Indemnitee as to any Expenses with respect to any
Proceedings to the full extent permitted by any applicable portion of this
Agreement that shall not have been invalidated or by any other applicable law,
and this Agreement shall remain enforceable to the fullest extent permitted by
law.
<PAGE>
-6-
11. This Agreement is supplemental to and does not in any respect replace or
alter the provisions of Article 25 of the Company's Articles of Association.
12. This Agreement shall be governed by and construed in accordance with the
laws of The Netherlands. In relation to any legal action or proceedings arising
out of or in connection with this Agreement, the parties to this Agreement
irrevocably submit to the jurisdiction of the competent court in Amsterdam, The
Netherlands, and its appellate courts.
Signed in [ ] on [ ] 1997.
_______________________
Chicago Bridge & Iron Company N.V.
By:
Its:
_______________________
[Indemnitee]
<PAGE>
EXHIBIT 10.2
TABLE OF CONTENTS
CHICAGO BRIDGE & IRON
EMPLOYEE STOCK PURCHASE PLAN (1997)
(Effective April 1, 1997)
ARTICLE I: DEFINITIONS......................................................1
1.01 COMPANY:..........................................................1
1.02 COMPENSATION:.....................................................1
1.03 CONTRIBUTION PERIOD:..............................................1
1.04 INCLUDED EMPLOYEE:................................................1
1.05 MARKET VALUE:.....................................................2
1.06 PARENT:...........................................................2
1.07 PLAN:.............................................................2
1.08 PLAN ADMINISTRATOR:...............................................2
1.09 PARTICIPANT:......................................................2
1.10 PARTICIPATING AFFILIATE:..........................................2
1.11 PURCHASE DATE:....................................................2
ARTICLE II: EFFECTIVE DATE..................................................2
ARTICLE III: PARTICIPATION..................................................2
3.01 PARTICIPATION:....................................................2
3.02 ELECTION TO CONTRIBUTE:...........................................2
3.03 ELECTION OF TYPE OF INVESTMENT:...................................2
3.04 INTEREST ON CONTRIBUTIONS:........................................3
ARTICLE IV: EMPLOYEE STOCK PURCHASE ACCOUNT.................................3
4.01 GRANT OF OPTIONS:.................................................3
4.02 PURCHASE PRICE:...................................................3
4.03 WITHDRAWAL OF EMPLOYEE STOCK PURCHASE ACCOUNT BALANCE:............3
4.04 STOCK AVAILABLE FOR OPTIONS:......................................3
ARTICLE V: LIMITATIONS ON STOCK PURCHASE....................................3
5.01 INELIGIBLE EMPLOYEES:.............................................3
5.02 NONTRANSFERABILITY OF OPTION:.....................................4
5.03 RECAPITALIZATION ADJUSTMENT:......................................4
5.04 NOTICES OF DISPOSITIONS OF STOCK:.................................4
ARTICLE VIII: AMENDMENT OF THE PLAN.........................................4
ARTICLE IX: EXPIRATION OR TERMINATION OF THE PLAN...........................5
<PAGE>
CHICAGO BRIDGE & IRON
EMPLOYEE STOCK PURCHASE PLAN (1997)
(Effective April 1, 1997)
Chicago Bridge & Iron Company, in order to give its employees and those of
Participating Affiliates an opportunity to participate in the growth of the
Company by investment and reinvestment in the common stock of Chicago Bridge &
Iron Company N.V., has established the Chicago Bridge & Iron Employee Stock
Purchase Plan (1997).
ARTICLE I: DEFINITIONS
Unless the context clearly indicates otherwise, the following terms when
used in this Plan shall have the following meanings:
1.01 COMPANY: Chicago Bridge & Iron Company, a Delaware corporation, and its
respective corporate successors, if any.
1.02 COMPENSATION: The total of all wages and salaries, overtime, shift and
other premiums and bonuses and other incentive payments paid by the Company or
any Participating Affiliate to an employee or former employee with respect to a
given period of employment during which the employee is a Participant, but
excluding the following:
(a) All employer contributions and payments under any deferred
compensation plan or contract, whether tax qualified or
non-qualified, excepting all elective employee salary deferrals
---------
which are treated as employer contributions under any such plan or
contract;
(b) All payments made by the Company, Parent or any Participating
Affiliate for services performed outside the United States which are
of a character not customarily made by the Company for services
performed within the United States;
(c) All payments identified when made as an allowance for reimbursement
of actual or estimated expenses incurred or to be incurred by the
recipient of such payments; and
(d) Any income realized from the grant, receipt, modification,
relinquishment, exchange, assignments, transfer, sale or other
disposition of securities of the Company, Parent or any other
Participating Affiliate, or rights or options with respect thereto.
1.03 CONTRIBUTION PERIOD: Either of two periods of each calendar year during
which payroll deductions are made under the Plan. The first such Contribution
Period shall begin with the start of the pay period which includes January 1 and
the second such Contribution Period shall begin with the start of the pay period
which includes July 1.
1.04 INCLUDED EMPLOYEE: Any person who is either: a) an employee of the Company,
Parent or of a Participating Affiliate employed within the United States, or b)
an employee of the Company or a Participating Affiliate employed outside of the
United States who is paid from a payroll constituting U.S. source income.
1
<PAGE>
1.05 MARKET VALUE: The closing price reported for a date for shares of the
common stock of the Parent traded on the New York Stock Exchange or if such
price is not so reported for that date, the value of a share of such common
stock on that date as determined in such reasonable manner as the Board of
Directors of the Company determines and describes in a written notice sent to
all holders of options granted hereunder and affected by that determination.
1.06 PARENT: Chicago Bridge & Iron Company N.V., a Netherlands corporation, or
its corporate successor, if any, constituting the parent corporation of the
Company.
1.07 PLAN: The Chicago Bridge & Iron Employee Stock Purchase Plan (1997), as
from time to time amended.
1.08 PLAN ADMINISTRATOR: The person or committee from time to time designated by
the Board of Directors of the Company for the purposes of administering and
conclusively construing the Plan.
1.09 PARTICIPANT: An Included Employee for whom there is an account established
pursuant to this Plan.
1.10 PARTICIPATING AFFILIATE: Such present or future affiliates and parents of
the Company which the Board of Directors of the Company may designate from time
to time to participate in this Plan.
1.11 PURCHASE DATE: January 15 and July 15 of each Plan Year or, if either of
such dates is not a regular business day, the next following business day.
ARTICLE II: EFFECTIVE DATE
The effective date of this Plan is April 1, 1997.
ARTICLE III: PARTICIPATION
3.01 PARTICIPATION: An Included Employee may elect to start payroll deductions
pursuant to Section 3.02.
3.02 ELECTION TO CONTRIBUTE: An election must be in writing and must be made by
December 15 to have effect for the first Contribution Period and by June 15 to
have effect for the second Contribution Period, and thereafter that election
cannot be changed or terminated during that Contribution Period. Each such
election shall authorize the Company or Participating Affiliate to withhold an
integral percentage from one percent (1%) to up to eight percent (8%) of each
payment of Compensation. An election once made shall be continuously applied to
that Contribution Period and all subsequent Contribution Periods (except as
otherwise provided in Sections 4.03) until the Participant notifies the Plan
Administrator, in writing, of the Participant's desire to change or terminate
the election. Such notice of change or termination shall be given by December 15
to have effect as of the beginning of the first Contribution Period and by June
15 to have effect as of the beginning of the second Contribution Period.
3.03 ELECTION OF INVESTMENT: Each Participant electing to make contributions to
the Plan as provided in Section 3.02 shall at the time of each such election
also be deemed to elect to purchase common stock of the Parent under the terms
of Articles IV and V.
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3.04 INTEREST ON CONTRIBUTIONS: The contributions made by a Participant pursuant
to Section 3.02 will draw interest, until disbursed, at the regular savings
account (non-time-deposit) rate at an insured financial institution selected by
the Board of Directors of the Company to be credited to the Participant's
account according to the rules and regulations of the selected institution.
ARTICLE IV: EMPLOYEE STOCK PURCHASE ACCOUNT
4.01 GRANT OF OPTIONS: A Participant who is an Included Employee and who has
made an election pursuant to Section 3.02 shall be granted on each January 1 and
July 1 on which an election pursuant to Section 3.03 is effective, an option to
purchase shares of common stock of the Parent on the Purchase Date next
following the applicable Contribution Period. The option so granted shall be
automatically exercised provided the Participant has not terminated employment
more than three months prior to the applicable Purchase Date and provided a
withdrawal pursuant to Section 4.03 has not occurred. Any unused portion of the
balance in the Participant's Employee Stock Purchase Account, representing a
fractional share, shall be maintained in the account, unless otherwise
withdrawn, for purchase of stock at the next Purchase Date subject to the
limitations of this Plan. Any unused portion, representing an excess over the
amount needed to purchase on the applicable Purchase Date the maximum number of
shares allowable under the limitations of Sections 4.02 and 5.01, shall be
refunded to such Participant. When employment of the Participant is terminated,
the balance in the Participant's Employee Stock Purchase Account not otherwise
used to purchase stock shall be refunded to such Participant.
4.02 PURCHASE PRICE: The price of the stock purchased under the option granted
pursuant to Section 4.01 shall be 85% of the Market Value of such stock on the
Purchase Date. The number of shares to which the option applies shall be equal
to the amount in the Employee Stock Purchase Account at the end of the month
preceding the Purchase Date divided by 85% of the Market Value of the stock on
the Purchase Date. The maximum number of shares a Participant may purchase on
each Purchase Date shall be the number purchasable under the limitations of
Section 5.01. No fractional shares may be purchased pursuant to this Plan.
4.03 WITHDRAWAL OF EMPLOYEE STOCK PURCHASE ACCOUNT BALANCE: Any Participant may
withdraw all of such Employee Stock Purchase Account balance at any time to and
including May 1 of the first Contribution Period of the Plan Year or November 1
of the second Contribution Period of the Plan Year. Upon withdrawal, elections
pursuant to Sections 3.02 and 3.03 automatically terminate until reinstated
pursuant to said Sections.
4.04 STOCK AVAILABLE FOR OPTIONS: All shares of common stock of the Parent from
time to time held in the treasury of the Company or Parent, and authorized but
presently unissued shares of common stock of the Parent as approved by the
Parent, but in any event limited to 250,000 shares, shall be available for
option and sale pursuant to this Plan. Shares allotted for option and sale
pursuant to this Plan for which the right to purchase has expired shall be
deemed available for reallotment for option and sale in ensuing Contribution
Periods and on subsequent Purchase Dates, as if such shares had never been so
allotted.
ARTICLE V: LIMITATIONS ON STOCK PURCHASE
5.01 INELIGIBLE EMPLOYEES: No employee shall be granted an option to purchase
stock pursuant to this Plan if immediately after that grant the employee owns,
or has an option on, stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of
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the Parent, the Company or any affiliate thereof, and for purposes of this
sentence, the rules of Section 425(d) of the Internal Revenue Code, as from time
to time amended, shall apply in determining the stock ownership of an employee.
Any stock which an employee may purchase under any outstanding right or option
shall be treated as stock owned by such employee for the purpose of this
section. No employee shall have or be granted under this Plan any option that
will permit the employee's rights or options to purchase stock under all
employee stock purchase plans of the Company, its affiliates, and any parent
corporation of the Company to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of Market Value of such stock, determined as of the
time such right or option is granted for each calendar year during which such
right or option is outstanding.
5.02 NONTRANSFERABILITY OF OPTION: No option to purchase stock pursuant to this
Plan shall be transferable by the grantee thereof during the grantee's lifetime,
but such an option may be transferred by will or by laws of descent and
distribution, which shall include the valid designation of a beneficiary
pursuant to uniform procedures prescribed by the Company. Each such option shall
be exercisable during the lifetime of the grantee only by the grantee.
Certificates for shares of stock purchased pursuant to an option granted under
this Plan may, however, be issued in the names of the grantee and any other
adult person or persons jointly, with right of survivorship, provided each such
person is a member of the grantee's immediate family and provided further that
the grantee so requests in writing at or before the time of his purchase of such
shares and at the same time informs the Company of the name and address of his
co-owner. A grantee's "immediate family" for the purposes of this Section 5.02
shall include only the grantee's spouse, son, daughter, grandson, granddaughter,
niece, nephew, father, mother, brother or sister. Certificates for shares
purchased after a transfer of an option as provided above in this Section 5.02
may be issued in the name or names of the person or persons so succeeding to the
option.
5.03 RECAPITALIZATION ADJUSTMENT: If at any time during the life of this Plan
the outstanding common stock of the Parent is augmented by a dividend in such
common stock or divided into a greater or consolidated into a lesser number of
shares of such common stock, then (A) the number of unissued shares of such
common stock which may thereafter be allotted shall be correspondingly increased
or decreased, (B) the number of shares of common stock to which any then
outstanding options under the Plan relates shall be correspondingly increased or
decreased to the extent that shares are available for allotment within the limit
provided in Section 4.04, and (C) the purchase price for each share in respect
of which any such option is outstanding at the time of such increase or decrease
in the number of outstanding shares of common stock of the Parent shall be
adjusted in inverse proportion to such increase or decrease in the number of
outstanding shares.
5.04 NOTICES OF DISPOSITIONS OF STOCK: Each Participant, or other person, who
purchases any stock pursuant to this Plan must promptly notify the Plan
Administrator, in writing, if such Participant, or other person, disposes of all
or any of that stock within two years after the date on which the Participant
was granted the option pursuant to which that purchase was made.
ARTICLE VI: AMENDMENT OF THE PLAN
The Company reserves the right to amend this Plan in any manner, at any
time or from time to time, by resolution of its Board of Directors, but except
for the purpose of making the Plan meet the requirements of the Internal Revenue
Code, as from time to time amended, with respect to employee stock purchase
plans, no such amendment shall increase the number of shares of common stock
that may be allotted for sale under the Plan or make the definition of the term
"Eligible Employee" more restrictive or reduce the purchase price
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per share for which Section 4.02 provides or alter or impair any right granted
under the Plan without the previous written consent of the holder of that right.
ARTICLE VII: EXPIRATION OR TERMINATION OF THE PLAN
The Plan shall expire on June 30, 2002, unless sooner terminated as
provided in this Article. The Company reserves the right to terminate this Plan
at any time by resolution of its Board of Directors, and the Plan shall
automatically terminate upon the happening of the first to happen of the
following events.:
(a) whenever no shares remain to be allotted under the Plan, or
(b) whenever any merger of the Company or Parent into another
corporation or any consolidation of the Company or Parent with
another corporation, or any transfer of substantially all of the
assets of the Company or Parent, or any liquidation of the Company
or Parent, becomes effective or takes place unless the corporate
successor of the Company or Parent in any such transaction assumes
the obligations of the Company under the Plan.
No options shall be granted after the Plan is terminated nor may any stock
be purchased pursuant to the Plan subsequent to the termination.
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EXHIBIT 10.3
ANNUAL INCENTIVE COMPENSATION PLAN
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The Company adopted the Annual Incentive Compensation Plan (bonus plan),
effective January 1, 1997 on a fiscal year basis. The plan shall be an annual
short-term incentive plan. Participants shall consist of the executive officers
of the Company and its principal operating subsidiaries, and other designated
management employees. The bonus plan shall be based on the annual operating
plan of the Company, developed after discussion and analysis of the business
plans within the major divisions of the Company. Payment of bonuses shall be
based on attaining a specific goal of operating income, and shall be paid
following the end of the fiscal year as of a date to be designated by the
officers of the Company. Such goal shall be set from year to year, at the
beginning of each year, upon management recommendation and approval by the
Board, and shall incorporate, in a manner to be determined at the discretion of
the Board, a minimum goal of long-term growth in operating income of 15% per
year compounded.
"Operating income" shall be computed in the same manner as disclosed in the
Company's annual report subject to extraordinary charges or expenses, if any,
resulting from the initial public offering of the Company.
The president and CEO, with the approval of the Board, at his discretion
may adjust operating income for the calculation of achievement of the goal for
extraordinary, non-recurring events beyond the control of the Company which
otherwise distorts operating income for this purpose, including, but not limited
to, special tax and accounting charges or the acquisition and disposition of
businesses.
Participating Chicago Bridge & Iron Company employees shall include all
executive officers, senior managers, and selected managers and employees in key
positions.
A target bonus amount, expressed either in dollars or as a percent of pay,
shall be established for each participating employee at the beginning of each
fiscal year based on
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position, responsibilities and grade level, as determined in the discretion of
the officers of the Company.
Bonuses paid shall be earned from two sources - achievement of the
corporate operating income goal and a discretionary portion. A percentage of
target bonus opportunity shall be allocated to each bonus source as follows: 70%
to the income goal, 30% to the discretionary portion.
Achievement of the Company's operating income goal shall earn 100% of the
portion of the target bonus allocated to such goal. No bonus shall be earned
unless the actual operating income is at least 75% of the goal. A maximum bonus
of 200% of the target will be earned for achievement of 125% of the goal.
The discretionary bonus shall be determined by the management's evaluation
of individual performance (the Compensation Committee of the Board, in the case
of the CEO).
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EXHIBIT 10.4
CHICAGO BRIDGE & IRON
LONG-TERM INCENTIVE PLAN
Chicago Bridge & Iron Company
March 1, 1997
<PAGE>
CONTENTS
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PAGE
Article 1. Establishment, Objectives, and Duration 1
Article 2. Definitions 1
Article 3. Administration 6
Article 4. Shares Subject to the Plan and Maximum Awards 6
Article 5. Eligibility and Participation 7
Article 6. Stock Options 7
Article 7. Restricted Stock 9
Article 8. Performance Units and Performance Shares 11
Article 9. Performance Measures 12
Article 10. Beneficiary Designation 13
Article 11. Deferrals 13
Article 12. Rights of Employees 13
Article 13. Change in Control 14
Article 14. Amendment, Modification, and Termination 14
Article 15. Withholding 15
Article 16. Indemnification 16
Article 17. Successors 16
Article 18. Legal Construction 16
<PAGE>
CHICAGO BRIDGE & IRON LONG-TERM INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1. ESTABLISHMENT OF THE PLAN. Chicago Bridge & Iron Company, a Delaware
corporation (hereinafter referred to as the "Company"), a wholly owned
subsidiary of Chicago Bridge & Iron Company N.V., a Dutch corporation
(hereinafter referred to as the "Parent"), hereby establishes an incentive
compensation plan to be known as the "Chicago Bridge & Iron Long-Term Incentive
Plan" (hereinafter referred to as the "Plan"), as set forth in this document.
The Plan permits the grant of Nonqualified Stock Options, Incentive Stock
Options, Restricted Stock, Performance Shares and Performance Units.
The Plan shall become effective as of the consummation of the Company's
initial public offering (the "Effective Date") and shall remain in effect as
provided in Section 1.3 hereof.
1.2. OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize
the profitability and growth of the Company through incentives which are
consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's stockholders; to provide Participants
with an incentive for excellence in individual performance; and to promote
teamwork among Participants.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants who make
significant contributions to the Company's success and to allow Participants to
share in the success of the Company.
1.3. DURATION OF THE PLAN. The Plan shall commence on the Effective Date,
as described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 15 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1. "AFFILIATE" shall have the meaning ascribed to such term in Rule 12b-
2 of the General Rules and Regulations of the Exchange Act.
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2.2. "AWARD" means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock,
Performance Shares or Performance Units.
2.3. "AWARD AGREEMENT" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan.
2.4. "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.5. "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
2.6. "CHANGE IN CONTROL" will be deemed to have occurred as of the first
day any one (1) or more of the following paragraphs shall have been satisfied:
(a) Any Person (other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or a corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company), becomes the Beneficial Owner, directly or indirectly, of
securities of the Company or any holding company of the Company having
a majority interest in the Company ("Holding Company"), representing
twenty-five percent (25%) or more of the combined voting power of the
Company's or the Holding Company's then outstanding securities;
(b) During any period of two (2) consecutive years or less (not including
any period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board, or members of the board
of directors or equivalent body of any Holding Company, (and any new
Director, whose election by the Company's stockholders was approved by
a vote of at least seventy-five percent (75%) of the Directors then
still in office who either were Directors at the beginning of the
period or whose election or nomination for election was so approved),
cease for any reason to constitute a majority thereof; or
(c) Upon the consummation of (i) any merger or other business combination
of the Company or any Holding Company with or into another company
puruant to which the stockholders of the Company or any Holding
Company, as the case may be, do not own, immediately after the
transaction, more than fifty percent (50%) of the voting power and the
value of the stock of the company that survives,
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or (ii) the sale, exchange or other disposition of all or substantially
all the assets of the Company or any Holding Company.
Notwithstanding the foregoing, the Company's initial public offering shall not
constitute a Change in Control for the purposes of this Plan.
Notwithstanding the foregoing, any event or transaction which would otherwise
constitute a Change in Control (a "Transaction") shall not constitute a Change
in Control with respect to a Participant if, in connection with the
Transaction, the Participant is an equity investor in the acquiring entity or
any of its affiliates (the "Acquiror"). For purposes of the preceding
sentence, a Participant shall not be deemed to be an equity investor in the
Acquiror by virtue of (i) obtaining beneficial ownership of any equity
interest in the Acquiror as a result of the grant to the Participant of an
incentive compensation award under one or more incentive plans of the Acquiror
(including, but not limited to, the conversion in connection with the
Transaction of incentive compensation awards of the Company into incentive
compensation awards of the Acquiror), on terms and conditions substantially
equivalent to those applicable to other executives of the Company immediately
prior to the Transaction, after taking into account normal differences
attributable to job responsibilities, title, and the like; (ii) obtaining
beneficial ownership of any equity interest in the Acquiror on terms and
conditions substantially equivalent to those obtained in the Transaction by
all other shareholders of the Company; or (iii) obtaining beneficial ownership
of any equity interest in the Acquiror in a manner unrelated to a Transaction.
2.7. "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
2.8. "COMMITTEE" means the Compensation Committee of the Board, as
specified in Article 3 herein, or such other Committee appointed by the Board to
administer the Plan with respect to grants of Awards.
2.9. "COMPANY" means Chicago Bridge & Iron Company, a Delaware
corporation, including any and all Subsidiaries, and any successor thereto as
provided in Article 17 herein.
2.10. "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company or any Subsidiary or Affiliate.
2.11. "DISABILITY" shall have the meaning ascribed to such term in the CBI
Pension Plan, or if such plan ceases to exist, or such Participant is not a
participant in that plan, at the discretion of the Committee.
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2.12. "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.13. "EMPLOYEE" means any employee of the Company or its Subsidiaries.
Directors who are not employed by the Company shall not be considered Employees
under this Plan.
2.14. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.15. "FAIR MARKET VALUE" shall be determined on the basis of the closing
sale price on the principal securities exchange on which the Shares are traded
or, if there is no such sale on the relevant date, then on the last previous day
on which a sale was reported.
2.15A. "FISCAL YEAR" means the fiscal year of the Company.
2.16. "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
2.17. "INSIDER" shall mean an individual who is, on the relevant date, an
officer, director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.18. "NAMED EXECUTIVE OFFICER" means a Participant who, as of the last
date of of the taxable year of the Company, is one of the group of "covered
employees," as defined in the regulations promulgated under Code Section 162(m),
or any successor statute.
2.19. "NONEMPLOYEE DIRECTOR" means an individual who is a member of the
Board of Directors of the Company but who is not an Employee of the Company.
2.20. "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
2.21. "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
2.22. "OPTION PRICE" means the price at which a Share may be purchased by
a Participant pursuant to an Option.
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2.22A. "OPTIONEE" means the Participant or, if the Participant has died, his
or her Beneficiary or other person determined under Section 6.9, entitled to
exercise any Option.
2.23. "PARTICIPANT" means an Employee or Director who has outstanding an
Award granted under the Plan.
2.24. "PERFORMANCE-BASED EXCEPTION" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.25. "PERFORMANCE SHARE" means an Award granted to a Participant, as
described in Article 8 herein.
2.26. "PERFORMANCE UNIT" means an Award granted to a Participant, as
described in Article 8 herein.
2.27. "PERIOD OF RESTRICTION" means the period during which the transfer
of Shares of Restricted Stock is limited in some way (based on the passage of
time, the achievement of performance goals, or upon the occurrence of other
events as determined by the Committee, at its discretion), and the Shares are
subject to a substantial risk of forfeiture, as provided in Article 7 herein.
2.28. "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.29. "RESTRICTED STOCK" means an Award granted to a Participant pursuant
to Article 8 herein.
2.30. "RETIREMENT" shall have the meaning ascribed to such term in the
Company's tax-qualified retirement plan.
2.31. "SHARES" means the shares of common stock of the Company.
2.32. "SUBSIDIARY" means any corporation in which the Company owns
directly, or indirectly through subsidiaries, at least fifty percent (50%) of
the total combined voting power of all classes of stock, or any other entity
(including, but not limited to, partnerships and joint ventures) in which the
Company owns at least fifty percent (50%) of the combined equity thereof.
2.33. "SUPERVISORY BOARD" means the Supervisory Board of the Parent, as
defined herein.
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ARTICLE 3. ADMINISTRATION
3.1. THE COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the Board, which
may be the Compensation Committee of the Parent. The members of the Committee
shall be appointed from time to time by, and shall serve at the discretion of,
the Board of Directors.
3.2. AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees and
Non-Employee Directors who shall participate in the Plan; determine the sizes
and types of Awards; determine the terms and conditions of Awards in a manner
consistent with the Plan; construe and interpret the Plan and any agreement or
instrument entered into under the Plan as they apply to Employees; establish,
amend, or waive rules and regulations for the Plan's administration as they
apply to Employees; and (subject to the provisions of Article 14 herein) amend
the terms and conditions of any outstanding Award to the extent such terms and
conditions are within the discretion of the Committee as provided in the Plan.
Further, the Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan, as the Plan applies
to Employees. As permitted by law, the Committee may delegate its authority as
identified herein. However, notwithstanding any other provision contained in
this Plan to the contrary, until after the first anniversary of the Effective
Date, no Awards of any type may be made except in the form of Nonqualified Stock
Options.
3.3. DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its stockholders, Directors, Employees, Participants, and
their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1. NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as
provided in Section 4.2 herein, the number of Shares hereby reserved for
issuance to Participants under the Plan shall be one million, two hundred fifty-
one thousand, seven hundred fifty-five (1,251,755). Unless and until the
Committee determines that an Award shall not be designed to comply with the
Performance-Based Exception, the maximum aggregate number of Shares that may be
granted in the form of Stock Options, pursuant to any Award granted in any one
fiscal year to any one single Participant shall be two hundred thousand
(200,000).
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4.2. ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368) or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of Shares which may be delivered under
Section 4.1, in the number and class of and/or price of Shares subject to
outstanding Awards granted under the Plan, and in the Award limits set forth in
subsections 4.1(a), 4.1(b) and 4.1(c), as may be determined to be appropriate
and equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1. ELIGIBILITY. Persons eligible to participate in this Plan include all
Employees of the Company, including Employees who are members of the Board, and
Non-Employee Directors.
5.2. ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible individuals those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.
ARTICLE 6. STOCK OPTIONS
6.1. GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee. The
date the option is granted shall be the day on which the Committee acts to award
a specific number of shares to a Participant, and shall be specified in each
Award Agreement.
6.2. AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Code Section 422, or an
NQSO whose grant is intended not to fall under the provisions of Code Section
422.
6.3. OPTION PRICE. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted.
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6.4. DURATION OF OPTIONS. Each Option granted shall expire at such time as
the Committee shall determine at the time of grant; provided, however, that if
the Award Agreement does not otherwise specify the expiration date, the Option
shall expire on the tenth (10th) anniversary date of its grant.
6.5. EXERCISE OF OPTIONS. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant, but which shall in no event be earlier than
the third anniversary of the date the Option is granted.
6.6. PAYMENT. If the Award Agreement does not otherwise specify the manner
of exercise, Options granted under this Article 6 shall be exercised by the
delivery of a written notice of exercise to the Company substantially in the
form of that attached as Exhibit A, completed by the Optionee and delivered
during regular business hours to the office of the Seceretary of the Company, or
sent by certified mail to the Secretary of the Company, accompanied by a
negotiable check or other cash equivalent in full payment for the Shares.
In the discretion of the Committee and as set forth in the Award Agreement,
the Option Price upon exercise of any Option may also be payable to the Company
in full either: (a) in cash or its equivalent, or (b) by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price, or (c) by a combination of (a) and (b).
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Committee determines to be consistent with the
Plan's purpose and applicable law.
Subject to any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment, the Company
shall deliver to the Participant, in the Participant's name, Share certificates
in an appropriate amount based upon the number of Shares purchased under the
Option(s).
6.7. RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.
8
<PAGE>
6.8. TERMINATION OF EMPLOYMENT. Each Participant's Option Award Agreement
shall set forth the extent to which the Participant shall have the right to
exercise the Option following termination of the Participant's employment with
the Company or service as a Director. Such provisions shall be determined in the
sole discretion of the Committee, shall be included in the Award Agreement
entered into with each Participant, need not be uniform among all Options issued
pursuant to this Article 6, and may reflect distinctions based on the reasons
for termination of employment.
6.9. NONTRANSFERABILITY OF OPTIONS.
(a) INCENTIVE STOCK OPTIONS. No ISO granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further,
all ISOs granted to a Participant under the Plan shall be exercisable
during his or her lifetime only by such Participant or by designation
of a Beneficiary in accordance with Article 10.
(b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6 may
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant's
Award Agreement, all NQSOs granted to a Participant under this Article
6 shall be exercisable during his or her lifetime only by such
Participant or by designation of a Beneficiary in accordance with
Article 10.
ARTICLE 7. RESTRICTED STOCK
7.1. GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine.
7.2. RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Committee shall determine.
7.3. TRANSFERABILITY. Except as provided in this Article 7, the Shares
of Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the applicable
Period of Restriction established by the Committee and specified in the
Restricted Stock Award Agreement, or upon earlier satisfaction of any other
conditions, as specified by the Committee in its sole discretion and set forth
in the Restricted
9
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Stock Award Agreement. All rights with respect to the Restricted Stock granted
to a Participant under the Plan shall be available during his or her lifetime
only to such Participant or by a Beneficiary designated in accordance with
Article 10.
7.4. OTHER RESTRICTIONS. The Committee may impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock,
restrictions based upon the achievement of specific performance goals (Company-
wide, divisional, and/or individual), time-based restrictions on vesting
following the attainment of the performance goals, and/or restrictions under
applicable Federal or state securities laws.
The Company shall retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 8, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.
7.5. VOTING RIGHTS. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
7.6. DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying Shares
while they are so held. The Committee may apply any restrictions to the
dividends that the Committee deems appropriate. Without limiting the generality
of the preceding sentence, if the grant or vesting of Restricted Shares granted
to a Named Executive Officer is designed to comply with the requirements of the
Performance-Based Exception, the Committee may apply any restrictions it deems
appropriate to the payment of dividends declared with respect to such Restricted
Shares, such that the dividends and/or the Restricted Shares maintain
eligibility for the Performance-Based Exception.
7.7. TERMINATION OF EMPLOYMENT. Each Restricted Stock Award Agreement
shall set forth the extent to which the Participant shall have the right to
receive unvested Restricted Shares following termination of the Participant's
employment with the Company or service as a Director. Such provisions shall be
determined in the sole discretion of the Committee, shall be included in the
Award Agreement entered into with each Participant, need not be uniform among
all Shares of Restricted Stock issued pursuant to the Plan, and may reflect
10
<PAGE>
distinctions based on the reasons for termination of employment; provided,
however that, except in the cases of terminations connected with a Change in
Control and terminations by reason of death or Disability, the vesting of Shares
of Restricted Stock which qualify for the Performance-Based Exception and which
are held by Named Executive Officers shall occur at the time they otherwise
would have, but for the employment termination.
ARTICLE 8. PERFORMANCE UNITS AND PERFORMANCE SHARES
8.1. GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan,
Performance Units and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee.
8.2. VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have
an initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will determine
the number and/or value of Performance Units/Shares that will be paid out to the
Participant. For purposes of this Article 8, the time period during which the
performance goals must be met shall be called a "Performance Period."
8.3. EARNING OF PERFORMANCE UNITS/SHARES. Subject to the terms of this
Plan, after the applicable Performance Period has ended, the holder of
Performance Units/Shares shall be entitled to receive payout on the number and
value of Performance Units/Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance goals have been achieved.
8.4. FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/ SHARES. Payment of
earned Performance Units/Shares shall be made in a single lump sum following the
close of the applicable Performance Period. Subject to the terms of this Plan,
the Committee, in its sole discretion, may pay earned Performance Units/Shares
in the form of cash or in Shares (or in a combination thereof) which have an
aggregate Fair Market Value equal to the value of the earned Performance
Units/Shares at the close of the applicable Performance Period. Such Shares may
be granted subject to any restrictions deemed appropriate by the Committee.
At the discretion of the Committee, Participants may be entitled to receive
any dividends declared with respect to Shares which have been earned in
connection with grants of Performance Units and/or Performance Shares which have
been earned, but not yet distributed to Participants (such dividends shall be
subject to the same accrual, forfeiture, and payout restrictions as apply to
11
<PAGE>
dividends earned with respect to Shares of Restricted Stock, as set forth in
Section 7.6 herein). In addition, Participants may, at the discretion of the
Committee, be entitled to exercise their voting rights with respect to such
Shares.
8.5. TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT.
Unless determined otherwise by the Committee and set forth in the Participant's
Award Agreement, in the event the employment or service as a Director of a
Participant is terminated by reason of death, Disability, or Retirement during a
Performance Period, the Participant shall receive a payout of the Performance
Units/Shares which is prorated, as specified by the Committee in its discretion.
Payment of earned Performance Units/Shares shall be made at a time specified
by the Committee in its sole discretion and set forth in the Participant's Award
Agreement. Notwithstanding the foregoing, with respect to Named Executive
Officers who retire during a Performance Period, payments shall be made at the
same time as payments are made to Participants who did not terminate employment
or service during the applicable Performance Period.
8.6. TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a
Participant's employment or service terminates for any reason other than those
reasons set forth in Section 8.5 herein, all Performance Units/Shares shall be
forfeited by the Participant to the Company unless determined otherwise by the
Committee, as set forth in the Participant's Award Agreement.
8.7. NONTRANSFERABILITY. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution or by designation of a Beneficiary in
accordance with Article 10. Further, except as otherwise provided in a
Participant's Award Agreement, a Participant's rights under the Plan shall be
exercisable during the Participant's lifetime only by the Participant or the
Participant's legal representative.
ARTICLE 9. PERFORMANCE MEASURES
Unless and until the Committee proposes for shareholder vote and shareholders
approve a change in the general performance measures set forth in this Article
9, the attainment of which may determine the degree of payout and/or vesting
with respect to Awards to Named Executive Officers which are designed to qualify
for the Performance-Based Exception, the performance measure(s) to be used for
purposes of such grants shall be chosen from among net income (either before or
after taxes), share price, earnings per share, operating income, return on
assets, return on equity, return on capital or investments, total shareholder
return, or economic value added.
12
<PAGE>
The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the preestablished performance goals; provided, however,
that Awards which are designed to qualify for the Performance-Based Exception,
and which are held by Named Executive Officers, may not be adjusted upward (the
Committee shall retain the discretion to adjust such Awards downward).
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining shareholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards which shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).
ARTICLE 10. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid, and to exercise any Stock Option or
succeed to the ownership of any Restricted Stock as provided in this Plan, in
case of his or her death before he or she receives any or all of such benefit.
Each such designation shall revoke all prior designations by the same
Participant, shall be in a form prescribed by the Company, and will be effective
only when filed by the Participant in writing with the Company during the
Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate.
ARTICLE 11. DEFERRALS
The Committee may permit or require a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such Participant by virtue of the exercise of an Option, the lapse or
waiver of restrictions with respect to Restricted Stock, or the satisfaction of
any requirements or goals with respect to Performance Units/Shares. If any such
deferral election is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures for such payment deferrals.
ARTICLE 12. RIGHTS OF EMPLOYEES
12.1. EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.
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12.2. PARTICIPATION. No Employee or Director shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
ARTICLE 13. CHANGE IN CONTROL
13.1. TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges:
(a) Any and all Options granted hereunder shall become immediately
exercisable, and shall remain exercisable throughout their entire term;
(b) Any restriction periods and restrictions imposed on Restricted Shares
shall lapse;
(c) The target payout opportunities attainable under all outstanding Awards
of Restricted Stock, Performance Units and Performance Shares shall be
deemed to have been fully earned for the entire Performance Period(s)
as of the effective date of the Change in Control. The vesting of all
Awards denominated in Shares shall be accelerated as of the effective
date of the Change in Control, and there shall be paid out in cash to
Participants within thirty (30) days following the effective date of
the Change in Control a pro rata amount based upon an assumed
achievement of all relevant performance goals and upon the length of
time within the Performance Period which has elapsed prior to the
Change in Control.
13.2. TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL
PROVISIONS. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 13 may not be terminated,
amended, or modified on or after the date of a Change in Control to affect
adversely any Award theretofore granted under the Plan without the prior written
consent of the Participant with respect to said Participant's outstanding
Awards; provided, however, the Board of Directors, upon recommendation of the
Committee, may terminate, amend, or modify this Article 14 at any time and from
time to time prior to the date of a Change in Control.
ARTICLE 14. AMENDMENT, MODIFICATION, AND TERMINATION
14.1. AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, however, that no amendment which requires shareholder
approval in order for the Plan to continue to comply with Rule 16b-3 under the
Exchange Act, including any successor to such Rule, shall be effective
14
<PAGE>
unless such amendment shall be approved by the requisite vote of shareholders of
the Company entitled to vote thereon.
14.2. ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.3 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan; provided that no such adjustment
shall be authorized to the extent that such authority would be inconsistent with
the Plan's meeting the requirements of Section 162(m) of the Code, as from time
to time amended.
14.3. AWARDS PREVIOUSLY GRANTED. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award.
14.4. COMPLIANCE WITH CODE SECTION 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Committee determines that such compliance is not desired with respect to any
Award or Awards available for grant under the Plan, then compliance with Code
Section 162(m) will not be required. In addition, in the event that changes are
made to Code Section 162(m) to permit greater flexibility with respect to any
Award or Awards available under the Plan, the Committee may, subject to this
Article 14, make any adjustments it deems appropriate.
ARTICLE 15. WITHHOLDING
15.1. TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan.
15.2. SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options, upon the lapse of restrictions on Restricted Stock, or upon
any other taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax which could be imposed on the transaction.
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<PAGE>
All such elections shall be irrevocable, made in writing, signed by the
Participant, and shall be subject to any restrictions or limitations that the
Committee, in its sole discretion, deems appropriate.
ARTICLE 16. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgement in any such action, suit, or proceeding against him or her, provided
he or she shall give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and defend it on his
or her own behalf. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
ARTICLE 17. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 18. LEGAL CONSTRUCTION
18.1. GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
18.2. SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
18.3. REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
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18.4. SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions or Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
plan or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.
18.5. GOVERNING LAW. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Illinois.
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EXHIBIT 10.5
CHICAGO BRIDGE & IRON COMPANY
DEFERRED COMPENSATION PLAN
ARTICLE I
ESTABLISHMENT, OBJECTIVES AND DURATION
1.1 Establishment of Plan. Chicago Bridge & Iron Company, a Delaware
---------------------
corporation wholly-owned by Chicago Bridge & Iron Company, N.V., a Netherlands
corporation, hereby establishes an elective deferred compensation plan, to be
known as the "Chicago Bridge & Iron Deferred Compensation Plan" (the "Plan") as
set forth in this document.
1.2 Effective Date. The Plan shall become effective as of April 1, 1997.
--------------
The Plan applies only to individuals who are employees or directors of the
Company or Subsidiaries on or after that effective date. The Plan shall remain
in effect until terminated as provided in Article VIII.
1.3 Objectives. The Plan is an unfunded deferred compensation arrangement
----------
for a select group of management or highly compensated employees and directors
of the Company. The Plan is intended to provide participating employees and
directors with the opportunity to defer compensation that is otherwise payable
to them as Salary, as Bonus under the Incentive Compensation Program, as
Directors' Fees, and (to the extent permitted under the Long-Term Incentive
Compensation Plan) as Awards under the Long-Term Incentive Compensation Plan.
ARTICLE II
DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set forth
below, and when the meaning is intended, the initial letter of the word shall be
capitalized:
2.1 "Account" means any of the separate bookkeeping accounts maintained
-------
for each Participant representing the Participant's total credits under Article
IV of the Plan. The Plan Administrator may create such subaccounts within any
Account as the Plan Administrator deems necessary or desirable.
2.2 "Award" has the meaning prescribed for that term in the Long-Term
-----
Incentive Plan.
2.3 "Board" means the Board of Directors of the Company.
-----
2.4 "Bonus" means an Employee's annual incentive bonus payable under the
-----
Company's Incentive Compensation Program (including without distinction target
payments based on meeting the Company's annual goals and discretionary
payments).
<PAGE>
2.5 "Change Date," as of which a Participant may change the deemed
-----------
investment of his or her Account or of future contributions to his or her
Account, means the first day of each calendar quarter.
2.6 "Code" means the Internal Revenue Code of 1986, as amended from time
----
to time.
2.7 "Company" means Chicago Bridge & Iron Company, a Delaware corporation.
-------
2.8 "Director" means a member of the Board or a member of the Board of
--------
Directors of any Subsidiary (whether or not an Employee of the
Company).
2.9 "Directors' Fees" means the compensation payable in cash to a Director
---------------
for his or her services as a Director.
2.10 "Employee" means any employee of the Company or any Subsidiary.
--------
2.11 "ERISA" means the Employee Retirement Security Act of 1974, as
-----
amended from time to time.
2.12 "Incentive Compensation Program" means the Chicago Bridge & Iron
------------------------------
Company Incentive Compensation Program as in effect from time to time.
2.13 "Long-Term Incentive Plan" means the Chicago Bridge & Iron Company
------------------------
Long Term Incentive Plan as in effect from time to time.
2.14 "Measurement Fund" means a T. Rowe Price mutual fund or funds from
----------------
the following list, which a Participant may select under Section 4.3 to
determine the subsequent income (or loss) on his or her deferrals:
Blue Chip Fund
Balanced Fund
Equity Income Fund
Equity Index
New Horizons
Prime Reserve
Spectrum Income
Spectrum Growth
International Stock
2.15 "Participant" means an Employee or Director who is eligible to
-----------
participate in the Plan in accordance with Section 3.1 and elects to defer
compensation under this Plan pursuant to Section 4.1.
2.16 "Plan Administrator" means the Company.
------------------
2
<PAGE>
2.17 "Plan Year" means the fiscal year of the Company, which until changed
---------
is the calendar year.
2.18 "Salary" means an employee's base salary, determined without regard
------
to Bonuses, Awards or any other incentive compensation, and without regard to
elective deferrals under the Savings Plan, any cafeteria plan under Section 125
of the Code, or this Plan.
2.19 "Savings Plan" means the Chicago Bridge & Iron Savings Plan, as
------------
amended from time to time.
2.20 "Subsidiary" means any corporation (other than the Company) in which
----------
Parent owns,
directly or indirectly through the Company or Subsidiaries, at least fifty
percent (50% of the total
combined voting power of all classes of stock, or any other entity (including
but not limited to partnerships and joint ventures) in which the Parent owns,
directly or indirectly through the Company or Subsidiaries, at least fifty
percent (50%) of the capital or profits interest.
2.21 "Trust" means the trust, of the type commonly known as a "rabbi"
-----
trust, established in connection with this Plan pursuant to Section 8.2.
2.22 "Trustee" means the Trustee of the Trust.
-------
2.23 "Valuation Date" means the last day of each calendar quarter.
--------------
ARTICLE III
PARTICIPATION
3.1 Eligibility. An Employee of the Company or any Subsidiary shall be
-----------
eligible to participate in this Plan if he or she is (i) a management or highly
compensated employee within the meaning of Sections 201(2), 301(a)(3), and
401(a)(2) of ERISA, (ii) a participant in the Long-Term Incentive Plan or
eligible to receive a Bonus under the Incentive Compensation Program, and (iii)
affirmatively selected by the Company to participate in this Plan and notified
by the Company of his or her eligibility pursuant to Section 3.2. A Director of
the Company or any Subsidiary shall be eligible to participate in this Plan.
3.2 Participation. The Company shall advise each eligible Employee or
-------------
Director of his or her eligibility and afford him or her the opportunity to
defer compensation in accordance with Section 4.1. An eligible Employee or a
Director shall become a Participant upon first electing to defer compensation
under Section 4.1.
3.3 Duration of Participation. A Participant shall continue to be a
-------------------------
Participant until the Participant's termination of service as an Employee or
Director with the Company and all Subsidiaries and thereafter shall be an
inactive Participant for so long as he or she is entitled to a benefit from the
Plan. A Participant who remains an Employee of the Company or a Subsidiary but
who for any reason ceases to meet the requirements of Section 3.1 for a Plan
Year shall be an inactive Participant for such Plan Year but shall be eligible
to again become an active Participant in any later Plan Year for which he or she
meets those requirements.
<PAGE>
ARTICLE IV
DEFERRED COMPENSATION
4.1 Deferral of Compensation. For each Plan Year, each Participant may
------------------------
elect, on a form provided by the Plan Administrator substantially in the form of
Exhibit A, to defer part of his or her Salary, part or all of his or her Bonus,
and part or all of his or her Directors' Fees, as follows:
(a) Salary Deferral. A Participant may elect to defer any whole
---------------
percentage up to and including 25% (as adjusted if applicable pursuant
to Section 4.5) of his or her Salary.
(b) Bonus Deferral. A Participant may elect to defer (i) any whole
--------------
percentage up to and including 100% of his or her Bonus, (ii) a stated
dollar amount of his or her Bonus, or (iii) all of his or her Bonus
(if any) in excess of a stated dollar amount. Notwithstanding such
election, in no event will the Bonus deferral exceed the actual Bonus
to which he or she turns out to be entitled under the Incentive
Compensation Program.
(c) Directors' Fees Deferral. A Participant may elect to defer any whole
------------------------
percentage up to and including 100% of his or her Directors' Fees.
Amounts deferred under Section 4.1 will be credited to an Account for the
Participant at such time or times as the Salary, Bonus or Directors' Fees would
otherwise have been paid to the Participant in cash.
4.2 Time of Election. This election shall be made during the ninety-day
----------------
period preceding the first day of the Plan Year. If an individual becomes a
Participant in mid-year, he or she may make this election, but only respecting
Salary, Bonus and Directors' Fees for services to be performed after he or she
makes the election, within 30 days of the date he or she becomes a Participant.
For this purpose, the Bonus for any year (paid after the close of that year)
shall be deemed to be for services performed ratably over the course of the
year; and notwithstanding a mid-year Participant's election under Section 4.1,
the portion of any Bonus which may be deferred under this Plan shall not exceed
the ratable portion of Bonus earned after the Participant makes his or her
election. A Participant may not elect to increase, decrease, or cease his or
her Salary, Bonus or Directors' Fees deferral at any time during the Plan Year
under this Plan. However, the Participant may make a new and different election
(or revoke his or her election) for the following Plan Year during the election
period for that
4
<PAGE>
following Plan Year. If a Participant does not change his or her current year's
election within the election period for the following year, his or her current
year's election will continue in effect for the following year. Every deferral
election under this Plan shall be effective only with respect to Salary, Bonus
and Directors' Fees not yet earned as of the date of the election.
4.3 Suspension of Deferral for Hardship. In the event of an unforeseeable
-----------------------------------
emergency that entitles the Participant to a distribution from his Account under
Section 6.3, or in the event that the Participant applies for and receives a
distribution by reason of hardship from the Savings Plan (determined under the
provision of that plan and applicable regulations under Section 401(k) of the
Code), deferral shall be cancelled with respect to any Salary, Bonus and
Directors' Fees that would not yet have been paid to the Participant in cash if
the Participant had not made a deferral election. The Participant may make a
new deferral election for the following year, subject to any restrictions on
deferral in this Plan or the Savings Plan.
4.4 Income (or Loss) on Credits. For purposes of determining income (or
---------------------------
loss) on a Participant's Account, the Account shall be deemed invested in such
Measurement Funds as he or she may designate from time to time. Simultaneously
with his or her election under Section 4.1, each Participant shall designate, on
a form provided by the Plan Administrator substantially in the form of Exhibit
B, the Measurement Fund or Funds to determine the income (or loss) to be
credited on the deferred compensation credited to his or her Account as though
his or her Account were invested in such Measurement Fund or Funds. The
designation of Measurement Funds from time to time shall apply to all deferrals
(of Salary, Bonus and Directors' Fees) and to the Participant's entire Account,
until changed. Designation of Measurement Funds shall be in whole percentages
of a Participant's deferrals or of his or her Account, which percentages shall
add up to 100%.
As of any Change Date, a Participant may change the designation or
allocation of Measurement Funds to determine income (or loss) on future credits
of deferred compensation, or may change the existing allocation of his or her
Account among Measurement Funds, by submitting a revised election form to the
Plan Administrator before the Change Date on which it is to become effective.
For purposes of determining income (or loss), a Participant's deferred
compensation shall be deemed to have been invested in Measurement Funds as soon
as reasonably practicable after the date as of which they are credited under
Section 4.1, and in all events by the fifteenth (15th) business day of the month
after the month in which they are credited under Section 4.1. For purposes of
determining income (or loss), a Participant's Account shall be deemed to have
been reinvested in the newly-designated Measurement Funds as soon as reasonably
practicable after the Change Date, and in all events by the fifteenth (15th)
business day of the month beginning with the Change Date.
4.5 Statements. The Plan Administrator shall give each Participant a
----------
statement of the value of his or her Account, and the Measurement Funds then in
effect for that Account, as of and as soon as reasonably practicable after the
Valuation Date which falls on the last day of the Plan Year. The Plan
Administrator may, but shall not be required to, provide similar statements
<PAGE>
as of any intervening quarterly Valuation Date. The value of a Participant's
Account, and the applicable Measurement Funds, as of the applicable Valuation
Date, shown on any such statement shall be conclusive and binding on both the
Company and the Participant absent bad faith or manifest error unless the
Participant brings error to the attention of the Plan Administrator by filing a
claim for clarification of his or her future rights to benefits pursuant to
Section 7.3 within ninety (90) days after receiving that statement.
4.6 Special Transitional Rule for First Plan Year. For the first
---------------------------------------------
Plan Year, the effective date of an initial Participant's Salary Deferral under
Section 4.1(a) shall be the start of a payroll period selected by the Plan
Administrator within a reasonable time after the initial Participants are
notified of their eligibility pursuant to Section 3.2, and the 25% limitation of
Section 4.1(a) shall be replaced by a percentage (not exceeding 100%) which is
(i) 25% multiplied by a fraction, the numerator of which is the total number of
payroll periods in the Plan Year, and the denominator of which is the number of
payroll periods remaining in the Plan Year beginning with such effective payroll
period, and (ii) rounded down to the nearest whole percentage.
ARTICLE V
VESTING
5.1 Vesting. A Participant shall be fully vested in his or her Account at
-------
all times.
ARTICLE VI
PAYMENT OF BENEFITS
6.1 Distribution Options. Simultaneously with his or her election under
--------------------
Section 4.1, a Participant shall elect, on a form provided by the Plan
Administrator substantially in the form of Exhibit C, and delivered to the Plan
Administrator, one of the following distribution methods for payment of his or
her Account:
(a) Lump Sum. A distribution in a single lump sum,
--------
(b) Installments. A distribution in annual installments over a period,
------------
not exceeding 10 years, elected by the Participant; with the amount of
each annual installment being the balance of the Participant's Account
subject to this distribution option as of the Valuation Date preceding
payment divided by the number of installments (including the current
installment) remaining to be paid.
In either case the lump sum payment or the first installment payment shall be
made in January of the calendar year following the calendar year in which the
Participant's employment terminates, and any
<PAGE>
remaining installment payments shall be made in January of each successive year
until payments are completed.
6.2 Changes in Distribution Options. A Participant may change his or her
-------------------------------
previously elected distribution option on a form provided by the Plan
Administrator substantially in the form of Exhibit C, and delivered to the Plan
Administrator. But no change in a Participant's distribution option after his
or her initial election of a distribution option will become effective (for
distribution upon a subsequent termination of employment) until the first annual
anniversary of the date the change of election is filed with the Plan
Administrator. The form of distribution on a Participant's termination of
employment shall therefore be determined by his or her most recent distribution
option election that has been on file with the Plan Administrator for at least
one year preceding the Participant's termination of employment, except as
provided in Sections 6.3 and 6.4.
6.3 Unforeseeable Emergencies. The Plan Administrator, upon request of a
-------------------------
Participant and substantiation acceptable to the Plan Administrator in its sole
discretion, may direct premature distribution of part or all of a Participant's
Account either during employment or after his or her employment terminates, upon
an unforeseeable emergency affecting the Participant. For this purpose, an
unforeseeable emergency is a severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
of a dependent (as defined in Section 152(a) of the Code) of the Participant,
loss of the Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant, as determined by the Plan Administrator
taking into account the facts of each case. An unforeseeable emergency does not
include the need to send a Participant's child to college or the desire to
purchase a home. The amount distributable shall not exceed the amount necessary
to relieve the hardship caused by the unforeseeable emergency after taking into
consideration the extent to which such hardship is or may be relieved through
reimbursement or compensation by insurance or otherwise, by liquidation of the
Participant's assets (to the extent such liquidation would not itself cause
severe financial hardship), or by cessation of compensation deferral under this
Plan or elective deferrals under the Savings Plan.
6.4 Small Installments and Account Balances. If for any reason, at any
---------------------------------------
time after a Participant's employment terminates, the balance of his or her
Account (or portion of an Account payable to a single Beneficiary) is less than
$10,000, then notwithstanding anything in this Plan or any Participant's
election to the contrary, the Participant's Account (or such portion) shall be
distributed in a single lump sum as soon as practicable. If for any reason, at
any time after a Participant's employment terminates, the amount of any annual
installment payable to a Participant or Beneficiary is less than $5,000, then
notwithstanding anything in this Plan or any Participant's election to the
contrary, each annual installment amount shall be $5,000 and installments shall
continue only until the Account is exhausted or the rule of the preceding
sentence takes effect. If for any reason the distributee of benefits under this
Plan is an estate, the Plan Administrator in its sole discretion may pay to the
estate the entire balance of the Account that is distributable to the estate in
a single lump sum.
<PAGE>
6.5 Form of Payment. All benefits under this Plan shall be paid by
---------------
negotiable check or
other cash equivalent from the Trust or other general funds of the Company.
6.6 Beneficiary. A Participant may designate a Beneficiary or
-----------
Beneficiaries (who may be named contingently or successively) to receive any
amounts payable under this Plan after his or her death. Each designation of
Beneficiary shall be on a form provided by the Plan Administrator substantially
in the form of Exhibit D, signed by the Participant and filed with the Plan
Administrator during the Participant's lifetime. A Participant may revoke such
designation (without the consent of any Beneficiary) and make a new designation
of Beneficiary by filing a new form in like manner. A properly completed and
executed change in a designation of Beneficiary shall take effect immediately
upon being filed with the Plan Administrator during the Participant's lifetime.
If upon a Participant's death no valid designation of Beneficiary is on file
with the Plan Administrator, or if a Beneficiary dies before payments are
completed and there are no living contingent or successive Beneficiaries, then
any remaining payments under this Plan shall be made (1) to the Participant's
surviving spouse, if any, or (2) if there is no surviving spouse, then in equal
shares to his or her children (with the then-living descendants of any deceased
child taking that child's share per stirpes), or (3) if there are neither a
----------
surviving spouse nor surviving children or their descendants, then to the estate
of the last to die of the Participant and all designated Beneficiaries.
6.7 Rights of Beneficiary. The Beneficiary of a Participant who has died
----------------------
shall have the same right as the Participant to designate Measurement Funds
under Section 4.3, and receive a statement under Section 4.4, for the Account
(or portion of an Account) as to which he or she is a Beneficiary.
6.8 Facility of Payment. In the event any distribution is payable under
-------------------
this Plan to a minor or other individual who is legally, physically or mentally
incompetent to receive such payment, the Plan Administrator in its sole
discretion shall pay such benefits to one or more of the following persons:
(a) Directly to such minor or other person;
(b) To the legal guardian or conservator of such minor or other person; or
(c) To the spouse, parent, brother, sister, child or other relative of
such minor or other person for the use of such minor or other person.
The Plan Administrator shall not be required to see to the application of any
distribution so made to any of such persons, but the receipt therefor shall be a
full discharge of the liability of the Plan, the Plan Administrator, the
Company, and the Trustee to such minor or other person.
<PAGE>
ARTICLE VII
ADMINISTRATION
7.1 Company as Plan Administrator. The Plan will be administered by the
-----------------------------
Company.
7.2 Power of the Plan Administrator. The Plan Administrator shall have
-------------------------------
the power and authority in its sole and absolute discretion:
(a) To construe and interpret the Plan, determine the application of the
Plan to situations where such application is unclear or disputable,
and make equitable adjustments for any mistakes or errors made in the
administration of the Plan;
(b) To determine all questions arising in the administration of the Plan,
including the power to determine the rights of Participants and their
beneficiaries and the amount of their respective benefits;
(c) To adopt such rules, regulations and forms as it may deem necessary
for the proper and efficient administration of the Plan consistent
with its purposes;
(d) To enforce the Plan in accordance with its terms and the rules,
regulations and forms adopted by the Plan Administrator;
(e) To take such action and establish such procedures as it deems
necessary or appropriate to coordinate deferrals and benefits under
this Plan with the Incentive Program, the Long-Term Incentive Plan,
the CBIC Excess Benefit Plan, or the Trust;
(f) To instruct the Trustee regarding payments from the Plan and to
provide, amend, and supplement from time to time a schedule of
payments to be made from the Trust for purposes of the Plan;
(g) To employ such counsel, auditors, actuaries, or other specialists (who
may be counsel, auditors, actuaries or other specialists for the
Company) and to engage such clerical or other services to the extent
such services are not provided by the Company;
(h) To delegate such of its powers and authorities to such person or
persons, with his, her, its or their consent, as the Plan
Administrator may appoint; and
(i) To do all other things the Plan Administrator deems necessary or
desirable for the advantageous administration of the Plan and to make
the Plan fully effective in accordance with its terms and intent.
7.3 Claims for Benefits. No claim shall be necessary for payments
-------------------
routinely due to begin under the terms of the Plan. Any claim for benefits not
received or received in an improper amount or time, or any claim for
clarification of a Participant's or Beneficiary's future rights to benefits,
shall be made in writing to the Plan Administrator. The Plan Administrator
shall decide
<PAGE>
each claim and give the person making the claim (a "Claimant") written notice of
the disposition of the claim within 90 days after the claim is filed. If the
Plan Administrator denies a claim, the notice of denial shall be in writing,
shall contain the specific reason or reasons for the denial of the claim, shall
contain a specific reference to the pertinent Plan provisions upon which the
denial is based, shall contain a description of any additional material or
information necessary for the claimant to perfect the claim along with an
explanation why such material or information is necessary, and shall contain an
explanation of the Plan's claims review procedures.
Within 60 days after receipt by the Claimant of a written notice of denial
of a claim, the Claimant may file a written request with the Board for a full
and fair review of the denial of the claim for benefits. In connection with a
claimant's appeal of the denial of the benefit, the Claimant may review
pertinent documents and may submit issues and comments in writing. The Board
shall deliver to the Claimant a written decision on the claim promptly, but not
later than sixty days after the Claimant's request for review. Such decision
shall be written in a manner calculated to be understood by the Claimant, shall
include specific reasons for the decision, and shall contain specific references
to the pertinent Plan provisions upon which the decision is based. The decision
of the Board shall be final, conclusive and binding on all persons.
ARTICLE VIII
MISCELLANEOUS
8.1 Funding Policy. The Accounts under this Plan are merely unfunded
--------------
bookkeeping accounts of the Company and all payments under this Plan shall be
deemed made by the Company from general assets available to all unsecured
creditors of the Company in the event of its insolvency. All Participants have
merely the status of general unsecured creditors of the Company and the Plan is
merely a promise by the Company to make benefit payments in the future. It is
the intent of the Company that the arrangements under this Plan be unfunded for
tax purposes and for purposes of Title I of ERISA.
8.2 Trust. The Company shall create for purposes of this Plan a Trust of
------
the type commonly referred to as a "rabbi" trust and in substantial conformity
to the terms of the model trust published by the Internal Revenue Service in
Rev. Proc. 92-64. The Company shall transfer assets to the Trustee to hold and
to make distributions under this Plan on behalf of the Company. The assets so
held in trust shall remain the general assets of the Company, which is the
grantor under the Trust. The rights of Participants and their Beneficiaries
under this Plan and the Trust shall be exclusively unsecured contractual rights.
No Participant or Beneficiary shall have any right, title or interest whatsoever
in the Trust.
10
<PAGE>
8.3 No Employment Rights. Nothing in this Plan shall confer any greater
--------------------
employment
rights on a Participant than he or she otherwise may have.
8.4 Withholding. The Company may withhold from amounts payable under this
-----------
Plan any amounts as it reasonably deems required under any federal, state or
local revenue law applying to such payments.
8.5 No Assignment. The Participant's rights to benefit payments under
-------------
this Plan are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge encumbrance, attachment or garnishment by creditors
of the Participant or the Participant's beneficiary other than by a "qualified
domestic relations order" (within the meaning of Section 206(d)(3)(B)(i) of
ERISA).
8.6 Expenses. Expenses of administering the Plan shall be borne by the
--------
Company.
8.7 Amendment and Termination. The Company may amend or terminate this
-------------------------
Plan at any time and in its sole discretion, by (and only by) written resolution
of the Board. Any such amendment or termination shall be binding on the Company
and all Participants and their Beneficiaries, even though it may be retroactive
and applicable to Participants whose employment by the Company or Subsidiaries
has terminated. However, no amendment or termination of the Plan shall
adversely affect the right of a Participant to payment of a benefit that he or
she would be entitled to (then or thereafter) under the terms of the Plan if his
or her employment terminated immediately before the adoption of such amendment
or termination of the Plan, unless such amendment or termination of the Plan in
the reasonable judgment of the Plan Administrator is required to comply with
applicable law or to preserve the tax treatment of benefits under this Plan for
the Company or for the Participant, or is consented to by the affected
Participant.
Notwithstanding anything in this Plan to the contrary, upon termination of
the Plan the Company may in its sole discretion pay all Account balances to the
Participants (or Beneficiaries) entitled thereto in a single lump sum.
8.9 Successors. All obligations of the Company under this Plan shall be
----------
binding on any successor to the Company, whether the existence of such successor
is the result of a direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all of the business and/or assets of the
Company.
8.9 Company Action. Except for matters on which this Plan specifically
--------------
requires action by the Board, any action or decision the Company is required or
permitted to take under this Plan will be properly done if done in writing over
the signature of the Company's Vice President - Human Resources and
Administration.
8.10 Notice. Any notice that this Plan requires or permits the Company
------
to receive will be properly given if sent by first class mail, postage paid and
properly addressed, to the principal business address of the Company to the
attention of the Company's Vice President - Human Resources
<PAGE>
and Administration. Any notice, or any check in payment of benefits, that this
Plan requires or permits a Participant to receive will be properly given and
received if sent to a Participant who is an Employee by regular interoffice
distribution channels; or sent to any Participant or Beneficiary by first class
mail, postage paid and properly addressed, to the last known residence address
of the Participant or Beneficiary appearing on the records of the Company.
8.11 Governing Law. This Plan is subject to Federal law under ERISA as
-------------
applicable to plans described in Section 3(a) of ERISA but exempt from certain
provisions of ERISA under Sections 201(2), 3 0 1 (a)(3), and 40 1 (a)(2) of
ERISA, and is subject to the laws of the State of Illinois to the extent such
laws are not preempted by ERISA.
IN WITNESS WHEREOF the Company has caused this Chicago Bridge & Iron
Company Deferred Compensation Plan to be executed by an authorized officer this
_____ day of _____, 1997.
CHICAGO BRIDGE & IRON COMPANY
By:
<PAGE>
EXHIBIT 10.6
Chicago Bridge & Iron Management
Defined Contribution Stock Incentive Plan
Preamble
- --------
This Plan shall be known as the Chicago Bridge & Iron Management Defined
Contribution Stock Incentive Plan (the "Plan"). The object of the Plan is to
provide certain select management employees of Chicago Bridge & Iron Company
N.V. and its subsidiaries ("CBI") with an ownership interest in the
equity of CBI. Chicago Bridge & Iron Company or a holding company the principal
assets of which are the shares of Chicago Bridge & Iron Company.
The Plan is not intended to be qualified under Section 401(a) of the
Internal Revenue Code (the "Code").
ARTICLE I
Definitions
-----------
Section 1.1 "Beneficiary" shall mean the person or persons (including a
-----------
trust or estate) who are entitled to receive any benefit payable hereunder by
reason of the death of a Participant, as designated pursuant to Section 10.1.
Section 1.2 "Board" shall mean the Management Board of Directors of
-----------
the Company.
Section 1.3 "Change of Control" shall mean, at any time that the Company
-----------
does not have any equity securities that are Publicly Traded
(I) when any "person" or "group" of persons (as such terms are used
in Section 13 of the Exchange Act), other than Praxair, Inc., the Company
or any majority-owned subsidiary of either Praxair or the Company,
becomes the "beneficial owner" (as such term is used in Section 13 of the
Exchange Act) of 50% or more of either (x) the total number of the common
shares of the Company
1a
<PAGE>
then outstanding or (y) the voting power of all of the voting securities of
the Company then outstanding; or
(ii) upon the consummation of (A) any merger or other business
combination of the Company with or into another company pursuant to which
the stockholders of the Company do not own, immediately after the
transaction, more than 50% of the voting power and the value of the stock
of the company that survives, or (B) the sale, exchange or other
disposition of all or substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have
occurred by reason of any public offering of the equity securities of the
Company, so long as, immediately following such transfer or the consummation of
such offering, no person or group (as such terms are used in Section 13 of the
Exchange Act) other than Praxair or one of its majority owned subsidiaries owns,
directly or indirectly, more than 25% of the Company's or the Holding
Corporation's equity securities. At any time one or more classes of the equity
securities of the Company are Publicly Traded, a "Change of Control" shall mean:
(i) when any "person" or "group" of persons (as such terms are used
in Section 13 of the Exchange Act), other than Praxair or the Company or
any majority owned subsidiary of Praxair or the Company, becomes the
"beneficial owner" (as such term is used in Section 13 of the Exchange Act)
of 25% or more of the total voting power of the Company's outstanding
securities;
(ii) upon the consummation of (A) any merger or other business
combination of the company with or into another company pursuant to which
the stockholders of the Company as the case may be, do not own, immediately
after
2a
<PAGE>
the transaction, more than 50% of the voting power and the value of the
stock of the Company that survives, or (B) the sale, exchange or other
disposition of all or substantially all of the assets of the Company; or
(iii) if, during any period of two years or less, individuals who at
the beginning of such period constituted the Supervisory Board
of of Directors of the Company, as the case may be, cease for any
reason to constitute at least a majority thereof; provided that any new
-------------
member of the Supervisory Board who is nominated for election to, the
Supervisory Board of Directors with the approval of at least 75% of the
other members then still in office who were members at the beginning of the
period shall be treated as though having been a member at the beginning of
such period.
Section 1.4 "Code" shall mean the Internal Revenue Code of 1986, as
-----------
amended.
Section 1.5 "Committee" shall mean the committee appointed in accordance
-----------
with Section 8.1.
Section 1.6 "Company" shall mean Chicago Bridge & Iron Company N.V.
-----------
or any intermediate holding company which owns all or a majority of the
outstanding voting securities of Chicago Bridge & Iron Company N.V., and
which, at the time of the first contribution to the Trust, is a majority-owned
subsidiary of Praxair, Inc.
Section 1.7 "Distribution Date" shall mean any date on which a
-----------
Participant receives a dividend distribution with respect to Stock held in his
Stock Account.
Section 1.8 "Exchange Act" shall mean the Securities Exchange Act of 1934,
-----------
as amended.
Section 1.9 "Effective Date" shall mean March 26, 1997.
-----------
3a
<PAGE>
Section 1.10 "Employee" shall mean each officer and each other key
------------
employee of any Employer or any of its majority-owned subsidiaries.
Section 1.11 "Employer" shall mean the Company and any successor to the
------------
Company, and its majority-owned subsidiaries.
Section 1.12 "Participant" shall mean any Employee who is designated as a
------------
Participant by the Committee pursuant to Article II.
Section 1.13 "Plan" shall mean this Chicago Bridge & Iron Management
------------
Defined Contribution Stock Incentive Plan, as described herein and as
hereinafter amended.
Section 1.14 "Plan Year" shall mean any calendar year or part thereof
------------
beginning on the Effective Date.
Section 1.15 "Publicly Traded" shall mean any time at which the Stock is
------------
registered under Section 12 of the Securities Exchange Act of 1934, as amended.
Section 1.16 "Stock" shall mean the class of the Company's common stock
------------
that has the highest voting rights and dividend rights of any class of common
stock.
Section 1.17 "Stock Account" shall mean a separate account to which is
------------
credited a Participant's interest in Stock held in the Trust.
Section 1.18 "Termination of Employment" shall mean (a) the resignation of
------------
an Employee for any reason, (b) the dismissal of an Employee, or (c) the
death, or retirement or total disability of an Employee.
Section 1.19 "Totally Disabled" or "Total Disability" shall mean a mental
------------
or physical condition of a Participant which the Committee, on the basis of
information satisfactory to it, finds to be a permanent condition which
renders such member unfit to perform the duties of an Employee, as such duties
shall be determined by the Committee.
4a
<PAGE>
Any determination of whether a Participant is Totally Disabled shall be made
under rules uniformly applied to all Participants.
Section 1.20 "Trust" shall mean the legal entity created by a trust
------------
agreement (and any amendments thereto) between the Employer and the Trustee.
Section 1.21 "Trustee" shall mean any corporation, individual or
------------
individuals who shall accept the appointment as Trustee to execute the duties of
the Trustee as specifically set forth in the trust agreement between the Trustee
and the Employer.
Section 1.22 "Unallocated Stock Account" shall mean a separate account
------------
established under Section 4.1 to hold Stock that is not allocated to the Stock
Account of any particular Participant and dividend distributions received with
respect to such Stock.
ARTICLE II
Eligibility and Participation
-----------------------------
Each Employee designated by the Committee shall be a Participant in the
Plan from the date on which he is so designated until the earlier of (i) his
Termination of Employment or (ii) the date he receives a distribution of all of
the Stock in his Stock Account.
ARTICLE III
Contributions
-------------
The Employer shall establish and contribute to the Trust [1,017,552] shares
of Stock on or immediately following the Effective Date. The Employer may
contribute additional shares of Stock from time to time at its sole discretion.
Stock contributions
5a
<PAGE>
shall initially be credited to the Unallocated Stock Account, unless the
Committee shall otherwise direct that any such Stock shall be allocated directly
to the Stock Account (s) of one or more Participants.
ARTICLE IV
Allocation of Contributions
---------------------------
Section 4.1 Establishment of Accounts. There shall be established a
----------- -------------------------
Stock Account in the name of each Participant and a separate account (the
Unallocated Stock Account) to which any contribution made without specific
allocation and any contribution made without specific allocation and any
forfeitures of Stock occurring hereunder shall be credited pending allocation to
Participants. These accounts shall also hold dividend distributions with
respect to any shares of Stock held therein until such distributions are payable
pursuant to the Plan.
Section 4.2 Allocations to Participants' Accounts. The Committee shall
----------- -------------------------------------
designate the number of shares of Stock allocable to the Stock Account of each
Participant at the time it designates an Employee as a Participant. The number
of shares so allocated shall be subtracted from the Unallocated Stock account
(in which case any dividends paid on such Stock prior to allocation to the
ParticipantOs Stock Account shall also be credited to such Stock Account, and
shall be distributed to the Participant as soon as practicable thereafter) or
credited to such Stock Account directly upon contribution by the Company.
Notwithstanding the foregoing, any Stock remaining in the Unallocated Stock
Account as of the last day of each Plan Year (whether due to unallocated
contributions or forfeitures and any dividend distributions received on Stock
credited to the Unallocated Stock
6a
<PAGE>
account) shall, as to forefeitures, be allocated during such Plan Year to the
successor of the Participant whose Stock has been forfeited, in such amount as
the Committee shall deem appropriate in its sole discretion, and any remaining
forfeited Stock and all unallocated contributions and such dividend
distributions shall be allocated among the Stock Accounts of each Participant
who is an Employee of the Employer on the last day of such Plan Year in the
proportion that each Participant's Stock Account bears to the total of all
Participants' Stock Accounts.
Section 4.3 Voting of Stock. When the shares of Stock held by the Trust
----------- ---------------
are Publicly Traded, notwithstanding the Trustee's general authority to vote any
Stock held by the Trust, each Participant shall be entitled to direct the
Trustee on a confidential basis, as to the manner in which such voting rights
will be exercised with respect to any corporate matter which involves the voting
of such shares allocated to the Participant's Stock Account. Any shares held in
a Participant's Stock Account which may be voted at the direction of such
Participant in accordance with the immediately preceding sentence with respect
to which the Trustee does not receive voting directions shall not be voted.
ARTICLE V
Account Valuations and Adjustments
----------------------------------
Section 5.1 Adjustments for Net Changes in Stock Accounts. Any cash
----------- ---------------------------------------------
dividends on shares of Stock allocated to a Participant's Stock Account shall be
distributed to each Participant no later than within ten (10) days following the
end of the calendar quarter in which such dividend is paid. In the event of a
Stock split, Stock dividend, combination of shares, or any other change or
exchange for other securities by
7a
<PAGE>
reclassification, reorganization, merger, consolidation, recapitalization or
otherwise, the Stock credited to any Stock Account (including the Unallocated
Stock Account) shall be appropriately adjusted to reflect such event(s) and the
rights of each Participant to any new, additional, or different shares of stock
or securities resulting from such event(s). If and when any event(s) described
in the preceding sentence occur, all Plan provisions shall apply to such new,
additional, or different shares or securities.
Section 5.2 Treatment of Expenses. All expenses incurred by the Committee
----------- ---------------------
and the Trustee in connection with administering this Plan and the Trust shall
be paid by Employer. All taxes related to income credited to or attributable to
the payment of cash dividends, or other adjustments to, Stock Accounts described
in Section 5.1 shall be paid from the assets of the Trust and charged against
the Stock Account to which the income is allocated as though it were payable
directly the Participant.
ARTICLE VI
Distribution
------------
Except as provided below, the Trustee shall distribute to the Participant
(or, if applicable, his Beneficiary) all amounts and all shares of Stock
credited to his Stock Account within thirty (30) days following the later of (i)
the date on which a Participant becomes 100% vested or (ii) the date on which
the Stock becomes Publicly Traded, provided that in the event that a Change of
--------
Control occurs at any time that the Stock is not Publicly Traded, the Company
(or its designate) shall purchase all of the Stock held in the Trust at the
price paid to the Company in respect of its Stock in the transaction giving
rise to the Change of Control (the "Change of Control Price") in cash or
8a
<PAGE>
marketable securities valued at the time of such Change of Control transaction,
and the value of each Participant's Stock Account shall be distributed to the
Participant (with the value of the Stock so based on the Change of Control
Price) as soon as practicable following such Change in Control with the payment
to be made in the same form and amount of consideration used to purchase the
Stock from the Trust.
ARTICLE VII
Vesting
-------
Subject to the provisions of this Article VII, a Participant's interest in
his Stock Account shall become vested on the earliest to occur of
(i) his death, (ii) his termination of employment due to Total Disability, (iii)
the third anniversary of the date on which the Stock first becomes Publicly
Traded, (iv) a Change of Control, (v) involuntary termination for any reason
other than wilful misconduct or gross negligence, or (vi) any
other date designated by the Committee. Any Participant who voluntarily
terminates employment with the Employer and each of its subsidiaries by which he
is employed prior to vesting in his Stock Account as provided in the preceding
sentence shall forfeit the amounts credited to his Stock Account.
ARTICLE VIII
Organization of Plan Committee;
-------------------------------
Administration of Plan
----------------------
Section 8.1 The Committee. The Plan shall be administered by a Committee
----------- -------------
composed of not less than 3 members, appointed by the Management Board,
each of
9a
<PAGE>
whom must be a member of the Board of the Employer. Each member of the Committee
shall serve at the will of the Board and without compensation. Any member of the
committee may resign by giving written notice to the Board not less than thirty
(30) days before the effective date of his resignation. Any member of the
Committee may be removed, with or without cause, at any time by the Board. The
Board shall fill vacancies in the Committee as soon as is reasonably possible
after a vacancy occurs and, until a new appointment is made, the remaining
members shall have full authority to act.
Section 8.2 Committee Action, Rules and Expenses. The Committee shall
----------- ------------------------------------
appoint a chairman and a secretary from its members approved by a majority of
its members. Action by the Committee shall be taken by a vote of the majority
of its members present at a meeting, at which a quorum is present, or signed by
a majority of its members in writing without a meeting. A quorum shall consist
of that number of members constituting a majority of the Committee. The
Committee may establish such rules as may be necessary or desirable for its own
operations. The proper expenses of the Committee in the performance of its
duties, shall be paid by the Employer.
Section 8.3 Plan Administered by Committee. The Committee shall
----------- ------------------------------
administer the Plan and shall have complete control in the administration
thereof. In exercising any of its discretionary powers with respect to the
administration of the Plan, the Committee shall act in a uniform and
nondiscretionary manner. The Board shall have no responsibility for the
operation of the Plan, except as otherwise provided herein. The Committee shall
have all powers which are reasonably necessary to carry out its responsibilities
under the Plan including, but not limited to by way of limitation, the power to
construe the
10a
<PAGE>
Plan and to determine all questions that shall arise thereunder, and shall also
have all the powers elsewhere in the Plan conferred upon it.
Section 8.4 Power of Delegation. The Committee may allocate among its
----------- -------------------
members or delegate to any person who is not a member of the committee any
administrative responsibility which it has hereunder. The responsibility of the
committee with respect to the management or control of the assets of the Trust
Fund may be delegated or allocated to the Trustee. Any delegation or allocation
of a responsibility pursuant to this Section shall be evidenced by the minutes
of the meeting of the Committee at which such delegation or allocation was
approved or, if no such meeting was held, by the writing under which such action
was taken.
Section 8.5 Communication By Committee. Decisions and directions of the
----------- --------------------------
Committee may be communicated to the Trustee, a Participant, a Beneficiary, an
Employer or any other person who is to receive such decision or direction by a
document signed by any one or more members of the Committee (or persons other
than members) so authorize, and such decision or direction of the Committee may
be relied upon by the recipient as being the decision or direction of the
Committee. The Committee may authorize one or more of its members, or a
designee who is not a member, to sign on behalf of the entire Committee.
ARTICLE IX
Provisions Relating to Interests in Stock
-----------------------------------------
Section 9.1 Drag-Along Notice. If, at any time at which the Stock is not
----------- -----------------
Publicly Traded, the Company or all of its shareholder(s) other than the Trustee
intend to sell all of the shares of the Company's Stock, whether directly or
indirectly, to a third party (a "100% Buyer"), the Company shall have the right
to require that the Trust sell all of the
11a
<PAGE>
shares of Stock it holds on, and subject to, the same terms and conditions. This
right shall be exercised by the Company by delivering a written notice (a "Drag-
Along Notice") to the Trustee and each Participant, stating that the Company
intends to exercise such rights, the name and address of the 100% Buyer, the per
share amount and form of consideration expected to be received for such shares
and the terms and conditions of payment of such consideration and all other
material terms and conditions of such transfer. If such a Drag-Along Notice is
delivered, the Trustee must transfer all of the shares of Stock held pursuant to
the Plan, regardless of whether credited to a Participant's Stock Account or the
Unallocated Stock Account on the terms and conditions described above, so long
as all other shareholders of the Company transfer all of their shares of Stock
to the 100% Buyer.
Section 9.2 Tag-Along Notice. If, at any time at which the Stock is not
----------- ----------------
Publicly Traded, the Company or any of its shareholder(s) other than
the Trustee propose to sell any Common Stock to an unrelated third party
(the "Proposed Purchaser"), the Company shall provide the Trustee and each
Participant written notice of such proposed sale, stating (i) the name and
address of the Proposed Purchaser, (ii) the per share amount and form of
consideration expected to be received for such shares and (iii) the terms and
conditions of payment of such consideration and all other material terms and
conditions of such transfer. The Trustee shall afford to each participant the
right to direct the Trustee whether to participate in such sale and sell a pro-
rata share of the shares held in such Participant's Stock Account to such
Proposed Purchaser at the price paid to the Company or such other
shareholders (or to have the Company purchase such shares at such price) and
upon the same other terms of the transaction by giving notice to that effect to
the
12a
<PAGE>
Company or such other Stockholders, as the case may be, and the Proposed
Purchaser within ten (10) business days after the receipt of the notice from the
proposed seller; provided that this sentence shall not apply in the case of any
-------------
sale or series of sales by the Company of newly issued or treasury shares of
Common Stock in connection with this Plan or any other plan maintained for the
benefit of employees of the Company or pursuant to any agreement entered into
with an employee of the Company. [Effect of dilution for later stock
issuances?]
Section 9.3 Registration Rights. If the Stock becomes Publicly Traded, the
----------- -------------------
Company shall, IF NECESSARY, register the shares of Stock held under the Trust
and any shares distributed from the Trust, under the Securities Act of 1933, as
amended, and satisfy any and all applicable state securities law requirements,
such that the shares of Stock may be freely sold by the Trust or any other
holder thereof without material limitation.
Section 9.4 Listing on Stock Exchange. The Company shall take such action
----------- -------------------------
as shall be necessary to cause any Stock issued in connection with the Plan and
not previously listed to be listed on any such exchange or trading market on
which shares of the class of the Stock are then listed.
ARTICLE X
Amendments
----------
The Board reserves the right at any time and from time to time to modify,
alter, amend or terminate the Plan or the Trust Agreement but no such action
adversely affect the rights of any Participant or reduce or otherwise impair the
rights of a Participant in
13a
<PAGE>
respect of Stock allocated to his Stock Account. No modification or amendment of
the Plan may be made which would cause or permit any part of the assets of the
Trust Fund to be used for, or diverted to, purposes other than for the exclusive
benefit of Participants or their Beneficiaries, or which would cause any part of
the assets of the Trust Fund to revert to or become the property of an Employer.
ARTICLE XI
Section 11.1 Designation of Beneficiaries. A Participant may designate a
------------ ----------------------------
Beneficiary or Beneficiaries (in any order of priority) by written notice filed
with the Committee, and may change his designated Beneficiary at any time by
designating a new Beneficiary or Beneficiaries in the same manner, and no notice
need be given to any prior designated Beneficiary. If no beneficiary as
designated or provided for above shall survive a deceased Participant, the
Participant's Stock Account shall be distributable to the Participant's estate.
Section 11.2 Plan Creates No Employment Rights. This Plan shall not be
------------ ---------------------------------
deemed to constitute a contract between the Employer and any Employee or other
person whether or not in the employ of the Employer, nor shall anything herein
contained be deemed to give an Employee or any other person, whether or not in
the employ of the Employer, any right to be retained in the employ of the
Employer, or to interfere with the right of the Employer to discharge an
Employee at any time and to treat him without any regard to the effect which
such treatment might have upon him as a Participant in the Plan, or any right to
any payment whatsoever, except to the extent expressly provided for hereunder.
14a
<PAGE>
Section 11.3 Limit on Employer Liability. No person shall have any right
------------ ---------------------------
or interest in the Trust other than as provided herein. All distributions under
the Plan shall be paid or provided solely from the Trust and the Employer assume
no responsibility therefor. Any final distribution to any Participant or
Beneficiary in accordance with the provisions of the Plan shall be in full
satisfaction of all claims against the Trust, the Trustee, the Committee, the
Employer, and the Board with respect to the Plan or Trust.
Section 11.4 Plan Headings. The headings in this Plan have been inserted
------------ -------------
for convenience of reference only, and are to be ignored in any construction of
the provisions hereof.
Section 11.5 Number and Gender. In the construction of this Plan, the
------------ -----------------
masculine shall include the feminine and the singular the plural, and vice
versa, in all cases where such meanings would be appropriate.
Section 11.6 Separability of Provisions. If any provision of this Plan or
------------ --------------------------
the application of such provision to any person or circumstance shall be held
invalid, the remainder of this Plan (and the application of such provision to
any person or circumstance other than the person or circumstance to which it is
held invalid) shall not be affected thereby.
Section 11.7 Interpretation of Provisions. The Employer intends this Plan
------------ ----------------------------
to be a nonqualified stock bonus plan. Accordingly, the Plan and Trust
Agreement shall be interpreted and applied in a manner consistent with this
intent, and to the extent not inconsistent therewith, in accordance with the
laws of the State of Illinois, without regard to its rules or provisions of
law regarding conflict of laws.
15a
<PAGE>
IN WITNESS WHEREOF, and as evidence of the adoption of this Plan effective
as of _____________, 1997 by the Company, it has caused the same to be signed by
its duly authorized officers this ____ day of _____________, 1997.
__________________________________
BY:______________________________
ATTEST:
______________________________
Secretary
16a
<PAGE>
EXHIBIT 10.7
CHICAGO BRIDGE & IRON COMPANY
EXCESS BENEFIT PLAN
ARTICLE I
ESTABLISHMENT, OBJECTIVES AND DURATION
1.1 Establishment of Plan. Chicago Bridge & Iron Company, a Delaware
---------------------
corporation wholly-owned by Chicago Bridge & Iron Company, N.V., a Netherlands
corporation, hereby establishes an elective deferred compensation plan to be
known as the "Chicago Bridge & Iron Excess Benefit Plan" (the "Plan") as set
forth in this document.
1.2 Effective Date. The Plan shall become effective as of January 1,
--------------
1997. The Plan applies only to individuals who are employees of the Company on
or after that effective date. The Plan shall remain in effect until terminated
as provided in Article VIII.
1.3 Objectives. The Plan is an unfunded deferred compensation arrangement
----------
for a select group of management or highly compensated employees of the Company.
The Plan is intended to provide participating employees with the benefits
equivalent to the contributions the Company would have made on their behalf to
the Chicago Bridge & Iron Savings Plan ("Savings Plan") but for the limitations
of the Code.
ARTICLE II
DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set forth
below, and when the meaning is intended, the initial letter of the word shall be
capitalized:
2.1 "Account" means any of the separate bookkeeping accounts maintained
--------
for each Participant representing the Participant's total credits under Article
IV of the Plan, and which consists of the following subaccounts:
(i) "Matching Contribution Subaccount" means the record of the
----------------------------------
Participant's Matching Contribution Credits under Section 4.1 and
earnings (or loss) thereon.
(ii) "Discretionary Contribution Subaccount" means the record of the
---------------------------------------
Participant's Discretionary Contribution Credits under Section
4.2 and earnings (or loss) thereon.
The Plan Administrator may maintain such other subaccounts within any Account as
the Plan Administrator deems necessary or desirable.
<PAGE>
2.2 "Board" means the Board of Directors of the Company.
------
2.3 "Change Date" as of which a Participant may change the deemed
------------
investment of his or her Account or of fiiture contributions to his or her
Account, means the first day of each calendar quarter.
2.4 "Code" means the Internal Revenue Code of 1986, as amended from time
-----
to time.
2.5 "Company" means Chicago Bridge & Iron Company, a Delaware corporation.
---------
2.6 "Compensation" means "compensation" as defined in the Savings Plan for
--------------
purposes of making Elective Deferrals, modified by including Salary Reduction
Credits under this Plan and elective deferrals under the CBIC Deferred
Compensation Plan as well as elective deferrals under the Savings Plan; and
determined without regard to the limits on includible compensation under
qualified plans imposed by Section 401(a)(17) of the Code or any provisions of
the Savings Plan responsive to those limits.
2.7 "Discretion Contribution Credits" means credits to a Participant's
--------------------------------
Account determined and made according to Section 4.2.
2.8 "Elective Deferrals" means "elective deferrals" as defined in the
--------------------
Savings Plan for purposes of applying the limitations of Sections
401(k)(3) and 402(g) of the Code.
2.9 "Employee" means any employee of the Company or its Subsidiaries.
--------
Directors who are not employed by the Company shall not be considered Employees
under this Plan.
2.10 "ERISA" means the Employee Retirement Security Act of l974, as
------
amended from
time to time.
2.11 "Highly Compensated Employee" means an Employee who is treated
----------------------------
as a highly
compensated employee, as defined in Section 414(q) of the Code, for
purposes of the Savings Plan.
2.12 "Matching Credits" means credits to a Participant's Account
-----------------
determined and made according to Section 4. 1.
2.13 "Measurement Fund" means a T. Rowe Price mutual fund or funds from
------------------
the following list, which a Participant may select under Section 4.3 to
determine the subsequent imputed interest on his or her deferrals:
<PAGE>
Blue Chip Fund
Balanced Fund
Equity Income Fund
Equity Index
New Horizons
Prime Reserve
Spectrum Income
Spectrum Growth
International Stock
2.14 "Participant" means an employee of the Company who is eligible to
------------
participate in this Plan in accordance with Section 3.1 and is selected to
participate in this Plan.
2.15 "Plan Administrator" means the Company.
-------------------
2.16 "Plan Year" means the plan year of the Savings Plan, which unless and
----------
until changed is identical to the fiscal year of the Company and to the calendar
year.
2.17 "Savings Plan" means the Chicago Bridge & Iron Savings Plan, as
-------------
amended from time to time.
2.18 "Subsidiary" means any corporation (other than the Company)
-----------
in which Parent owns, directly or indirectly through the Company or
Subsidiaries, at least fifty percent (50% of the total combined voting power of
all classes of stock, or any other entity (including but not limited to
partnerships and joint ventures) in which the Parent owns, directly or
indirectly through the Company or Subsidiaries, at least fifty percent (50%) of
the capital or profits interest.
2.19 "Trust" means the trust of the type commonly known as a "rabbi"
------
trust, established in connection with this Plan pursuant to Section 8.2.
2.20 "Trustee" means the Trustee of the Trust.
--------
2.21 "Valuation Date" means the last day of each calendar quarter.
---------------
ARTICLE III
PARTICIPATION
3.1 Eligibility. An Employee of the Company or any Subsidiary shall be
-----------
eligible to participate in this Plan if he or she is (i) a management or highly
compensated employee within the meaning of Sections 201(2), 301(a)(3), and
401(a)(2) of ERISA, (ii) a Highly Compensated Employee, and (iii) affirmatively
selected by the Company to participate in this Plan and notified by the Company
of his or her eligibility pursuant to Section 3.3.
3.2 Condition on Participation. Benefits under this Plan are conditioned
--------------------------
upon the Participant's making the maximum Elective Deferrals under Section
402(g) of the Code or permitted
3
<PAGE>
under the terms of the Savings Plan. Accordingly, in order to be able to
receive Matching Contribution Credits for any Plan Year, the Participant must
have elected to make the maximum Elective Deferrals under Section 402(g) of the
Code or permitted under the terms of the Savings Plan for such Plan Year. The
calculation of whether the Participant has elected to make the required maximum
Elective Deferrals under the Savings Plan will be made as of the beginning of
the applicable Plan Year.
3.3 The Company shall advise each eligible Employee selected for
participation of his or her eligibility and afford him or her the opportunity to
participate. An eligible Employee shall become a Participant upon returning the
appropriate participation forms to the Plan Administrator in accordance with
Sections 4.3 and 6.1.
3.4 Duration of Participation. A Participant shall continue to be a
-------------------------
Participant until the Participant's termination of employment with the Company
and all Subsidiaries, and thereafter shall be an inactive Participant for so
long as he or she is entitled to a benefit from the Plan. A Participant who
remains an employee of the Company or a Subsidiary but who but for any reason is
not a Highly Compensated Employee for a Plan Year or does not meet the
requirement of Section 3.2 for a Plan Year shall be an inactive Participant for
such Plan Year, but shall again become an active Participant in any later Plan
Year in which he or she meets those requirements.
ARTICLE IV
COMPANY CREDITS
4.1 Matching Contribution Credits. For each Plan Year, a Participant who
-----------------------------
has met the applicable requirements of Article III and is credited with matching
contributions under the Savings Plan shall receive a Matching Contribution
Credit equal to (a) below minus (b) below, but in no event greater than (c)
below, as follows:
(a) Three percent (3%) of the Participant's Compensation.
(b) The matching contribution actually made for the Participant under the
Savings Plan for the Plan Year (after applying the limitations of Code
SS SS 401(a)(17), 401(m), and 415)).
(c) The sum of the Participant's Elective Deferrals under the Savings Plan
plus his or her Salary Deferral under the Chicago Bridge & Iron
Company Deferred Compensation Plan.
Matching Contribution Credits shall be credited to the Participant's Matching
Contribution Subaccount as of the date (or dates) that matching contributions
are credited to Participants' accounts under the Savings Plan.
4
<PAGE>
4.2 Discretionary Contribution Credits. For each Plan Year in which the
-----------------------------------
Company makes discretionary contributions under the Savings Plan, a Participant
shall receive a Discretionary Contribution Credit equal to (a) below minus (b)
below, as follows:
(a) An amount equal to the percentage of compensation (as defined in the
Savings Plan) at which Company discretionary contributions for the
Plan Year are allocated to the accounts of Savings Plan participants
who are not Mghly Compensated Employees, applied to the Participant's
Compensation for the Plan Year (without regard to limitations of Code
SS SS 401(a)(17) and 415); and
(b) The discretionary contribution, if any, actually made for the
Participant under the Savings Plan for the Plan Year (after applying
the limitations of Code SS 401(a)(17) and 415).
If the Savings Plan provides an allocation of discretionary contributions to
participants in the Savings Plan who have not elected to make Elective Deferrals
under the Savings Plan, then, notwithstanding anything in this Plan, a
Discretionary Contribution Credit shall be given to each otherwise eligible
Participant under this Plan without regard to the condition of Section 3.2.
Discretionary Contribution Credits shall be credited to the Participant's
Discretionary Contribution Subaccount as of the date that the discretionary
contributions are credited to participants' accounts under the Savings Plan.
4.3 Income (or Loss) on Credits. For purposes of determining income (or
---------------------------
loss) on a Participant's Account, the Account shall be deemed invested in such
Measurement Funds as he or she may designate from time to time. Upon becoming a
Participant in this Plan, the Participant shall designate, on a form provided by
the Plan Administrator substantially in the form of Exhibit A, the Measurement
Fund or Funds to determine the income (or loss) to be credited on the deferred
compensation credited to his or her Account as though his or her Account were
invested in such Measurement Fund or Funds. The designation of Measurement
Funds from time to time shall apply to both his or her Matching Contribution
Subaccount and Discretionary Contribution Subaccount until changed. Designation
of Measurement Funds shall be in whole percentages of the periodic credits to
the Participant's Account, or of the balance of his or her Account, which
percentages shall add up to 100%.
As of any Change Date, a Participant may change the designation or
allocation of Measurement Funds to determine income (or loss) on future credits
to his or her Account, or may change the existing allocation of his or her
Account among Measurement Funds, by submitting a revised election form to the
Plan Administrator before the Change Date on which it is to become effective.
For purposes of determining income (or loss), a Participant's Matching and
Discretionary Contribution Credits shall be deemed to have been invested in
Measurement Funds as soon as reasonably practicable after the date as of which
they are credited under Sections 4.1 or 4.2, and in all events by the fifteenth
(15th) business day of the month after the month in which they are
5
<PAGE>
determinable for crediting under Sections 4.1 or 4.2. For purposes of
determining income (or loss), a Participant's Account shall be deemed to have
been reinvested in the newly-designated Measurement Funds as soon as reasonably
practicable after the Change Date, and in all events by the fifteenth (15th)
business day of the month beginning with the Change Date.
4.4 Statements. The Plan Administrator shall give each Participant a
-----------
statement of the value of his or her Account, and the Measurement Funds then in
effect for that Account, as of and as soon as reasonably practicable after the
Valuation Date which falls on the last day of the Plan Year. The Plan
Administrator may, but shall not be required to, provide similar statements as
of any intervening quarterly Valuation Date. The value of a Participant's
Account, and the applicable Measurement Funds, as of the applicable Measurement
Date, shown on any such statement shall be conclusive and binding on both the
Company and the Participant absent bad faith or manifest error unless the
Participant brings error to the attention of the Plan Administrator by filing a
claim for clarification of his or her future rights to benefits pursuant to
Section 7.3 within ninety (90) days after receiving that statement.
4.5 Excess Elective Deferrals. Notwithstanding anything in this Plan to
-------------------------
the contrary, in no circumstances will any Elective Deferrals or other Company
contributions under the Savings Plan be deferred or contributed into this Plan
or the Trust. Any portion of a Participant's Elective Deferrals or other
Company contributions made on his behalf under the Savings Plan that for any
reason cannot remain in the Savings Plan (or its associated trust) shall be paid
out to the Participant in accordance with the Savings Plan.
ARTICLE V
VESTING
5.1 Vesting. A Participant shall be vested in his or her Matching
-------
Contribution Subaccount and Discretionary Contribution Subaccount (if any) to
the same extent as the Participant is vested in his or her corresponding
accounts under the Savings Plan.
ARTICLE VI
PAYMENT OF BENEFITS
6.1 Distribution Options. Upon becoming a Participant in this Plan, the
--------------------
Participant shall elect, on a form provided by the Plan Administrator
substantially in the form of Exhibit B, and delivered to the Plan Administrator,
one of the following distribution methods for payment of his or her Account:
(a) Lump Sum. A distribution in a single lump sum.
--------
6
<PAGE>
(b) Installments. A distribution in annual installments over a period, not
------------
exceeding 10 years, elected by the Participant; with the amount of each
annual installment being the balance of the Participant's Account subject
to this distribution option as of the Valuation Date preceding payment
divided by the number of installments (including the current installment)
remaining to be paid.
In either case the lump sum payment or the first installment payment shall be
made in January of the calendar year following the calendar year in which the
Participant's employment terminates, and any remaining installment payments
shall be made in January of each successive year until payments are completed.
The distribution option elected shall apply uniformly to the entire balance of
the Participant's Account, including both the Matching Contribution Subaccount
and the Discretionary Contribution Subaccount (if any).
6.2 Changes in Distribution Options. A Participant may change his or her
-------------------------------
previously elected distribution option on a form provided by the Plan
Administrator substantially in the form of Exhibit B, and delivered to the Plan
Administrator. But no change in a Participant's distribution option after his
or her initial election of a distribution option will become effective (for
distribution upon a subsequent termination of employment) until the first annual
anniversary of the date the change of election is filed with the Plan
Administrator. The form of distribution on a Participant's termination of
employment shall therefore be determined by his or her most recent distribution
option election that has been on file with the Plan Administrator for at least
one year preceding the Participant's termination of employment, except as
provided in Sections 6.3 and 6.4.
6.3 Unforeseeable Emergencies. The Plan Administrator, upon request of a
-------------------------
Participant and substantiation acceptable to the Plan Administrator in its sole
discretion, may direct premature distribution of part or all of a Participant's
Account either during employment or after his or her employment terminates, upon
an unforeseeable emergency affecting the Participant. For this purpose, an
unforeseeable emergency is a severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
of a dependent (as defined in Section 152(a) of the Code) of the Participant,
loss of the Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant, as determined by the Plan Administrator
taking into account the facts of each case. An unforeseeable emergency does not
include the need to send a Participant's child to college or the desire to
purchase a home. The amount distributable shall not exceed the amount necessary
to relieve the hardship caused by the unforeseeable emergency after taking into
consideration the extent to which such hardship is or may be relieved through
reimbursement or compensation by insurance or otherwise, by liquidation of the
Participant's assets (to the extent such liquidation would not itself cause
severe financial hardship), or by cessation of compensation deferral under this
Plan or elective deferrals under the Savings Plan.
6.4 Small Installments and Account Balances. If for any reason, at any
----- ---------------------------------
time after a Participant's employment terminates, the balance of his or her
Account (or portion of an Account payable to a single Beneficiary) is less than
$10,000, then notwithstanding anything in this Plan or any
7
<PAGE>
Participant's election to the contrary, the Participant's Account (or such
portion) shall be distributed in a single lump sum as soon as practicable. If
for any reason, at any time after a Participant's employment terminates, the
amount of any annual installment payable to a Participant or Beneficiary is less
than $5,000, then notwithstanding anything in this Plan or any Participant's
election to the contrary, each annual installment amount shall be $5,000 and
installments shall continue only until the Account is exhausted or the rule of
the preceding sentence takes effect. If for any reason the distributes of
benefits under this Plan is an estate, the Plan Administrator in its sole
discretion may pay to the estate the entire balance of the Account that is
distributable to the estate in a single lump sum.
6.5 Form of Payment. All benefits under this Plan shall be paid by
---------------
negotiable check or other cash equivalent from the Trust or other general funds
of the Company.
6.6 Beneficiary. A Participant may designate a Beneficiary or
-----------
Beneficiaries (who may be named contingently or successively) to receive any
amounts payable under this Plan after his or her death. Each designation of
Beneficiary shall be on a form provided by the Plan Administrator substantially
in the form of Exhibit C, signed by the Participant and filed with the Plan
Administrator during the Participant's lifetime. A Participant may revoke such
designation (without the consent of any Beneficiary) and make a new designation
of Beneficiary by filing a new form in like manner. If upon a Participant's
death no valid designation of Beneficiary is on file with the Plan
Administrator, or if a Beneficiary dies before payments are completed and there
are no living contingent or successive Beneficiaries, then any remaining
payments under this Plan shall be made (1) to the Participant's surviving
spouse, if any, or (2) if there is no surviving spouse, then in equal shares to
his or her children (with the then-living descendants of any deceased child
taking that child's share per stirpes), or (3) if there are neither a surviving
----------
spouse nor surviving children or their descendants, then to estate of the last
to die of the Participant and all designated Beneficiaries.
6.7 Rights of Beneficiary. The Beneficiary of a Participant who has died
---------------------
shall have the same right as a Participant to designate Measurement Funds under
Section 4.3, and receive a statement under Section 4.4, for the Account (or
portion of an Account) as to which he or she is a Beneficiary.
6.8 Facility of Payment. In the event any distribution is payable under
-------- ----------
this Plan to a minor or other individual who is legally, physically or mentally
incompetent to receive such payment, the Plan Administrator in its sole
discretion shall pay such benefits to one or more of the following persons:
(a) Directly to such minor or other person.
(b) To the legal guardian or conservator of such minor or other
person; or
(c) To the spouse, parent, brother, sister, child or other relative of
such minor or other person for the use of such minor or other person.
8
<PAGE>
The Plan Administrator shall not be required to see to the application of any
distribution so made to any of such persons, but the receipt therefor shall be a
full discharge of the liability of the Plan, the Plan Administrator, the
Company, and the Trustee to such minor or other person.
ARTICLE VII
ADMINISTRATION
7.1 Company as Plan Administrator. The Plan will be administered by the
-----------------------------
Company.
7.2 Power of the Plan Administrator. The Plan Administrator shall have
-------------------------------
the power and authority in its sole and absolute discretion:
(a) To construe and interpret the Plan, determine the application of the
Plan to situations where such application is unclear or disputable,
and make equitable adjustments for any mistakes or errors made in the
administration of the Plan;
(b) To determine all questions arising in the administration of the Plan,
including the power to determine the rights of Participants and their
beneficiaries and the amount of their respective benefits;
(c) To adopt such rules, regulations and forms as it may deem necessary
for the proper and efficient administration of the Plan consistent
with its purposes;
(d) To enforre the Plan in accordance with its terms and the rules,
regulations and forms adopted by the Plan Administrator;
(e) To take such action and establish such procedures as it deems
necessary or appropriate to coordinate deferrals and benefits under
this Plan with the Savings Plan, the CBIC Deferred Compensation Plan,
or the Trust;
(f) To instruct the Trustee regarding payments from the Plan and to
provide, amend, and supplement from time to time a schedule of
payments to be made from the Trust for purposes of the Plan;
(g) To employ such counsel, auditors, actuaries, or other specialists (who
may be counsel, auditors, actuaries or other specialists for the
Company) and to engage such clerical or other services to the extent
such services are not provided by the Company;
(h) To delegate such of its powers and authorities to such person or
persons, with his, her, its or their consent, as the Plan
Administrator may appoint; and
<PAGE>
(i) To do all other things the Plan Administrator deems necessary or
desirable for the advantageous administration of the Plan and to make
the Plan fully effective in accordance with its terms and intent.
7.3 Claims for Benefits. No claim shall be necessary for payments
-------------------
routinely due to begin under the terms of the Plan. Any claim for benefits not
received or received in an improper amount or time, or any claim for
clarification of a Participant's or Beneficiary's future rights to benefits,
shall be made in writing to the Plan Administrator. The Plan Administrator
shall decide each claim and give the person making the claim (a "Claimant")
written notice of the disposition of the claim within 90 days after the claim is
filed. If the Plan Administrator denies a claim, the notice of denial shall be
in writing, shall contain the specific reason or reasons for the denial of the
claim, shall contain a specific reference to the pertinent Plan provisions upon
which the denial is based, shall contain a description of any additional
material or information necessary for the claimant to perfect the claim along
with an explanation why such material or information is necessary, and shall
contain an explanation of the Plan's claims review procedures.
Within 60 days after receipt by the Claimant of a written notice of denial
of a claim, the Claimant may file a written request with the Board for a full
and fair review of the denial of the claim for benefits. In connection with a
claimant's appeal of the denial of the benefit, the Claimant may review
pertinent documents and may submit issues and conunents in writing. The Board
shall deliver to the Claimant a written decision on the claim promptly, but not
later than sixty days after the Claimant's request for review. Such decision
shall be written in a manner calculated to be understood by the Claimant, shall
include specific reasons for the decision, and shall contain specific references
to the pertinent Plan provisions upon which the decision is based. The decision
of the Board shall be final, conclusive and binding on all persons.
ARTICLE VIII
MISCELLANEOUS
8.1 Funding Policy. The Accounts under this Plan are merely unfunded
--------------
bookkeeping accounts of the Company and all payments under this Plan shall be
deemed made by the Company from general assets available to all unsecured
creditors of the Company in the event of its insolvency. All Participants have
merely the status of general unsecured creditors of the Company and the Plan is
merely a promise by the Company to make benefit payments in the future. It is
the intent of the Company that the arrangements under this Plan be unfunded for
tax purposes and for purposes of Title I of ERISA.
8.2 Trust. The Company shall create for purposes of this Plan a Trust of
-----
the type commonly referred to as a "rabbi" trust and in substantial conformity
to the terms of the model trust published by the Internal Revenue Service in
Rev. Proc. 92-64. The Company shall transfer assets to the Trustee to hold and
to make distributions under this Plan on behalf of the Company. The
10
<PAGE>
assets so held in trust shall remain the general assets of the Company, which is
the grantor under the Trust. The rights of Participants and their Beneficiaries
under this Plan and the Trust shall be exclusively unsecured contractual rights.
No Participant or Beneficiary shall have any right, title or interest whatsoever
in the Trust.
8.3 No Employment Rights. Nothing in this Plan shall confer any greater
--------------------
employment rights on a Participant than he or she otherwise may have.
8.4 Withholding. The Company may withhold from amounts payable under this
-----------
Plan any amounts as it reasonably deems required under any federal, state or
local revenue law applying to such payments.
8.5 No Assignment. The Participant's rights to benefit payments under
-------------
this Plan are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge encumbrance, attachment or garnishment by creditors
of the Participant or the Participant's Beneficiaries other than by a "qualified
domestic relations order" (within the meaning of Section 206(d)(3)(B)(i) of
ERISA).
8.6 Expenses. Expenses of administering the Plan shall be bome by the
--------
Company.
8.7 Amendment and Termination. The Company may ainend or terminate this
-------------------------
Plan at any time and in its sole discretion, by (and only by) written resolution
of the Board. Any such amendment or termination shall be binding on the Company
and all Participants and their Beneficiaries, even though it may be retroactive
and applicable to Participants whose employment by the Company or Subsidiaries
has terminated. However, no amendment or termination of the Plan shall
adversely affect the right of a Participant to payment of a benefit that he or
she would be entitled to (then or thereafter) under the terms of the Plan if his
or her employment terminated immediately before the adoption of such amendment
or termination of the Plan, unless such amendment or termination of the Plan in
the reasonable judgment of the Plan Administrator is required to comply with
applicable law or to preserve the tax treatment of benefits under this Plan for
the Company or for the Participant, or is consented to by the affected
Participant.
Notwithstanding anything in this Plan to the contrary, upon termination of
the Plan the Company may in its sole discretion pay all Account balances to the
Participants (or Beneficiaries) entitled thereto in a single lump sum.
8.8 Successors. All obligations of the Company under this Plan shall be
----------
binding on any successor to the Company, whether the existence of such successor
is the result of a direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all of the business and/or assets of the
Company.
8.9 Company Action. Except for matters on which this Plan specifically
--------------
requires action by the Board, any action or decision the Company is required or
permitted to take under
11
<PAGE>
this Plan will be properly done if done in writing over the signature of the
Company's Vice President - Human Resources and Administration.
8.10 Notice. Any notice that this Plan requires or permits the Company
-------
to receive will be properly given if sent by first class mail, postage paid and
properly addressed, to the principal business address of the Company to the
attention of its Vice President - Human Resources and Administration. Any
notice, or any check in payment of benefits, that this Plan requires or permits
a Participant to receive will be properly given and received if sent to a
Participant who is an Employee by regular interoffice distribution channels; or
sent to any Participant or Beneficiary by first class mail, postage paid and
properly addressed, to the last known residence address of the Participant or
Beneficiary appearing on the records of the Company.
8.11 Governing Law. This Plan is subject to Federal law under ERISA as
-------------
applicable to plans described in Section 3(a) of ERISA but exempt from certain
provisions of ERISA under Sections 201(2), 301(a)(3), and 401(a)(2) of ERISA,
and is subject to the laws of the State of Illinois to the extent such laws are
not preempted by ERISA.
IN WITNESS WHEREOF the Company has caused this Chicago Bridge & Iron
Company Excess Benefit Plan to be executed by an authorized officer this ____
day of _________, 1997.
CHICAGO BRIDGE & IRON COMPANY
By:
12
<PAGE>
EXHIBIT 10.8
================================================
FORM OF
CHICAGO BRIDGE & IRON
SUPPLEMENTAL EXECUTIVE DEATH
BENEFITS PLAN
=================================================
<PAGE>
CHICAGO BRIDGE & IRON SUPPLEMENTAL EXECUTIVE DEATH BENEFITS PLAN
1. INTRODUCTION
This document sets forth the terms of the Chicago Bridge & Iron
Supplemental Executive Death Benefits Plan, a plan sponsored by
Chicago Bridge & Iron Company, a Delaware corporation, for Selected
Key Executives of the Company, its subsidiaries and affiliates. This
document, along with the Insurance Policy issued to the Executive or
his designee under the Plan, the Assignment Form, the Plan
Participation Form and the life insurance application documents
described herein constitute the official Plan documents.
2. PLAN PURPOSE
The purpose of the Plan is to encourage Selected Key Executives,
who have rendered and will render in the future valuable services to
the Company, its subsidiaries and affiliates, to continue in
employment by providing an insured death benefit with respect to the
Executive before and after retirement.
3. EFFECTIVE DATE
April 1, 1997
4. DEFINITIONS
"Annual Premium" means the amount of consideration determined
annually by the Insurance Company for an Insurance Policy issued under
the Plan. For Plan purposes, if necessary, the Annual Premium shall be
separated into two component parts: (i) the "Basic Annual Premium"
shall be the part of the Annual Premium for standard risk life
insurance coverage; and (ii) the "Extra Premium" shall be the part of
the Annual Premium, if any, required for a life insurance risk
determined by the Insurance Company to be substandard.
"Assignment" or "Assignment Form" means a written agreement
between the Executive and the Rabbi Trust, whereby the Executive
assigns certain Insurance Policy rights and interests to the Rabbi
Trust, in accordance with the terms of the Plan documents.
1
<PAGE>
"Beneficiary(ies)" means the individual(s) or entity(ies)
designated by the Executive or his designee to be the beneficiary of
certain Death Benefit Proceeds payable under the Insurance Policy
subject to the terms of the Plan documents.
"Group Life Insurance Plan" means that employee benefit plan
sponsored by the Company that provides group life insurance benefits
to certain salaried employees of the Company, its subsidiaries and
affiliates, as it may hereinafter be amended, and including any
successor plan(s).
"Long Term Disability Plan" means that employee benefit plan
sponsored by the Company that provides disability benefits to certain
salaried employees of the Company, its subsidiaries and affiliates, as
it may be hereinafter amended, and including any successor plan(s).
"Change in Control" shall mean the occurrence at any time of any
of the following events:
(a) Any "person" as defined under The Securities Exchange Act of
1934, as amended ("the Act"), (other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company, or a
corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company), becomes the "beneficial owner" (as defined in
the Act), directly or indirectly, of securities of the Company or any
holding company of the Company having a majority interest in the
Company ("Holding Company"), representing twenty-five percent (25%) or
more of the combined voting power of the Company's or the Holding
Company's then outstanding securities;
(b) During any period of two (2) consecutive years or less (not
including any period prior to the Effective Date), individuals who at
the beginning of such period constitute the Board, or members of the
equivalent body of any Holding Company, (and any new Director, whose
election by the Company's stockholders was approved by a vote of at
least seventy-five percent (75%) of the Directors then still in office
who either were Directors at the beginning of the period or whose
election or nomination for election was so approved, as may be the
case), cease for any reason to constitute a majority thereof; or
(c) Upon the consummation of (i) any merger or other business
combination of the Company or any Holding Company with or into another
company pursuant to which the stockholders of the Company or any
Holding Company, as the case may be, do not own, immediately after the
transaction, more than fifty percent (50%) of the voting power and the
value of the stock of the company that survives, or (ii) the sale,
exchange or other disposition of all or substantially all the assets
of the Company or any Holding Company.
Notwithstanding the foregoing, any event or transaction which
would otherwise constitute a Change of Control (a "Transaction") shall
not constitute a Change of Control with respect to a Participant or
Beneficiary if, in connection with the Transaction, the
2
<PAGE>
Participant or Beneficiary is an equity investor in the acquiring
entity or any of its affiliates (the "Acquiror"). For purposes of the
preceding sentence, a Participant or Beneficiary shall not be deemed
to be an equity investor in the Acquiror by virtue of (i) obtaining
beneficial ownership of any equity interest in the Acquiror as a
result of the grant to the Participant of an incentive compensation
award under one or more incentive plans of the Acquiror (including,
but not limited to, the conversion in connection with the Transaction
of incentive compensation awards of the Company into incentive
compensation awards of the Acquiror), on terms and conditions
substantially equivalent to those applicable to other executives of
the Company immediately prior to the Transaction, after taking into
account normal differences attributable to job responsibilities,
title, and the like; (ii) obtaining beneficial ownership of any equity
interest in the Acquiror on terms and conditions substantially
equivalent to those obtained in the Transaction by all other
shareholders of the Company; or (iii) obtaining beneficial ownership
of any equity interest in the Acquiror in a manner unrelated to a
Transaction.
"Corporate Capital Interest" means, at the earliest of the
following to occur, the cumulative amount of Annual Premiums paid by
the Rabbi Trust for an Insurance Policy, less the cumulative amount of
Imputed Income attributed to the Executive with respect to that
Insurance Policy, plus whichever of the following is applicable: (i)
the amount, if any, at the conclusion of the Normal Premium Period, by
which the Insurance Policy's remaining cash value exceeds the
projected amount of cash value for that Insurance Policy necessary,
based on conservative, actuarial funding assumptions as determined at
the time by the Plan Administrator, to provide the Executive or his
designee with an Insurance Policy that will provide the Scheduled
Death Benefit Amount without the necessity of any further payment of
Annual Premiums by the Rabbi Trust, the Executive or his designee;
(ii) the amount, if any, in the event the Executive dies before the
Corporate Capital Interest is otherwise recovered, by which the Death
Benefit Proceeds of the Insurance Policy exceed the Scheduled Death
Benefit Amount for the Executive at the time of death; or (iii) the
amount, if any, in the event of the insolvency of the Company, the
termination of the Plan pursuant to Section 12, or the termination of
the Executive's employment for any reason other than death or
Retirement, by which the Insurance Policy's remaining actual cash
value exceeds an estimated cash value determined by the Plan
Administrator, provided that the estimated cash value shall be equal
to that amount of cash value which would have accumulated in the
Insurance Policy had Annual Premiums been paid based upon: (a) the
Executive's actual Salary progression rather than the assumed Salary
progression utilized by the Company in determining funding of the
Insurance Policy; and (b) the actual earnings performance of the
Insurance Policy rather than the earnings assumptions attributed to
the Insurance Policy utilized by the Company in determining the
funding of the Insurance Policy. At all times, the amount of the
Corporate Capital Interest shall be determined by the Company, and
such determination shall be binding upon the Insurance Company and any
person or entity having an ownership or beneficial interest in the
Insurance Policy. The Corporate Capital Interest shall be reduced by
policy loans, if any (including interest thereon), made by the Rabbi
Trust from the Insurance Policy.
3
<PAGE>
"Company" means Chicago Bridge & Iron Company, a Delaware
corporation, and its successors and assigns.
"Death Benefit" or "Death Benefit Proceeds" means the amount of
proceeds paid, or to be paid, at the death of the Executive by the
Insurance Company under an Insurance Policy.
"Executive" or "Selected Key Executive" (collectively
"Executives" or "Selected Key Executives") means: (i) an actively
employed executive of the Company, or one of its subsidiaries or
affiliates, nominated by an Officer of the Company, and approved by
the Chairman of the Board of Directors of the Company, to be eligible
to participate in the Plan; or (ii) a retired Executive of the
Company, or one of its subsidiaries or affiliates, who was
participating in the Plan at the date of Retirement.
"Imputed Income" means that amount of annual income imputed to
the Executive equal to the lower of (i) the one-year term insurance
premium rate prescribed by the Internal Revenue Service or (ii) the
Insurance Company's alternate term insurance premium rate, with either
(i) or (ii), as applicable, multiplied by the Scheduled Death Benefit
Amount provided to the Executive under the Plan at the time such
imputed income is determined.
"Insurance Company" means the life insurance company(ies)
selected by the Company to issue Insurance Policies pursuant to the
Plan.
"Insurance Policy" means the life insurance policy, together
with additional policy benefits and riders, if any, issued by the
Insurance Company pursuant to the Plan. Unless otherwise required by
the Plan, Insurance Policy terms used herein shall have the same
meaning as in the Insurance Policy.
"Normal Premium Period" means that time period during which the
Rabbi Trust will pay Annual Premiums, subject to the limits on the
amount of Annual Premiums to be paid by the Rabbi Trust set forth in
Section 15, to the Insurance Company for an Insurance Policy issued
pursuant to the Plan. The Normal Premium Period will extend from the
date the first Annual Premium is paid until the later to occur of
either: (i) the date the Executive reaches age sixty-five (65); or
(ii) the date the cumulative amount of Annual Premiums paid by the
Rabbi Trust and, if applicable, the cumulative amount of Extra
Premiums paid by the Executive or his designee pursuant to Section 15,
create sufficient cash value under the Insurance Policy, after taking
into account the recovery of the Corporate Capital Interest by the
Rabbi Trust, so that the Scheduled Death Benefit Amount can be
sustained without further payment of Annual Premiums by the Rabbi
Trust, the Executive or his designee, provided that this period shall
generally not be more than fifteen (15) years.
4
<PAGE>
"Plan" means the Chicago Bridge & Iron Supplemental Executive
Death Benefits Plan.
"Plan Participation Form" means a writing wherein the Executive
is designated as being eligible to participate in the Plan, and
whereby the Executive acknowledges such designation and the terms and
conditions of the Plan.
"Rabbi Trust" means the Chicago Bridge & Iron Benefit
Restoration Trust, a trust established by the Company for the purpose
of providing funds for certain employee benefits and compensation.
"Retirement" means retirement under the CBI Pension Plan, or if
an Executive is not or did not participate in that plan, the
attainment of both at least age 55 and ten (10) years of credited
service with the Company.
"Salary" means: (i) in the case of an Executive paid on the
basis of a weekly base salary, the Executive's base weekly salary
expressed in terms of United States dollars, or the currency in which
the Executive is normally paid, multiplied by fifty-two (52); or (ii)
in the case of an Executive paid on any basis other than a weekly base
salary, the aggregate of the Executive's base salary expressed in
terms of United States dollars, or the currency in which the Executive
is normally paid, received each pay period, multiplied by the number
of pay periods normally occurring during a calendar year.
"Scheduled Death Benefit Amount" means that amount of life
insurance which is set forth in Appendix A and is to be provided to
the Executive pursuant to the Plan.
Definitions of other terms are as provided below in the text of the
Plan.
5. Eligibility
Selected Key Executives nominated by an Officer of the Company
and approved by the Chairman of the Board of Directors of the Company
are eligible to participate in the Plan as indicated herein.
5
<PAGE>
6. PARTICIPATION
Participation begins on the date an Insurance Policy under the
Plan is issued on the life of the Executive to the Executive or his
designee and all other Plan documents are completed by the Executive
to the satisfaction of the Plan Administrator and the Insurance
Company. Participation in the Plan by an Executive will not cause that
Executive's participation in the Group Life Insurance Plan to
terminate.
7. PLAN OPERATION
The Plan is a "split dollar" life insurance program. The
Executive or his designee shall be the owner of an Insurance Policy on
the Executive's life issued by the Insurance Company, for which the
Company, through the Rabbi Trust, shall pay the Annual Premiums for
the duration of the Normal Premium Period. The Company, through the
Rabbi Trust, shall retain an economic interest in both the cash value
and Death Benefit Proceeds of the Insurance Policy documented by the
Assignment Form. Except as otherwise provided in the Plan, the
Executive shall not be responsible for payment of Annual Premiums, but
under United States tax laws in effect on the effective date of the
Plan, the Executive shall be responsible for paying income tax on the
Imputed Income attributed to the Executive's participation in the Plan
until the Rabbi Trust recovers the Corporate Capital Interest and
cancels the Assignment Form. Executives who are not covered by United
States income tax laws shall be responsible for income tax or other
tax consequences under applicable laws of other countries.
The Scheduled Death Benefit Amount provided to the Executive
shall be a multiple of the Executive's Salary. The amount of the
Executive's multiple is set forth in Exhibit A.
If applicable, at the conclusion of the Normal Premium Period,
the Rabbi Trust shall cease paying Annual Premiums and, under the
Assignment Form, shall recover from the Insurance Policy's cash value
the Corporate Capital Interest. The aggregate amount of Annual
Premiums paid by the Rabbi Trust shall be scheduled with the intent to
produce sufficient cash value so that after the Rabbi Trust recovers
the Corporate Capital Interest and cancels the Assignment Form, the
Executive or his designee will own the Insurance Policy providing the
Scheduled Death Benefit Amount without payment of any further Annual
Premiums. The Executive or his designee may continue the Scheduled
Death Benefit Amount from the Insurance Policy or withdraw all or part
of the remaining cash value at any point after the Rabbi Trust has
recovered the Corporate Capital Interest, although such withdrawing of
cash value shall void the guarantee under Section 8. In the event the
Executive dies before the Corporate Capital Interest is recovered, the
Rabbi Trust shall recover the Corporate Capital Interest from the
Death Benefit Proceeds attributable to the Executive's Insurance
Policy pursuant to the Assignment Form.
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<PAGE>
8. GUARANTEE OF BENEFITS
The funding of the Plan is intended to create sufficient cash
values in the Insurance Policy at the conclusion of the Normal Premium
Period so that the Scheduled Death Benefit Amount will be available
under the Insurance Policy until the Executive's death, based upon
conservative, actuarial assumptions as determined from time to time by
the Plan Administrator.
However, in the event the Death Benefit Proceeds actually paid
to the Beneficiary under the Insurance Policy are not at least equal
to the Scheduled Death Benefit Amount, or, if applicable, the Reduced
Death Benefit as provided in Section 15, an additional payment will be
made from the Rabbi Trust to the Beneficiary. The amount of this
additional payment from the Rabbi Trust will be the difference between
the Scheduled Death Benefit Amount, or Reduced Death Benefit,
whichever is applicable, and the Death Benefit Proceeds actually paid
to the Beneficiary under the Insurance Policy, adjusted so that the
total net after tax amount payable to the Beneficiary, both from the
Insurance Policy and the Rabbi Trust, after taking into account the
assumed liability of the Beneficiary to pay income taxes on the
additional payment from the Rabbi Trust, equals the Scheduled Death
Benefit Amount, or Reduced Death Benefit, as the case may be, under
the Insurance Policy.
For purposes of determining assumed income taxes under this
Section, the highest marginal personal United States Federal Income
Tax rate for married individuals filing jointly in effect at the date
of the Executive's death will be used.
It is the intent of the Plan to guarantee the Scheduled Death
Benefit Amount only insofar as such guarantee is described in this
Section, and there is no other guarantee concerning the cash value or
any other Death Benefit Proceeds under the Insurance Policy at any
time. Furthermore, the guarantee under this Section shall be void and
of no effect in the event the Executive or his designee withdraws any
part of the cash value or dividends payable under the Insurance Policy
following recovery of the Corporate Capital Interest and cancellation
of the Assignment Form. In the event the Executive or his designee
obtains a loan under the Insurance Policy which has not been
completely repaid at the date of the Executive's death, the guarantee
provided by this Section shall be reduced by the amount of any such
loan and any unpaid interest thereon.
The guarantee under this Section shall not apply in the event
the Insurance Company, during the two year contestability period that
begins with the date of issue of the Insurance Policy, rescinds the
Insurance Policy or denies a claim thereunder on the basis of a
misstatement in Insurance Company applications, or in the event the
Insurance Company denies or limits a claim where the Executive dies by
suicide within one year from the date of issue of the Insurance
Policy.
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<PAGE>
9. SCHEDULED DEATH BENEFIT AMOUNT
The Executive's Scheduled Death Benefit Amount is set forth in
Appendix A.
10. COMPANY PARTICIPATION IN FUNDING OF PLAN
Subject to the terms of the Plan, the Company, through the Rabbi
Trust, will pay Annual Premiums for Insurance Policies issued pursuant
to the Plan until the earliest to occur of the following:
. The termination of the Normal Premium Period.
. The Executive's death.
. The Executive's termination from employment by reason
other than death or Retirement, provided the Executive's
termination is not reasonably related to or as a result of
a Change in Control.
Upon the earliest to occur of these events, the Rabbi Trust will
withdraw the Corporate Capital Interest and terminate the Assignment
against the Insurance Policy. Prior to such withdrawal, the Rabbi
Trust may borrow against the Insurance Policy to the extent of the
Corporate Capital Interest.
If the Executive is living after the Rabbi Trust withdraws the
Corporate Capital Interest, the Executive or his designee will own the
Insurance Policy free of any interest on the part of the Company or
the Rabbi Trust and may then exercise without restriction all the
rights available under the Insurance Policy, although the exercise of
such rights may affect the guarantee provided under Section 8.
11. SECURITY
The Company will ensure that the Rabbi Trust, on each date on
which the Rabbi Trust evaluates its obligations, has sufficient assets
to provide funding equal to the net present value (utilizing a
discount rate equal to the Insurance Company's then current dividend
rate minus 100 basis points) of future Annual Premiums for Insurance
Policies issued to Executives under the Plan and against which the
Rabbi Trust holds an Assignment Form payable for the next ten (10)
years (hereinafter the "Security Fund"). In the case of a decision by
the Company to terminate or amend the Plan pursuant to Section 12, or
if the Company fails or refuses to ensure that the Rabbi Trust has
sufficient assets available to meet funding obligations pursuant to
the Plan, the Security Fund shall be used
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<PAGE>
by the Rabbi Trust to pay Annual Premiums on the Insurance Policies to
the extent and in the amount available.
In the case of the insolvency of the Company, the Rabbi Trust
would be subject to the claims of the Company's creditors (which would
include participants in the Plan) and funds in the Rabbi Trust
(including the Security Fund) may not be available to pay future
Annual Premiums or to meet the guarantee to participants under Section
8. The amount of the Corporate Capital Interest in the Insurance
Policies would also be subject to the claims of the Company's
creditors. The interests of the Executive under the Insurance Policy
in excess of the Corporate Capital Interest, however, generally should
not be subject to the claims of the Company's creditors.
Accordingly, in the case of the insolvency of the Company (as
that term is defined in the Rabbi Trust) the Rabbi Trust will recover
from the Insurance Policy the Corporate Capital Interest, to the
extent allowed by law, terminate the Assignment of the Insurance
Policy and have no further obligations under this Plan. The Executive
or his designee may thereafter elect to maintain the Insurance Policy
by assuming responsibility for paying Annual Premiums. If the
Executive or his designee elects to maintain the Insurance Policy, he
will deal directly with the Insurance Company.
12. RIGHT TO TERMINATE OR AMEND
The Company reserves the right to terminate the Plan if the
Company, in its sole discretion, determines that changes in the U.S.
tax laws or other laws, or other government action or events beyond
the control of the Executive or the Company adversely and materially
affect the Plan. If the Plan is terminated and the Company has
instituted at the time of termination of the Plan a comparable
replacement plan providing benefits, security and a guarantee to all
Executives not less than the benefits, security and guarantee provided
under the Plan, the Rabbi Trust may recover the Corporate Capital
Interest from the Insurance Policies and the guarantee provided under
Section 8 of the Plan shall be void and of no further force and
effect.
If the Plan is terminated and a comparable replacement plan has
not been instituted at the time of termination of the Plan, to the
extent outlined in Section 11 payment of future Annual Premiums will
be made from the Rabbi Trust from the Security Fund. The Rabbi Trust
will thereafter recover the Corporate Capital Interest upon the
earliest to occur of the following: (a) the date on which funds in the
Security Fund are exhausted; or (b) the date on which the Company's
obligations to pay Annual Premiums pursuant to Section 10 ceases.
Subsequent to termination of the Plan, the Company may institute,
at any time, a comparable replacement plan providing benefits,
security and a guarantee to all Executives not less than the benefits,
security and guarantee previously provided by the Plan, in which
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<PAGE>
event the Rabbi Trust may recover the Corporate Capital Interest upon
institution of the replacement plan, and the guarantee previously
provided under Section 8 of the Plan and surviving the prior
termination shall be void and of no further force and effect.
In the event the Company does not institute a comparable
replacement plan, as previously defined, the guarantee provided in
Section 8 shall survive termination of the Plan.
Following termination of the Plan and recovery of the Corporate
Capital Interest, the Executive or his designee will thereafter have
the option of surrendering his share of the Insurance Policy for its
remaining cash value or making Annual Premium payments, if required,
directly to the Insurance Company in order to maintain the Insurance
Policy.
The Company may amend the Plan at any time, provided that no
amendment shall reduce or eliminate the obligation of the Rabbi Trust
to make payments of the guarantee of benefits as described in the
Plan, and that any amendment to reduce or eliminate the obligation to
provide the Security Fund shall be prospective in application only. No
amendment shall reduce the benefits in effect for Executives before
the amendment without the prior written consent of the Executives
affected by the amendment whose Scheduled Death Benefit Amounts in the
aggregate represent at least 51% of the total amount of Scheduled
Death Benefit Amounts then provided to them. Amendments to the Plan
shall be made by a written instrument signed by the Plan
Administrator. The Plan Administrator will inform Executives affected
by the amendment in writing of the amendment to the Plan.
13. TERMINATION OF EMPLOYMENT
If the Executive's employment is terminated for any reason other
than death or Retirement, and the Executive's termination is not
reasonably related to or as a result of a Change in Control of the
Company, the Rabbi Trust will withdraw the Corporate Capital Interest
and terminate the Assignment. The Executive or his designee may
thereafter maintain the Insurance Policy by assuming responsibility
for paying Annual Premiums. If the Executive or his designee elects to
maintain the Insurance Policy, he will deal directly with the
Insurance Company. Thereafter, neither the Company nor the Rabbi Trust
shall have further responsibility to such Executive for any of the
benefits or the guarantee of benefits provided under the Plan.
If the employment of an Executive is terminated and is reasonably
related to or as a result of a Change in Control of the Company,
Annual Premiums will be paid by the Rabbi Trust to the extent of the
Security Fund as provided in Section 11.
10
<PAGE>
14. DISABILITY
If the Executive becomes disabled and, as a result, becomes
eligible for benefits from the CBI Long-Term Disability Plan, the
Executive will be treated as being actively employed for purposes of
this Plan and subject to the terms of this Plan. If an Executive who
is receiving benefits from the CBI Long Term Disability Plan retires
under the CBI Pension Plan, the Executive will be deemed retired for
purposes of this Plan.
15. UNDERWRITING
In order to participate in the Plan and be issued an Insurance
Policy under the Plan, the Executive will be required to provide
medical evidence of insurability satisfactory to the Insurance
Company. This medical evidence will include taking a physical
examination.
If the Insurance Company, based upon the medical evidence
obtained, issues an Insurance Policy on the Executive's life that will
require the payment of an Extra Premium, the Rabbi Trust will pay that
portion of the Extra Premium that does not exceed 40% of the Basic
Annual Premium. The Executives affected by the requirement for an
Extra Premium will be so notified.
If the cost of the Extra Premium exceeds 40% of the Basic Annual
Premium, the following three (3) options will be available to the
Executive or his designee:
. Pay that portion of the Extra Premium that exceeds 40% of
the Basic Annual Premium in order to maintain an Insurance
Policy that will provide the Scheduled Death Benefit Amount;
. Accept a Death Benefit equal to the amount of Death
Benefit the Basic Annual Premium and that portion of the
Extra Premium that does not exceed 40% of the Basic Annual
Premium would purchase (herein the "Reduced Death Benefit").
If the Executive elects to accept a Reduced Death Benefit,
the obligation to provide the Scheduled Death Benefit Amount
and the guarantee under Section 8 shall be limited to the
amount of the Reduced Death Benefit; or
. Remain a participant in the Group Life Insurance Plan,
and not participate in the Plan.
11
<PAGE>
If the Insurance Company determines that the Executive is
uninsurable, the Executive will remain a participant in the Group Life
Insurance Plan, and will not be a participant in this Plan.
Benefit changes brought about by changes in Salary will be
handled as follows :
. Except as provided below, adjustments will be made to
the Scheduled Death Benefit Amount provided by the Insurance
Policy at the same time that the Salary change is effective
and, in general, these adjustments will not require medical
evidence.
. Where any Salary increase in any calendar year causes
an increase in the Scheduled Death Benefit Amount in excess
of 8%, medical evidence of insurability may be required for
the portion of the Scheduled Death Benefit Amount increase
exceeding 8%. If an Executive is found uninsurable based on
medical evidence for the portion of the Scheduled Death
Benefit Amount increase exceeding 8%, the Scheduled Death
Benefit Amount increase for that year will be limited to
that amount not exceeding 8%.
If the Insurance Company determines that an Extra
Premium will be required on the Scheduled Death Benefit
Amount increase, the Rabbi Trust will pay that portion of
the Extra Premium that does not exceed 40% of the Basic
Annual Premium applicable to the increase in Scheduled Death
Benefit Amount. If the Extra Premium exceeds 40% of the
Basic Annual Premium required for the Scheduled Death
Benefit Amount increase, the options set forth previously in
this Section will be available to the Executive.
16. ENROLLMENT PROCEDURES
To participate in the Plan, the Executive must:
. Sign a Plan Participation Form.
. Designate who will apply for and be the owner of
the Insurance Policy to be issued, if other than the
Executive.
. Complete any required Insurance Company
applications and cooperate in providing the Insurance
Company with medical evidence of insurability.
12
<PAGE>
. Designate a Beneficiary under the Insurance Policy.
. Sign an Assignment Form.
17. PLAN ADMINISTRATION
Unless otherwise designated in writing by the Company's Vice
President of Human Resources or officer of equivalent duties, the Plan
Administrator ("Plan Administrator") will be the Company's Manager of
Employee Benefits or person of equivalent duties, who shall have
control over the administration and interpretation of the Plan. To the
extent not limited otherwise in this Plan, the Plan Administrator
shall have full and absolute discretion to construe, interpret and
apply the terms of the Plan, and decisions of the Plan Administrator
shall be final and binding on all parties to the fullest extent
permitted by law. The Plan Administrator will have all power needed to
carry out his duties, and as he deems necessary or advisable, may
adopt rules and regulations relating to the Plan, may delegate
administrative responsibilities to advisors or other persons, and may
rely on information or opinions of legal counsel or experts.
The Insurance Company under the Plan is , unless such
other Insurance Company is selected by the Company. The Insurance
Company shall be responsible for all matters relating to any Insurance
Policy.
The trustee of the Rabbi Trust is .
18. CLAIMS PROCEDURE
For all benefits to be paid by the Insurance Policy, the claims
procedure will be the claims procedure established by the Insurance
Company. In any other case, a written claim must be filed with the
Plan Administrator or the Trustee of the Rabbi Trust. The Plan
Administrator or the Trustee of the Rabbi Trust, as applicable, will
fully and fairly review all claims and provide a final written
decision within sixty (60) days of the date the claim is received by
the Plan Administrator or the Trustee.
The Plan Administrator is designated as the agent to receive
service of legal process on behalf of the Plan.
13
<PAGE>
19. NO RELATION BETWEEN PLAN AND CONTINUED EMPLOYMENT
Nothing in this Plan and/or any actions taken under it shall be
construed or interpreted as a contract of employment giving the
Executive a right to be retained as an employee of the Company for any
period of time, or to restrict the right of the Company or the
Executive to terminate employment at any time for any reason, or to
give the Executive a right to continued employment in a capacity
eligible to participate in the Plan.
20. RULES OF CONSTRUCTION
As used in this Plan and where appropriate, the singular shall
include the plural, and vice versa, and the masculine shall include
the feminine, and vice versa.
21. STATEMENT OF ERISA RIGHTS
Executives are entitled to certain rights and protection under
the Employee Retirement Income Security Act of 1974 ("ERISA"). ERISA
imposes duties upon the people who are responsible for the operation
of the Plan. The people who operate the Plan, called "fiduciaries" of
the Plan, have a duty to do so prudently and in the interest of
Executives and their beneficiaries and designees. The Company may not
fire or otherwise discriminate against the Executive in any way to
prevent him from obtaining Plan benefits to which he is entitled or
from exercising his rights under ERISA. If a claim for a benefit is
denied in whole or in part, the Executive must receive a written
explanation of the reason for the denial. The Executive has the right
to have the Plan reviewed and his claim reconsidered. Under ERISA,
there are steps to enforce the above rights. For instance, if a claim
for benefits is denied or ignored, in whole or in part, the Executive
may file suit in a state or federal court. If it should happen that
Plan fiduciaries misuse the Plan's money, or if the Executive is
discriminated against for asserting his rights, he may seek assistance
from the U.S. Department of Labor, or may file suit in a federal
court. The court will decide who should pay court costs and legal
fees, for example, if it finds that the Executive's claim is
frivolous. If there are any questions about this statement or the
Executive's rights under ERISA, contact the Plan Administrator or the
nearest Area Office of the U.S. Labor-Management Service
Administration, Department of Labor.
22. CONTROLLING LAW
To the extent not controlled by federal law, the Plan shall be
interpreted according to the laws of the State of Illinois.
14
<PAGE>
CHICAGO BRIDGE & IRON SUPPLEMENTAL EXECUTIVE DEATH BENEFITS PLAN
APPENDIX A
Executive Name:__________________________________
Date:_________________________________________
Your Scheduled Death Benefit Amount under the Plan is:
Scheduled Death Benefit Amount
------------------------------
Pre-Retirement 2 1/2 x Salary at Date of Death
Post-Retirement 1 1/2 x Salary at Date of Retirement
<PAGE>
EXHIBIT 10.9
[LETTERHEAD OF PRAXAIR, INC.]
February 26, 1997
Mr. Gerald M. Glenn
President and Chief Executive Officer
Chicago Bridge & Iron Company BUSINESS CONFIDENTIAL
1501 North Division Street
Plainfield, IL 60544-8929
Dear Gerald,
This letter is to formalize Praxair's offer to you and your management team, and
your acceptance of the position as president and chief executive officer of
Chicago Bridge & Iron Company (CB&I).
The clarification is as follows, and replaces and supersedes all prior
agreements concerning the subject matter of this letter.
Praxair is in the process of selling its interest in CB&I, either through a
public offering or a private sale to a third party.
a) In the event that all or part of the shares of common stock of CB&I
owned by Praxair are sold in a public offering, Praxair shall cause for
you and the members of your management team to receive (in accordance
with the Management Plan to be adopted by the Board of Directors) shares
of common stock in CB&I over and above the shares held by Praxair
(Additional Shares). The value of the amount of Additional Shares (using
the initial public offering price) shall equal the value of a percentage
of the total Enterprise Value as set forth below:
Enterprise Value $250mm $300mm $350mm
Percentage Share 6% 7% 8%
Incentive Value 15mm 21mm 28mm
For each $50 million in Enterprise Value over $350 million, the amount of
percentage share for you and management shall increase by 1%. For values less
than $250mm, the amount of percentage share for you and management shall
decrease by 1%. Pro-rating shall, in any event, occur in between the actual
Enterprise Value and the last preceding named increment.
For example, if "Enterprise Value" equals $290mm, the percentage share would
equal 6.8% and the Incentive Value would equal $19.72mm, totaling 986,000
Additional Shares (assuming a per share price of $20).
<PAGE>
-2-
Your share of the Additional Shares shall be one half of those shares
and the remaining one half shall be available for members of your
management team, as shown in the attached "Schedule A".
In the event of a public offering, Enterprise Value shall be defined as
follows:
Enterprise Value equals the total value of all of the shares of common
stock issued (including, but not limited to, shares issued to you and
your management team pursuant to this letter) at the price the shares
are sold in the initial public offering as if all the shares of common
stock were sold at such time, less a fixed amount of Thirteen million,
six hundred thousand dollars ($13,600,000) representing all costs and
fees paid by Praxair to third parties (other than employees of CB&I) in
connection with the initial public offering (including, but not limited
to, the cost of reorganization of CB&I as a Dutch holding company), plus
a fixed amount of Fifty-five million dollars ($55,000,000) representing
debt to be paid, plus a cash dividend of Five million dollars
($5,000,000), minus a fixed amount of Seven million dollars
($7,000,000), representing the value of excess cash.
b) In the event that all or part of the shares held by Praxair are sold in
a private sale to a third party, Praxair shall pay to you a cash
incentive fee, the amount of which shall be determined as follows:
Enterprise Value $250mm $300mm $350mm
Percentage Share 3.0% 3.5% 4.0%
Incentive Fee 7.5mm 10.5mm 14mm
For each $50mm in Enterprise Value over $350 million, the amount of the
Incentive Fee shall increase by 0.5%. For values less than $250mm, the
amount of the Incentive Fee shall decrease by 0.5%. Pro-rating shall, in
any event, occur for values in between the actual Enterprise Value and
the last preceding named increment.
For example, if "Enterprise Value" equals $290mm, the percentage share
would equal 3.4% and the value of the cash payment for the Incentive Fee
would equal $9.86mm.
There will be no cash Incentive Fee for members of your management team
other than as provided in the separate "Success Fee and Severance
Compensation Agreement" letter dated February 26, 1997, other than may
be, or may have been, agreed to in another agreement.
In the event of a private sale, Enterprise Value shall be defined as
follows:
Enterprise Value equals the total consideration paid by the Buyer to
Praxair (giving full value for any part of the consideration not in cash
including, but not limited to, debt assumed by the Buyer), less out of
pocket costs and fees paid to third parties (other than
<PAGE>
-3-
employees of CB&I) in connection with the sale (including, but not
limited to, the reorganization of CB&I as a Dutch holding company or
otherwise), plus the value of any cash extracted by Praxair since
January 1, 1997, including, but not limited to, a dividend in a fixed
amount of Five million dollars ($5,000,000), and less any liability of
CB&I that Praxair assumes including, but not limited to, inter-company
debt.
Payment to Gerald M. Glenn shall be made within ten (10) days of the
closing of the private sale.
As it related to your 1997 Annual Incentive, we have agreed that the Target
Payout Range is 75% of your base pay.
If you are in agreement with this clarification, please execute a copy of this
letter and return to me.
Sincerely,
/s/ E. G. Hotard
EGH:cl
cc: J.A. Clerico
J.F.X. Fusaro
Agreed and Accepted
/s/ Gerald M. Glenn
- --------------------------------------
Gerald M. Glenn
President and Chief Executive Officer
<PAGE>
SCHEDULE A
----------
Percentage of
Enterprise Value
----------------
T.J. Wiggins 0.75%
T.L. Aldinger 0.75%
R.H. Wolfe 0.25%
S.M. Duffy 0.125%
C.D. Bassett 0.125%
G.M. Galdo 0.0625%
Approximate 45 other management participants *
(*) To be allocated by G.M. Glenn at his sole and complete discretion. The
total of Enterprise Value allocated to the approximate 45 participants when
added to the percentage of Enterprise Value already allocated to the six (6)
named executives will be equal to one half (1/2) of the total percentage share.
<PAGE>
Chicago Bridge & Iron Company
1501 North Division Street
Plainfield, Illinois 60544-8984
August 26, 1996
Mr. Timothy Wiggins
4866 Deer Ridge Drive North
Carmel, IN 46033
Dear Tim:
I am pleased to modify our offer to you for the position of Vice
President and Chief Financial Officer of the Chicago Bridge & Iron Company
located in Plainfield, Illinois.
Your base salary in this position will be $220,000 per year. In
addition, in 1996, you will be eligible for an incentive bonus based on
performance. While this amount is discretionary in nature, you will be
guaranteed a minimum payment of $30,000.
In addition to a base salary and bonus, you will be eligible to
participate in the programs listed below. As we have discussed, many of these
programs are currently under development and specific details are not yet
available. However, the information listed below is intended to provide a
conceptual framework for this offer of employment.
INCENTIVE COMPENSATION
----------------------
For the year 1997, you will participate in a yet to be determined
short-term incentive compensation program with a targeted bonus of not
less than 25% of base pay. Target bonus is defined as the level of
bonus payout which results from average company and individual
performance.
<PAGE>
-2-
RESTRICTED STOCK
----------------
You will be eligible to receive a restricted stock grant based on the
enterprise value realized by Praxair, Inc. from an initial pubic
offering of the Chicago Bridge & Iron Company. The amount of the
grant will be three quarters (3/4) of one (1) percent (.75%) of the
enterprise value received by Praxair. An example of the calculation:
Value Realized by Praxair Minimum Value of Grant
--------------------------- ----------------------
200 Million $1,500,000
250 Million $1,875,000
300 Million $2,225,000
This significant reward is intended to recognize the importance of
your individual contribution to a successful initial public offering initiative.
These restricted shares will become vested to you, free of any restrictions, on
the third anniversary of the grant date subject to your continued employment
through that date.
INCOME SECURITY
---------------
In the event of a sale of Chicago Bridge & Iron which results in your
termination, or a significant reduction in your level of
responsibility, during your first two (2) years following the
transaction, you will be eligible to receive a lump sum payment equal
to $1,000,000.00. This payment will be made to you within thirty (30)
days of your separation.
In the event that Praxair, Inc. chooses to pursue a disposition
alternative other than the sale or Initial Public Offering of the
Chicago Bridge & Iron Company, Praxair will design a compensation
vehicle which will provide a value equivalent to the restricted stock
you would have received from an I.P.O.
RELOCATION
----------
You will be eligible to participate in the Chicago Bridge & Iron
relocation program which includes a home purchase provision. Details
of this program have been faxed to you for review.
<PAGE>
-3-
MISCELLANEOUS
-------------
As an exception to Policy, you will receive the following executive
benefits:
. Four (4) weeks of paid vacation annually.
. Use of a company owned vehicle (American-made, full size
sedan i.e., Buick or equivalent) or an automobile allowance
of $500.00 per month.
. We will work with you to obtain a preexisting condition
waiver from our health care plan in order to provide coverage
for Brian's impending surgery.
. The company will provide a country club membership and dues
to facilitate your business entertainment needs.
. Effective on your start date, you will become a member of the
Interim Board of Directors for CB&I. The Board is comprised
of Praxair and CB&I employees and was established to provide
for the effective management of the business prior to a sale
or I.P.O.
The make up of the Board after an I.P.O. has not been determined.
However, should it be decided that the Board will have more than one
internal member, I will recommend that you be selected for that
position.
Under separate cover, you have received materials which describe the
benefit programs in which you will be eligible to participate. As discussed,
these programs are in transition and you will be advised of any new or revised
plans as information becomes available.
<PAGE>
-4-
This offer is contingent upon successful completion of a company
required drug test which must be taken prior to your start date. Please contact
my office as soon as possible to schedule this test. I look forward to your
affirmative response no later than Friday, August 30. If you have any questions
regarding this offer, please do not hesitate to call.
Sincerely,
/s/ Gerald M. Glenn
-------------------
Gerald M. Glenn
Chief Executive Officer &
President
cc: Stephen Duffy
Enclosures
ACCEPTED: /s/ Timothy Wiggins
----------------------
Mr. Timothy Wiggins
<PAGE>
Chicago Bridge & Iron Company
1501 North Division Street
Plainfield, Illinois 60544-8984
November 7, 1996
Mr. Robert H. Wolfe
3373 Faring Road
Mountain Brook, AL 35223
Dear Bob:
I am pleased to modify our offer to you for the position of Vice
President and General Counsel of the Chicago Bridge & Iron Company located in
Plainfield, Illinois.
Your base salary in this position will be $175,000 per year. In
addition, in 1996, you will be eligible for an incentive bonus based on
performance. While the amount is discretionary in nature, you will be
guaranteed a minimum payment of $5,000.00.
In addition to a base salary and bonus, you will be eligible to
participate in the programs listed below. Many of these programs are currently
under development and specific details are not yet available. However, the
information listed below is intended to provide a conceptual framework for this
offer of employment.
INCENTIVE COMPENSATION
----------------------
For the year 1997, you will participate in a yet to be determined
short-term incentive compensation program with a targeted bonus of net
less than 25% of base pay. Target bonus is defined as the level of
bonus payout which results from average company and individual
performance.
RESTRICTED STOCK
----------------
You will be eligible to receive a restricted stock grant based on the
enterprise value realized by Praxair, Inc., from an initial public
offering of the
<PAGE>
-2-
Chicago Bridge & Iron Company. The amount of the grant will be one
quarter (1/4) of one (1) percent (.25%) of the enterprise value
received by Praxair. An example of the calculation:
Value Realized by Praxair Minimum Value of Grant
--------------------------- ----------------------
200 Million $500,000
250 Million $625,000
300 Million $750,000
This significant reward is intended to recognize the importance of
your individual contribution to a successful initial public offering
initiative. These restricted shares will become vested to you, free
of any restrictions, on the third anniversary of the grant date
subject to your continued employment through that date.
INCOME SECURITY
---------------
In the event of a sale of Chicago Bridge & Iron which results in your
termination, a reduction in pay or benefits, relocation of over 50
miles, or a significant reduction in your level of responsibility or
job status, during your first two (2) years following the transaction,
you will be eligible to receive a lump sum payment equal to $750,000.
This payment will be made to you within thirty (30) days of your
separation.
In the event that Praxair, Inc. chooses to pursue a disposition
alternative other than an Initial Public Offering, Praxair will design
a compensation vehicle which will provide incentive to maximize their
value realization. You will be a participant in the program.
RELOCATION
----------
You will be eligible to participate in the Chicago Bridge & Iron
relocation program which includes a home purchase provision. Details
of this program are enclosed for your review.
<PAGE>
-3-
MISCELLANEOUS
-------------
As an exception to Policy, you will receive the following executive
benefits:
. Use of a company owned vehicle (American-made, full-size
sedan, i.e., Buick or equivalent) or an automobile allowance
of $500.00 per month.
Also enclosed are materials which describe the benefit programs in
which you will be eligible to participate. As discussed, these programs are in
transition and you will be advised of any new or revised plans as information
becomes available.
This offer is contingent upon successful completion of a company
required drug test which must be taken prior to your start date. Please contact
my office as soon as possible to schedule this test. I look forward to your
affirmative response no later than November 11, 1996. If you have any questions
regarding this offer, please do not hesitate to call.
Sincerely,
/s/ Gerald M. Glenn
------------------------
Gerald M. Glenn
Chief Executive Officer &
President
cc: Stephen Duffy
Enclosures
ACCEPTED: /S/ ROBERT H. WOLFE
-------------------
Robert H. Wolfe
<PAGE>
[LETTERHEAD OF PRAXAIR, INC.]
October 9, 1996
Mr. C. David Bassett
815 Jonesville Road
Simpsonville, SC 29681
Dear David:
The following letter has been revised to reflect our discussions regarding your
offer of employment.
I am pleased to offer you the position of Vice President Engineering,
Fabrication and Logistics for the Chicago Bridge & Iron Company located in
Plainfield, Illinois.
Your base salary in this position will be $100,000 per year. This rate
recognizes the fact that you will devote approximately 60% of normal business
hours to this position. As discussed, should your involvement require
significant additional hours (above the 1,200 hour range) those additional hours
will be compensated at the rate of $75.00 per hour. Furthermore, in 1996, you
will be eligible for an incentive bonus based on performance. While this amount
is discretionary in nature, you will be guaranteed a minimum payment of $15,000.
In addition to a base salary and bonus, you will be eligible to participate in
the programs listed below. As we have discussed, many of these programs are
currently under development and specific details are not yet available.
However, the information listed below is intended to provide a conceptual
framework for this offer of employment.
INCENTIVE COMPENSATION
----------------------
For the year 1997, you will participate in a yet to be determined short-
term incentive compensation program with a targeted bonus of not less
than 40% of base pay. Target bonus is defined as the level of bonus
payout which results from average company and individual performance.
RESTRICTED STOCK
----------------
You will be eligible to receive a restricted stock grant based on the
enterprise value realized by Praxair, Inc. from an initial public
offering of the Chicago Bridge & Iron Company. The amount of the grant
will be one eighth of one (1) percent or .0125 of the enterprise value
received by Praxair. An example of the calculation:
Value Realized by Praxair Minimum Value of Grant
------------------------- ----------------------
200 Million $250,000
250 Million $312,500
300 Million $375,000
<PAGE>
Mr. C. David Bassett
October 9, 1996
Page Two
This significant reward is intended to recognize the importance of your
individual contribution to a successful initial public offering
initiative. These restricted shares will become vested to you, free of
any restrictions, January 1, 1999.
MISCELLANEOUS
-------------
. It is understood that you will retain your principal residence in
South Carolina. During your employment you will be provided with an
appropriate two bedroom apartment in the Chicago area, as well as the
use of a company provided automobile. In addition, you will be
provided with round-trip air fare to your home location on an as
needed basis (not to exceed two trips per month).
. You will be eligible to receive a pre-existing condition waiver from
our Health Care Plan for expenses related to your medical condition
(adult diabetes). Normal coverage will apply.
Enclosed are materials which describe the benefit programs in which you will be
eligible to participate. As discussed, these programs are in transition and you
will be advised of any new or revised plans as information becomes available.
This offer is contingent upon successful completion of a company required drug
test which must be taken prior to your start date. Please contact my office as
soon as possible to schedule this test. I look forward to your affirmative
response no later than Tuesday, October 15. If you have any questions regarding
this offer, please do not hesitate to call.
Sincerely,
/s/ Gerald M. Glenn
Gerald M. Glenn
Chief Executive Officer & President
cc: Stephen Duffy
Enclosures
ACCEPTED: /s/ C. David Bassett
----------------------
Mr. C. David Bassett
Oct. 14, 1996
<PAGE>
EXHIBIT 10.10
January 31, 1997
Mr. Thomas L. Aldinger
501 Devon Drive
Burr Ridge, IL 60521
Change of Control Severance Agreement
-------------------------------------
Dear Mr. Aldinger:
Chicago Bridge & Iron Company (the "Company") is a wholly owned
subsidiary of Praxair, Inc. (the "Parent"). The Parent is contemplating the
possible direct or indirect sale of all or a substantial part of its interests
in the Company. The Company recognizes that members of senior management may
become concerned about the effect of such action on their job and financial
security. The Company considers the maintenance of a sound and vital management
to be essential to protecting and enhancing the best interests of the Company
and its Parent. Accordingly, the Board of Directors of the Company has
determined to enter into this agreement (your "Agreement") to provide you with
severance benefits in the event your employment with the Company terminates
following a Change of Control (as defined below) under certain circumstances.
The purpose of entering into this Agreement is to induce you to
remain in the employ of the Company pending and after any direct or indirect
sale by the Parent of the Company or an intermediate holding corporation to
which the Parent has transferred the majority of the Company's stock, measured
by either or both vote and value (the "Holding Corporation") to an unrelated
third party or the consummation of an initial public offering ("IPO") for the
Company's stock or the stock of the Holding Corporation. Therefore, in
consideration of your continued employment with the Company under these
circumstances, the Company and you agree as follows:
1. Termination Benefits.
--------------------
(a) Basic Benefits. In the event your employment with the
--------------
Company and any subsidiary of the Company terminates by reason of a Qualifying
Termination within two years after a Change of Control, you shall receive,
within thirty days after your employment terminates, a lump sum amount equal to
One Million Five Hundred Thousand Dollars ($1,500,000.00). In addition, if your
employment with the Company and any subsidiary by which you are employed is
terminated by the Company or any such subsidiary for any reason (other than your
willful misconduct or gross negligence in the performance of your duties as an
<PAGE>
employee which results in a material detriment to either the Company or the
Holding Corporation) within six months prior
<PAGE>
to the occurrence of a Change of Control, you shall be paid the lump sum
referred to in the immediately preceding sentence, minus the gross amount of any
severance benefits otherwise paid to you, within ten days following such Change
of Control.
(b) Outplacement. In the event of a Qualifying Termination
------------
(or a termination of your employment prior to a Change of Control with
respect to which you are entitled to receive a payment under Section 1(a)
of this Agreement), the Company agrees that, upon a written request from
you, it will engage on your behalf an outplacement or similar firm of
your choice to provide you with customary services and support in seeking
other appropriate employment.
(c) Certain Further Payments.
------------------------
(i) Additional Payments in Respect of Excise Taxes. In the
----------------------------------------------
event that a Change of Control occurs at the time that either the Company or the
Holding Corporation has a class of equity securities registered under Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any
amount or benefit paid or distributed to you pursuant to this Agreement, taken
together with any amounts or benefits otherwise paid or distributed to you, are
or become subject to the tax (the "Excise Tax") imposed under Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), or any similar tax
that may hereafter be imposed, the Company shall pay you, at the same time as it
pays the severance benefit described above, an additional amount (the "Tax
Reimbursement Payment") such that the net amount retained by you with respect to
such Covered Payments, after deduction of any Excise Tax on the Covered Payments
and any Federal, state and local income or employment tax and Excise Tax on the
Tax Reimbursement Payment provided for by this Section 1(b), but before
deduction for any Federal, state or local income or employment tax withholding
on such Covered Payments, shall be equal to the amount of the Covered Payments.
(ii) Calculation of the Excise Tax. For purposes of
-----------------------------
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax,
(A) all "parachute payments" in excess of the "base amount"
(as defined under Section 280G(b)(3) of the Code) shall be treated as
subject to the Excise Tax, unless, and except to the extent that, in the
good faith judgment of the Company's independent certified public
accountants appointed prior to the Change of Control or tax counsel
selected by such Accountants (the "Accountants"), the Company has a
reasonable basis to conclude that such Covered Payments (in whole or in
part) represent reasonable compensation for personal services actually
rendered (within
3
<PAGE>
the meaning of Section 280G(b)(4)(B) of the Code) in
excess of the "base amount," or such "parachute payments" are otherwise
not subject to such Excise Tax, and
(B) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accountants in accordance
with the principles of Section 280G of the Code.
(iii) Calculation of the Tax Reimbursement Payment. For
--------------------------------------------
purposes of determining the amount of the Tax Reimbursement Payment, you shall
be deemed to pay:
(A) Federal income taxes at the highest applicable marginal
rate of Federal income taxation for the calendar year in which the Tax
Reimbursement Payment is to be made, and
(B) any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the calendar year in
which the Tax Reimbursement Payment is to be made, net of the maximum
reduction in Federal income taxes which could be obtained from the
deduction of such state or local taxes if paid in such year.
(d) Adjustments to Tax Reimbursement Payment. In the event
----------------------------------------
that the Excise Tax is subsequently determined by the Accountants or pursuant to
any proceeding or negotiations with the Internal Revenue Service to be less than
the amount taken into account hereunder in calculating the Tax Reimbursement
Payment made, you shall repay to the Company, at the time that the amount of
such reduction in the Excise Tax is finally determined, the portion of such
prior Tax Reimbursement Payment that would not have been paid if such Excise Tax
had been applied in initially calculating such Tax Reimbursement Payment, plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any
portion of the Tax Reimbursement Payment to be refunded to the Company has been
paid to any Federal, state or local tax authority, repayment thereof shall not
be required until actual refund or credit of such portion has been made to you.
You and the Company shall mutually agree upon the course of action to be pursued
if your good faith claim for refund or credit is denied; provided that the
--------
Company shall bear the cost of any expenses incurred which are related to
pursuing any recovery of any amount paid in respect of the Excise Tax.
In the event that the Excise Tax is later determined by the
Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to exceed the
4
<PAGE>
amount taken into account hereunder at the time the Tax Reimbursement Payment is
made (including, but not limited to, by reason of any payment the existence or
amount of which cannot be determined at the time of the Tax Reimbursement
Payment), the Company shall make an additional Tax Reimbursement Payment in
respect of such excess (plus any interest or penalty payable with respect to
such excess) at the time that the amount of such excess is finally determined.
2. Definitions.
-----------
(a) Change of Control When the Company or the Holding
-------------------------------------------------
Corporation is Not Public. At any time that neither the Company nor the Holding
- -------------------------
Corporation has any equity securities registered under Section 12 of the
Exchange Act, a "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such
terms are used in Section 13 of the Exchange Act), other than the Parent,
the Holding Corporation, the Company or any majority-owned subsidiary of
either the Parent, the Holding Corporation or the Company, becomes the
"beneficial owner" (as such term is used in Section 13 of the Exchange
Act) of 50% or more of either (x) the total number of the common shares
of the Holding Corporation or the Company then outstanding or (y) the
voting power of all of the voting securities of the Holding Corporation
or the Company then outstanding; or
(ii) upon the consummation of (A) any merger or other
business combination of the Company or the Holding Corporation with or
into another company pursuant to which the stockholders of the Company or
the Holding Corporation, as the case may be, do not own, immediately
after the transaction, more than 50% of the voting power and the value of
the stock of the company that survives, or (B) the sale, exchange or
other disposition of all or substantially all of the assets of the
Company or the Holding Corporation.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have
occurred by reason of a transfer of the Company's stock to the Holding
Corporation or any public offering of the equity securities of the Company or
Holding Corporation, so long as, immediately following such transfer or the
consummation of such offering, no person or group (as such terms are used in
Section 13 of the Exchange Act) other than the Parent or one of its majority
owned subsidiaries owns, directly or indirectly, more than 25% of the Company's
or the Holding Corporation's equity securities.
5
<PAGE>
(b) Change of Control When the Company or the Holding
-------------------------------------------------
Corporation is Public. At any time one or more classes of the equity securities
- ---------------------
of the Company or the Holding Corporation are registered under Section 12 of the
Exchange Act, a "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such
terms are used in Section 13 of the Exchange Act), other than the Parent,
the Holding Corporation, the Company or any majority owned subsidiary of
the Parent, the Holding Corporation or the Company, becomes the
"beneficial owner" (as such term is used in Section 13 of the Exchange
Act) of 25% or more of the total voting power of the Company's or the
Holding Corporation's outstanding securities;
(ii) upon the consummation of (A) any merger or other
business combination of the Company or the Holding Corporation with or
into another company pursuant to which the stockholders of the Company or
the Holding Corporation as the case may be, do not own, immediately after
the transaction, more than 50% of the voting power and the value of the
stock of the Company that survives, or (B) the sale, exchange or other
disposition of all or substantially all of the assets of the Company or
the Holding Corporation; or
(iii) if, during any period of two years or less,
individuals who at the beginning of such period constituted the Board of
Directors of the Company or the Holding Corporation, as the case may be,
cease for any reason to constitute at least a majority thereof; provided
--------
that any new director who is elected to, or nominated for election to,
the Board of Directors with the approval of at least 75% of the directors
then still in office who were directors at the beginning of the period
shall be treated as though having been a director at the beginning of
such period.
(c) "Qualifying Termination" means the termination of your
employment with the Company and any of its subsidiaries by which you are
employed (i) by the Company or any such subsidiary for any reason other than
your willful misconduct or gross negligence in the performance of your duties as
an employee which results in a material detriment to the Company or the Holding
Corporation or (ii) by you within 180 days following the occurrence of any of
the following events (without your prior written consent):
6
<PAGE>
(A) any significant reduction in your positions,
duties, titles, responsibilities and status with the Company and its
subsidiaries from those in effect immediately prior to such Change of
Control;
(B) a reduction in your base salary, a reduction in
your annual bonus opportunity or a material reduction in the aggregate
value of your participation in the Company's employee benefits programs,
as each was in effect immediately prior to such Change of Control; or
(C) your principal place of employment is moved to a
location more than 50 miles from your principal place of employment
immediately prior to such Change of Control or you are required in the
performance of your duties to travel to an extent substantially more
burdensome than your travel obligations immediately prior to such Change
of Control.
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
3. Miscellaneous.
-------------
(a) Arbitration; Related Expenses. Any dispute or controversy
-----------------------------
arising under or in connection with this Agreement shall be settled exclusively
by arbitration held in accordance with the rules of the American Arbitration
Association pertaining to the resolution of employment disputes. Any such
arbitration shall be held in Chicago, Illinois or such other location which the
parties have mutually agreed to in writing. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The Company shall pay on a
current basis all legal expenses (including attorneys' fees) incurred by you in
connection with such arbitration, subject to your obligation to repay such
amounts, plus interest at the short-term annual Applicable Federal Rate (as
determined under Section 1274(b) of the Code as in effect on the date your
employment terminates), if you should not prevail as to at least one material
issue adjudicated in such proceeding.
(b) No Offset; No Mitigation. The Company's obligation to
------------------------
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim,
7
<PAGE>
recoupment, defense or other right which the Company may have against you or
others whether by reason of your subsequent employment or otherwise. You shall
not be obligated to mitigate any damages you incur by reason of any Qualifying
Termination and the amounts payable hereunder shall not be reduced by any
amounts received by you as a result of your employment or self-employment
following your termination hereunder.
(c) Entire Obligation of Company. In the event your
----------------------------
employment with the Company and any subsidiary of the Company by which you are
employed terminates following a Change of Control, the amounts payable to you
hereunder and any vested amounts or benefits owing to you under the Company's
otherwise applicable employee benefit plans and programs and any accrued
vacation pay not yet paid, shall constitute the entire obligation of the Company
and its affiliates to you. Payment or other satisfaction thereof shall be
contingent upon your execution of a release in favor of the Company
substantially in the form attached hereto as Exhibit A, stating that the
payments and other benefits referred to in the immediately preceding sentence
constitute full settlement of any claim under law or in equity that you might
otherwise assert against the Company or any of its subsidiaries on account of
such termination.
(d) Employment at Will. This Agreement shall neither obligate
------------------
the Company or any subsidiary of the Company to continue you in its employ (or
to employ you in any particular office or to perform any specified
responsibility) nor obligate you to continue in the employ of the Company or any
subsidiary of the Company.
(e) Successors. This Agreement shall be binding upon and
----------
inure to the benefit of you, your estate and the Company and any successor of
the Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by you.
(f) Governing Law. This Agreement shall be governed by the
-------------
laws of the State of Illinois, applied without reference to principles of
conflict of laws.
(g) Severability. If any provision of this contract as
------------
applied to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
of this Agreement.
(h) Waiver. No provision of this Agreement may be modified,
------
waived or discharged unless such modification, waiver or discharge is agreed to
in a writing signed by you and such officer as may be specifically designated by
the Board of Directors of the Company or a duly authorized Committee thereof. No
waiver by either party hereto at any time of any breach
8
<PAGE>
by the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of any other condition or
provision at any time.
(i) Entire Agreement. This Agreement contains the entire
----------------
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
If you are in agreement with the foregoing, please so indicate
by signing and returning to the Company the enclosed copy of this letter,
whereupon this letter shall constitute a binding agreement between you and the
Company.
Very truly yours,
CHICAGO BRIDGE & IRON COMPANY
By________________________________
Agreed:
_______________________________
Employee
9
<PAGE>
FULL AND FINAL RELEASE
Thomas L. Aldinger (hereinafter "EMPLOYEE"), in exchange for
sufficient consideration, on behalf of himself, his family, his heirs and
assigns, irrevocably and unconditionally releases Chicago Bridge & Iron Company,
any parent corporations, any subsidiary corporations, any affiliated entities
whether or not incorporated, the employees, agents, officers, directors, and
shareholders of all such entities and any person or entity which may succeed to
the rights and liabilities of such persons or entities by assignment or
otherwise (hereinafter "CBI"), from all claims, controversies, liabilities,
demands, causes of action, debts, obligations, promises, acts, agreements,
rights of contribution and/or indemnification, and damages of whatever kind or
nature, whether known or unknown, suspected or unsuspected, foreseen or
unforeseen, liquidated or contingent, actual or potential, joint or individual,
that he has had or now has, based on any and all aspects of EMPLOYEE'S
employment with CBI or his separation from that employment, including, but not
limited to, all claims arising under the Age Discrimination in Employment Act;
Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the
Equal Pay Act; the Americans with Disabilities Act; the Employee Retirement
Income Security Act of 1974; or any federal, state or local laws or regulations
relating to employment or benefits associated with employment, any and all
claims for breach of express or implied contract or the covenant of good faith
and fair dealing (whether written or oral), all claims for retaliation or
violation of public policy, breach of promise, detrimental reliance or tort
(e.g., intentional infliction of emotional distress, defamation, assault,
battery, false imprisonment, wrongful termination, interference with contractual
or advantageous relationship, etc.), whether based on common law or otherwise;
claims for emotional distress, mental anguish, personal injury, loss of
consortium, and any and all claims that may be asserted on EMPLOYEE'S behalf by
others. The foregoing list is meant to be illustrative rather than inclusive.
This release does not preclude EMPLOYEE from seeking to obtain any benefits to
which he may be entitled under any employee welfare benefit plan or retirement
or profit sharing plan sponsored by CBI, but his entitlement to such benefits,
if any, will be determined in accordance with the plan documents.
If I initiate or participate in any legal action in violation
of this release, CBI may reclaim any amounts paid in respect of my termination,
without waiving the release granted herein, and terminate any benefits or
payments that are due to me, in addition to any other remedies. This release
shall be construed in accordance with the laws of the State of Illinois,
applicable to contracts made and entirely to be performed therein.
EMPLOYEE ACKNOWLEDGES AND AGREES THAT THIS RELEASE IS A FULL
AND FINAL BAR TO ANY AND ALL CLAIM(S) OF ANY TYPE THAT HE MAY NOW HAVE AGAINST
CBI. EMPLOYEE FURTHER ACKNOWLEDGES THAT HE HAS BEEN GIVEN FORTY-FIVE (45) DAYS
TO CONSIDER WHETHER TO EXECUTE THIS RELEASE, THAT HE HAS SEVEN (7) DAYS TO
RESCIND THIS RELEASE AFTER ITS EXECUTION, WHICH SHALL BE EFFECTED BY WRITTEN
NOTICE TO CBI DELIVERED WITHIN SUCH SEVEN (7) DAY PERIOD, AND THAT HE HAS BEEN
ADVISED THAT HE SHOULD SPEAK WITH COUNSEL REGARDING THE SIGNIFICANCE OF THIS
RELEASE.
10
<PAGE>
Dated:____________________ Signed:_____________________
11
<PAGE>
January 31, 1997
Mr. Charles D. Bassett
815 Jonesville Road
Simpsonville, SC 29681
Change of Control Severance Agreement
-------------------------------------
Dear Mr. Bassett:
Chicago Bridge & Iron Company (the "Company") is a wholly owned
subsidiary of Praxair, Inc. (the "Parent"). The Parent is contemplating the
possible direct or indirect sale of all or a substantial part of its interests
in the Company. The Company recognizes that members of senior management may
become concerned about the effect of such action on their job and financial
security. The Company considers the maintenance of a sound and vital management
to be essential to protecting and enhancing the best interests of the Company
and its Parent. Accordingly, the Board of Directors of the Company has
determined to enter into this agreement (your "Agreement") to provide you with
severance benefits in the event your employment with the Company ter-minates
following a Change of Control (as defined below) under certain circumstances.
The purpose of entering into this Agreement is to induce you to
remain in the employ of the Company pending and after any direct or indirect
sale by the Parent of the Company or an intermediate holding corporation to
which the Parent has transferred the majority of the Company's stock, measured
by either or both vote and value (the "Holding Corporation") to an unrelated
third party or the consummation of an initial public offering ("IPO") for the
Company's stock or the stock of the Holding Corporation. Therefore, in
consideration of your continued employment with the Company under these
circumstances, the Company and you agree as follows:
1. Termination Benefits.
--------------------
(a) Basic Benefits. In the event your employment with the
--------------
Company and any subsidiary of the Company terminates by reason of a Qualifying
Termination within two years after a Change of Control, you shall receive,
within thirty days after your employment terminates, a lump sum amount equal to
Three Hundred Seventy-Five Thousand Dollars ($375,000.00). In addition, if your
employment with the Company and any subsidiary by which you are employed is
terminated by the Company or any such subsidiary for any reason (other than your
willful misconduct or gross negligence in the performance of your duties as an
<PAGE>
employee which results in a material detriment to either the Company or the
Holding Corporation) within six months prior
<PAGE>
to the occurrence of a Change of Control, you shall be paid the lump sum
referred to in the immediately preceding sentence, minus the gross amount of any
severance benefits otherwise paid to you, within ten days following such Change
of Control.
(b) Outplacement. In the event of a Qualifying Termination (or a
------------
termination of your employment prior to a Change of Control with respect to
which you are entitled to receive a payment under Section 1(a) of this
Agreement), the Company agrees that, upon a written request from you, it will
engage on your behalf an outplacement or similar firm of your choice to provide
you with customary services and support in seeking other appropriate employment.
(c) Certain Further Payments.
------------------------
(i) Additional Payments in Respect of Excise Taxes. In the
----------------------------------------------
event that a Change of Control occurs at the time that either the Company or the
Holding Corporation has a class of equity securities registered under Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any
amount or benefit paid or distributed to you pursuant to this Agreement, taken
together with any amounts or benefits otherwise paid or distributed to you, are
or become subject to the tax (the "Excise Tax") imposed under Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), or any similar tax
that may hereafter be imposed, the Company shall pay you, at the same time as it
pays the severance benefit described above, an additional amount (the "Tax
Reimbursement Payment") such that the net amount retained by you with respect to
such Covered Payments, after deduction of any Excise Tax on the Covered Payments
and any Federal, state and local income or employment tax and Excise Tax on the
Tax Reimbursement Payment provided for by this Section 1(b), but before
deduction for any Federal, state or local income or employment tax withholding
on such Covered Payments, shall be equal to the amount of the Covered Payments.
(ii) Calculation of the Excise Tax. For purposes of determining
-----------------------------
whether any of the Covered Payments will be subject to the Excise Tax and the
amount of such Excise Tax,
(A) all "parachute payments" in excess of the "base amount"
(as defined under Section 280G(b)(3) of the Code) shall be treated as
subject to the Excise Tax, unless, and except to the extent that, in
the good faith judgment of the Company's independent certified public
accountants appointed prior to the Change of Control or tax counsel
selected by such Accountants (the "Accountants"), the Company has a
reasonable basis to conclude that such Covered Payments (in whole or
in part) represent reasonable compensation for personal services
actually rendered (within
3
<PAGE>
the meaning of Section 280G(b)(4)(B) of the Code) in excess of the
"base amount," or such "parachute payments" are otherwise not subject
to such Excise Tax, and
(B) the value of any non-cash benefits or any deferred payment
or benefit shall be determined by the Accountants in accordance
with the principles of Section 280G of the Code.
(iii) Calculation of the Tax Reimbursement Payment. For purposes
--------------------------------------------
of determining the amount of the Tax Reimbursement Payment, you shall be deemed
to pay:
(A) Federal income taxes at the highest applicable marginal
rate of Federal income taxation for the calendar year in which the
Tax Reimbursement Payment is to be made, and
(B) any applicable state and local income taxes at the highest
applicable marginal rate of taxation for the calendar year in which
the Tax Reimbursement Payment is to be made, net of the maximum
reduction in Federal income taxes which could be obtained from the
deduction of such state or local taxes if paid in such year.
(d) Adjustments to Tax Reimbursement Payment. In the event
----------------------------------------
that the Excise Tax is subsequently determined by the Accountants or pursuant to
any proceeding or negotiations with the Internal Revenue Service to be less than
the amount taken into account hereunder in calculating the Tax Reimbursement
Payment made, you shall repay to the Company, at the time that the amount of
such reduction in the Excise Tax is finally determined, the portion of such
prior Tax Reimbursement Payment that would not have been paid if such Excise Tax
had been applied in initially calculating such Tax Reimbursement Payment, plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any
portion of the Tax Reimbursement Payment to be refunded to the Company has been
paid to any Fed-eral, state or local tax authority, repayment thereof shall not
be required until actual refund or credit of such portion has been made to you.
You and the Company shall mutually agree upon the course of action to be pursued
if your good faith claim for refund or credit is denied; provided that the
--------
Company shall bear the cost of any expenses incurred which are related to
pursuing any recovery of any amount paid in respect of the Excise Tax.
In the event that the Excise Tax is later determined by the
Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to exceed the
4
<PAGE>
amount taken into account hereunder at the time the Tax Reimbursement Payment is
made (including, but not limited to, by reason of any payment the existence or
amount of which cannot be determined at the time of the Tax Reimbursement
Payment), the Company shall make an additional Tax Reimbursement Payment in
respect of such excess (plus any interest or penalty payable with respect to
such excess) at the time that the amount of such excess is finally determined.
2. Definitions.
-----------
(a) Change of Control When the Company or the Holding
Corporation is Not Public. At any time that neither the Company nor the Holding
Corporation has any equity securities registered under Section 12 of the
Exchange Act, a "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such terms are
used in Section 13 of the Exchange Act), other than the Parent, the
Holding Corporation, the Company or any majority-owned subsidiary of
either the Parent, the Holding Corporation or the Company, becomes the
"beneficial owner" (as such term is used in Section 13 of the Exchange
Act) of 50% or more of either (x) the total number of the common shares
of the Holding Corporation or the Company then outstanding or (y) the
voting power of all of the voting securities of the Holding Corporation
or the Company then outstanding; or
(ii) upon the consummation of (A) any merger or other business
combination of the Company or the Holding Corporation with or into
another company pursuant to which the stockholders of the Company or
the Holding Corporation, as the case may be, do not own, immediately
after the transaction, more than 50% of the voting power and the value
of the stock of the company that survives, or (B) the sale, exchange or
other disposition of all or substantially all of the assets of the
Company or the Holding Corporation.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have
occurred by reason of a transfer of the Company's stock to the Holding
Corporation or any public offering of the equity securities of the Company or
Holding Corporation, so long as, immediately following such transfer or the
consummation of such offering, no person or group (as such terms are used in
Section 13 of the Exchange Act) other than the Parent or one of its majority
owned subsidiaries owns, directly or indirectly, more than 25% of the Company's
or the Holding Corporation's equity securities.
5
<PAGE>
(b) Change of Control When the Company or the Holding Corporation
-------------------------------------------------------------
is Public. At any time one or more classes of the equity securities of the
- ---------
Company or the Holding Corporation are registered under Section 12 of the
Exchange Act, a "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such terms are
used in Section 13 of the Exchange Act), other than the Parent, the
Holding Corporation, the Company or any majority owned subsidiary of
the Parent, the Holding Corporation or the Company, becomes the
"beneficial owner" (as such term is used in Section 13 of the Exchange
Act) of 25% or more of the total voting power of the Company's or the
Holding Corporation's outstanding securities;
(ii) upon the consummation of (A) any merger or other business
combination of the Company or the Holding Corporation with or into
another company pursuant to which the stockholders of the Company or
the Holding Corporation as the case may be, do not own, immediately
after the transaction, more than 50% of the voting power and the value
of the stock of the Company that survives, or (B) the sale, exchange or
other disposition of all or substantially all of the assets of the
Company or the Holding Corporation; or
(iii) if, during any period of two years or less, individuals
who at the beginning of such period constituted the Board of Directors
of the Company or the Holding Corporation, as the case may be, cease
for any reason to constitute at least a majority thereof; provided that
--------
any new director who is elected to, or nominated for election to, the
Board of Directors with the approval of at least 75% of the directors
then still in office who were directors at the beginning of the period
shall be treated as though having been a director at the beginning of
such period.
(c) "Qualifying Termination" means the termination of your
employment with the Company and any of its subsidiaries by which you are
employed (i) by the Company or any such subsidiary for any reason other than
your willful misconduct or gross negligence in the performance of your duties as
an employee which results in a material detriment to the Company or the Holding
Corporation or (ii) by you within 180 days following the occurrence of any of
the following events (without your prior written consent):
6
<PAGE>
(A) any significant reduction in your positions, duties, titles,
responsibilities and status with the Company and its subsidiaries from
those in effect immediately prior to such Change of Control;
(B) a reduction in your base salary, a reduction in your annual
bonus opportunity or a material reduction in the aggregate value of
your participation in the Company's employee benefits programs, as each
was in effect immediately prior to such Change of Control; or
(C) your principal place of employment is moved to a location
more than 50 miles from your principal place of employment immediately
prior to such Change of Control or you are required in the performance
of your duties to travel to an extent substantially more burdensome
than your travel obligations immediately prior to such Change of
Control.
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
3. Miscellaneous.
-------------
(a) Arbitration; Related Expenses. Any dispute or controversy
-----------------------------
arising under or in connection with this Agreement shall be settled exclusively
by arbitration held in accordance with the rules of the American Arbitration
Association pertaining to the resolution of employment disputes. Any such
arbitration shall be held in Chicago, Illinois or such other location which the
parties have mutually agreed to in writing. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The Company shall pay on a
current basis all legal expenses (including attorneys' fees) incurred by you in
connection with such arbitration, subject to your obligation to repay such
amounts, plus interest at the short-term annual Applicable Federal Rate (as
determined under Section 1274(b) of the Code as in effect on the date your
employment terminates), if you should not prevail as to at least one material
issue adjudicated in such proceeding.
(b) No Offset; No Mitigation. The Company's obligation to
------------------------
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim,
7
<PAGE>
recoupment, defense or other right which the Company may have against you or
others whether by reason of your subsequent employment or otherwise. You shall
not be obligated to mitigate any damages you incur by reason of any Qualifying
Termination and the amounts payable hereunder shall not be reduced by any
amounts received by you as a result of your employment or self-employment
following your termination hereunder.
(c) Entire Obligation of Company. In the event your employment
----------------------------
with the Company and any subsidiary of the Company by which you are employed
terminates following a Change of Control, the amounts payable to you hereunder
and any vested amounts or benefits owing to you under the Company's otherwise
applicable employee benefit plans and programs and any accrued vacation pay not
yet paid, shall constitute the entire obligation of the Company and its
affiliates to you. Payment or other satisfaction thereof shall be contingent
upon your execution of a release in favor of the Company substantially in the
form attached hereto as Exhibit A, stating that the payments and other benefits
referred to in the immediately preceding sentence constitute full settlement of
any claim under law or in equity that you might otherwise assert against the
Company or any of its subsidiaries on account of such termination.
(d) Employment at Will. This Agreement shall neither obligate
------------------
the Company or any subsidiary of the Company to continue you in its employ (or
to employ you in any particular office or to perform any specified
responsibility) nor obligate you to continue in the employ of the Company or any
subsidiary of the Company.
(e) Successors. This Agreement shall be binding upon and inure
----------
to the benefit of you, your estate and the Company and any successor of the
Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by you.
(f) Governing Law. This Agreement shall be governed by the laws
-------------
of the State of Illinois, applied without reference to principles of conflict of
laws.
(g) Severability. If any provision of this contract as applied
------------
to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
of this Agreement.
(h) Waiver. No provision of this Agreement may be modified,
------
waived or discharged unless such modifica-tion, waiver or discharge is agreed to
in a writing signed by you and such officer as may be specifically designated by
the Board of Directors of the Company or a duly authorized Committee thereof. No
waiver by either party hereto at any time of any breach
8
<PAGE>
by the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of any other condition or
provision at any time.
(i) Entire Agreement. This Agreement contains the entire
----------------
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
If you are in agreement with the foregoing, please so indicate by
signing and returning to the Company the enclosed copy of this letter, whereupon
this letter shall constitute a binding agreement between you and the Company.
Very truly yours,
CHICAGO BRIDGE & IRON COMPANY
By________________________________
Agreed:
_______________________________
Employee
9
<PAGE>
FULL AND FINAL RELEASE
Charles D. Bassett (hereinafter "EMPLOYEE"), in exchange for
sufficient consideration, on behalf of himself, his family, his heirs and
assigns, irrevocably and unconditionally releases Chicago Bridge & Iron Company,
any parent corporations, any subsidiary corporations, any affiliated entities
whether or not incorporated, the employees, agents, officers, directors, and
shareholders of all such entities and any person or entity which may succeed to
the rights and liabilities of such persons or entities by assignment or
otherwise (hereinafter "CBI"), from all claims, controversies, liabilities,
demands, causes of action, debts, obligations, promises, acts, agreements,
rights of contribution and/or indemnification, and damages of whatever kind or
nature, whether known or unknown, suspected or unsuspected, foreseen or
unforeseen, liquidated or contingent, actual or potential, joint or individual,
that he has had or now has, based on any and all aspects of EMPLOYEE'S
employment with CBI or his separation from that employment, including, but not
limited to, all claims arising under the Age Discrimination in Employment Act;
Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the
Equal Pay Act; the Americans with Disabilities Act; the Employee Retirement
Income Security Act of 1974; or any federal, state or local laws or regulations
relating to employment or benefits associated with employment, any and all
claims for breach of express or implied contract or the covenant of good faith
and fair dealing (whether written or oral), all claims for retaliation or
violation of public policy, breach of promise, detrimental reliance or tort
(e.g., intentional infliction of emotional distress, defamation, assault,
battery, false imprisonment, wrongful termination, interference with contractual
or advantageous relationship, etc.), whether based on common law or otherwise;
claims for emotional distress, mental anguish, personal injury, loss of
consortium, and any and all claims that may be asserted on EMPLOYEE'S behalf by
others. The foregoing list is meant to be illustrative rather than inclusive.
This release does not preclude EMPLOYEE from seeking to obtain any benefits to
which he may be entitled under any employee welfare benefit plan or retirement
or profit sharing plan sponsored by CBI, but his entitlement to such benefits,
if any, will be determined in accordance with the plan documents.
If I initiate or participate in any legal action in violation of
this release, CBI may reclaim any amounts paid in respect of my termination,
without waiving the release granted herein, and terminate any benefits or
payments that are due to me, in addition to any other remedies. This release
shall be construed in accordance with the laws of the State of Illinois,
applicable to contracts made and entirely to be performed therein.
EMPLOYEE ACKNOWLEDGES AND AGREES THAT THIS RELEASE IS A FULL AND
FINAL BAR TO ANY AND ALL CLAIM(S) OF ANY TYPE THAT HE MAY NOW HAVE AGAINST CBI.
EMPLOYEE FURTHER ACKNOWLEDGES THAT HE HAS BEEN GIVEN FORTY-FIVE (45) DAYS TO
CONSIDER WHETHER TO EXECUTE THIS RELEASE, THAT HE HAS SEVEN (7) DAYS TO RESCIND
THIS RELEASE AFTER ITS EXECUTION, WHICH SHALL BE EFFECTED BY WRITTEN NOTICE TO
CBI DELIVERED WITHIN SUCH SEVEN (7) DAY PERIOD, AND THAT HE HAS BEEN ADVISED
THAT HE SHOULD SPEAK WITH COUNSEL REGARDING THE SIGNIFICANCE OF THIS RELEASE.
Dated:____________________ Signed:_____________________
10
<PAGE>
January 31, 1997
Mr. Stephen M. Duffy
15117 Ginger Creek Lane
Orland Park, IL 60462
Change of Control Severance Agreement
-------------------------------------
Dear Mr. Duffy:
Chicago Bridge & Iron Company (the "Company") is a wholly owned
subsidiary of Praxair, Inc. (the "Parent"). The Parent is contemplating the
possible direct or indirect sale of all or a substantial part of its interests
in the Company. The Company recognizes that members of senior management may
become concerned about the effect of such action on their job and financial
security. The Company considers the maintenance of a sound and vital management
to be essential to protecting and enhancing the best interests of the Company
and its Parent. Accordingly, the Board of Directors of the Company has
determined to enter into this agreement (your "Agreement") to provide you with
severance benefits in the event your employment with the Company ter-minates
following a Change of Control (as defined below) under certain circumstances.
The purpose of entering into this Agreement is to induce you to
remain in the employ of the Company pending and after any direct or indirect
sale by the Parent of the Company or an intermediate holding corporation to
which the Parent has transferred the majority of the Company's stock, measured
by either or both vote and value (the "Holding Corporation") to an unrelated
third party or the consummation of an initial public offering ("IPO") for the
Company's stock or the stock of the Holding Corporation. Therefore, in
consideration of your continued employment with the Company under these
circumstances, the Company and you agree as follows:
1. Termination Benefits.
--------------------
(a) Basic Benefits. In the event your employment with the
--------------
Company and any subsidiary of the Company terminates by reason of a Qualifying
Termination within two years after a Change of Control, you shall receive,
within thirty days after your employment terminates, a lump sum amount equal to
Two Hundred Forty Thousand Dollars ($240,000.00). In addition, if your
employment with the Company and any subsidiary by which you are employed is
terminated by the Company or any such subsidiary for any reason (other than your
willful misconduct or gross negligence in the performance of your duties as an
employee which
<PAGE>
results in a material detriment to either the Company or the Holding
Corporation) within six months prior
<PAGE>
to the occurrence of a Change of Control, you shall be paid the lump sum
referred to in the immediately preceding sentence, minus the gross amount of any
severance benefits otherwise paid to you, within ten days following such Change
of Control.
(b) Outplacement. In the event of a Qualifying Termination
------------
(or a termination of your employment prior to a Change of Control with respect
to which you are entitled to receive a payment under Section 1(a) of this
Agreement), the Company agrees that, upon a written request from you, it will
engage on your behalf an outplacement or similar firm of your choice to provide
you with customary services and support in seeking other appropriate employment.
(c) Certain Further Payments.
------------------------
(i) Additional Payments in Respect of Excise Taxes. In the
----------------------------------------------
event that a Change of Control occurs at the time that either the Company or the
Holding Corporation has a class of equity securities registered under Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any
amount or benefit paid or distributed to you pursuant to this Agreement, taken
together with any amounts or benefits otherwise paid or distributed to you, are
or become subject to the tax (the "Excise Tax") imposed under Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), or any similar tax
that may hereafter be imposed, the Company shall pay you, at the same time as it
pays the severance benefit described above, an additional amount (the "Tax
Reimbursement Payment") such that the net amount retained by you with respect to
such Covered Payments, after deduction of any Excise Tax on the Covered Payments
and any Federal, state and local income or employment tax and Excise Tax on the
Tax Reimbursement Payment provided for by this Section 1(b), but before
deduction for any Federal, state or local income or employment tax withholding
on such Covered Payments, shall be equal to the amount of the Covered Payments.
(ii) Calculation of the Excise Tax. For purposes of
-----------------------------
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax,
(A) all "parachute payments" in excess of the "base amount"
(as defined under Section 280G(b)(3) of the Code) shall be treated as subject to
the Excise Tax, unless, and except to the extent that, in the good faith
judgment of the Company's independent certified public accountants appointed
prior to the Change of Control or tax coun-sel selected by such Accountants (the
"Accountants"), the Company has a reasonable basis to conclude that such Covered
Payments (in whole or in part) represent reasonable compensation for personal
services actually rendered (within
3
<PAGE>
the meaning of Section 280G(b)(4)(B) of the Code) in excess of the "base
amount," or such "parachute payments" are otherwise not subject to such
Excise Tax, and
(B) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accountants in accordance
with the principles of Section 280G of the Code.
(iii) Calculation of the Tax Reimbursement Payment. For
--------------------------------------------
purposes of determining the amount of the Tax Reimbursement Payment, you shall
be deemed to pay:
(A) Federal income taxes at the highest applicable marginal
rate of Federal income taxation for the calendar year in which the Tax
Reimbursement Payment is to be made, and
(B) any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the calendar year in
which the Tax Reimbursement Payment is to be made, net of the maximum
reduction in Federal income taxes which could be obtained from the
deduction of such state or local taxes if paid in such year.
(d) Adjustments to Tax Reimbursement Payment. In the event
----------------------------------------
that the Excise Tax is subsequently determined by the Accountants or pursuant to
any proceeding or negotiations with the Internal Revenue Service to be less than
the amount taken into account hereunder in calculating the Tax Reimbursement
Payment made, you shall repay to the Company, at the time that the amount of
such reduction in the Excise Tax is finally determined, the portion of such
prior Tax Reimbursement Payment that would not have been paid if such Excise Tax
had been applied in initially calculating such Tax Reimbursement Payment, plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any
portion of the Tax Reimbursement Payment to be refunded to the Company has been
paid to any Fed-eral, state or local tax authority, repayment thereof shall not
be required until actual refund or credit of such portion has been made to you.
You and the Company shall mutually agree upon the course of action to be pursued
if your good faith claim for refund or credit is denied; provided that the
--------
Company shall bear the cost of any expenses incurred which are related to
pursuing any recovery of any amount paid in respect of the Excise Tax.
In the event that the Excise Tax is later determined by the
Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to exceed the
4
<PAGE>
amount taken into account hereunder at the time the Tax Reimbursement Payment is
made (including, but not limited to, by reason of any payment the existence or
amount of which cannot be determined at the time of the Tax Reimbursement
Payment), the Company shall make an additional Tax Reimbursement Payment in
respect of such excess (plus any interest or penalty payable with respect to
such excess) at the time that the amount of such excess is finally determined.
2. Definitions.
-----------
(a) Change of Control When the Company or the Holding
-------------------------------------------------
Corporation is Not Public. At any time that neither the Company nor the Holding
- -------------------------
Corporation has any equity securities registered under Section 12 of the
Exchange Act, a "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such
terms are used in Section 13 of the Exchange Act), other than the Parent,
the Holding Corporation, the Company or any majority-owned subsidiary of
either the Parent, the Holding Corporation or the Company, becomes the
"beneficial owner" (as such term is used in Section 13 of the Exchange
Act) of 50% or more of either (x) the total number of the common shares
of the Holding Corporation or the Company then outstanding or (y) the
voting power of all of the voting securities of the Holding Corporation
or the Company then outstanding; or
(ii) upon the consummation of (A) any merger or other
business combination of the Company or the Holding Corporation with or
into another company pursuant to which the stockholders of the Company or
the Holding Corporation, as the case may be, do not own, immediately
after the transaction, more than 50% of the voting power and the value of
the stock of the company that survives, or (B) the sale, exchange or
other disposition of all or substantially all of the assets of the
Company or the Holding Corporation.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have
occurred by reason of a transfer of the Company's stock to the Holding
Corporation or any public offering of the equity securities of the Company or
Holding Corporation, so long as, immediately following such transfer or the
consummation of such offering, no person or group (as such terms are used in
Section 13 of the Exchange Act) other than the Parent or one of its majority
owned subsidiaries owns, directly or indirectly, more than 25% of the Company's
or the Holding Corporation's equity securities.
5
<PAGE>
(b) Change of Control When the Company or the Holding
-------------------------------------------------
Corporation is Public. At any time one or more classes of the equity securities
- ---------------------
of the Company or the Holding Corporation are registered under Section 12 of the
Exchange Act, a "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such
terms are used in Section 13 of the Exchange Act), other than the Parent,
the Holding Corporation, the Company or any majority owned subsidiary of
the Parent, the Holding Corporation or the Company, becomes the
"beneficial owner" (as such term is used in Section 13 of the Exchange
Act) of 25% or more of the total voting power of the Company's or the
Holding Corporation's outstanding securities;
(ii) upon the consummation of (A) any merger or other
business combination of the Company or the Holding Corporation with or
into another company pursuant to which the stockholders of the Company or
the Holding Corporation as the case may be, do not own, immediately after
the transaction, more than 50% of the voting power and the value of the
stock of the Company that survives, or (B) the sale, exchange or other
disposition of all or substantially all of the assets of the Company or
the Holding Corporation; or
(iii) if, during any period of two years or less,
individuals who at the beginning of such period constituted the Board of
Directors of the Company or the Holding Corporation, as the case may be,
cease for any reason to constitute at least a majority thereof; provided
--------
that any new director who is elected to, or nominated for election to,
the Board of Directors with the approval of at least 75% of the directors
then still in office who were directors at the beginning of the period
shall be treated as though having been a director at the beginning of
such period.
(c) "Qualifying Termination" means the termination of your
employment with the Company and any of its subsidiaries by which you are
employed (i) by the Company or any such subsidiary for any reason other than
your willful misconduct or gross negligence in the performance of your duties as
an employee which results in a material detriment to the Company or the Holding
Corporation or (ii) by you within 180 days following the occurrence of any of
the following events (without your prior written consent):
6
<PAGE>
(A) any significant reduction in your positions,
duties, titles, responsibilities and status with the Company and its
subsidiaries from those in effect immediately prior to such Change of
Control;
(B) a reduction in your base salary, a reduction in
your annual bonus opportunity or a material reduction in the aggregate
value of your participation in the Company's employee benefits programs,
as each was in effect immediately prior to such Change of Control; or
(C) your principal place of employment is moved to a
location more than 50 miles from your principal place of employment
immediately prior to such Change of Control or you are required in the
performance of your duties to travel to an extent substantially more
burdensome than your travel obligations immediately prior to such Change
of Control.
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
3. Miscellaneous.
-------------
(a) Arbitration; Related Expenses. Any dispute or controversy
-----------------------------
arising under or in connection with this Agreement shall be settled exclusively
by arbitration held in accordance with the rules of the American Arbitration
Association pertaining to the resolution of employment disputes. Any such
arbitration shall be held in Chicago, Illinois or such other location which the
parties have mutually agreed to in writing. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The Company shall pay on a
current basis all legal expenses (including attorneys' fees) incurred by you in
connection with such arbitration, subject to your obligation to repay such
amounts, plus interest at the short-term annual Applicable Federal Rate (as
determined under Section 1274(b) of the Code as in effect on the date your
employment terminates), if you should not prevail as to at least one material
issue adjudicated in such proceeding.
(b) No Offset; No Mitigation. The Company's obligation to
------------------------
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim,
7
<PAGE>
recoupment, defense or other right which the Company may have against you or
others whether by reason of your subsequent employment or otherwise. You shall
not be obligated to mitigate any damages you incur by reason of any Qualifying
Termination and the amounts payable hereunder shall not be reduced by any
amounts received by you as a result of your employment or self-employment
following your termination hereunder.
(c) Entire Obligation of Company. In the event your
----------------------------
employment with the Company and any subsidiary of the Company by which you are
employed terminates following a Change of Control, the amounts payable to you
hereunder and any vested amounts or benefits owing to you under the Company's
otherwise applicable employee benefit plans and programs and any accrued
vacation pay not yet paid, shall constitute the entire obligation of the Company
and its affiliates to you. Payment or other satisfaction thereof shall be
contingent upon your execution of a release in favor of the Company
substantially in the form attached hereto as Exhibit A, stating that the
payments and other benefits referred to in the immediately preceding sentence
constitute full settlement of any claim under law or in equity that you might
otherwise assert against the Company or any of its subsidiaries on account of
such termination.
(d) Employment at Will. This Agreement shall neither obligate
------------------
the Company or any subsidiary of the Company to continue you in its employ (or
to employ you in any particular office or to perform any specified
responsibility) nor obligate you to continue in the employ of the Company or any
subsidiary of the Company.
(e) Successors. This Agreement shall be binding upon and
----------
inure to the benefit of you, your estate and the Company and any successor of
the Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by you.
(f) Governing Law. This Agreement shall be governed by the
-------------
laws of the State of Illinois, applied without reference to principles of
conflict of laws.
(g) Severability. If any provision of this contract as
------------
applied to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
of this Agreement.
(h) Waiver. No provision of this Agreement may be modified,
------
waived or discharged unless such modification, waiver or discharge is agreed to
in a writing signed by you and such officer as may be specifically designated by
the Board of Directors of the Company or a duly authorized Committee thereof. No
waiver by either party hereto at any time of any breach
8
<PAGE>
by the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of any other condition or
provision at any time.
(i) Entire Agreement. This Agreement contains the entire
----------------
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
If you are in agreement with the foregoing, please so indicate
by signing and returning to the Company the enclosed copy of this letter,
whereupon this letter shall constitute a binding agreement between you and the
Company.
Very truly yours,
CHICAGO BRIDGE & IRON COMPANY
By________________________________
Agreed:
_______________________________
Employee
9
<PAGE>
FULL AND FINAL RELEASE
Stephen M. Duffy (hereinafter "EMPLOYEE"), in exchange for
sufficient consideration, on behalf of himself, his family, his heirs and
assigns, irrevocably and unconditionally releases Chicago Bridge & Iron Company,
any parent corporations, any subsidiary corporations, any affiliated entities
whether or not incorporated, the employees, agents, officers, directors, and
shareholders of all such entities and any person or entity which may succeed to
the rights and liabilities of such persons or entities by assignment or
otherwise (hereinafter "CBI"), from all claims, controversies, liabilities,
demands, causes of action, debts, obligations, promises, acts, agreements,
rights of contribution and/or indemnification, and damages of whatever kind or
nature, whether known or unknown, suspected or unsuspected, foreseen or
unforeseen, liquidated or contingent, actual or potential, joint or individual,
that he has had or now has, based on any and all aspects of EMPLOYEE'S
employment with CBI or his separation from that employment, including, but not
limited to, all claims arising under the Age Discrimination in Employment Act;
Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the
Equal Pay Act; the Americans with Disabilities Act; the Employee Retirement
Income Security Act of 1974; or any federal, state or local laws or regulations
relating to employment or benefits associated with employment, any and all
claims for breach of express or implied contract or the covenant of good faith
and fair dealing (whether written or oral), all claims for retaliation or
violation of public policy, breach of promise, detrimental reliance or tort
(e.g., intentional infliction of emotional distress, defamation, assault,
battery, false imprisonment, wrongful termination, interference with contractual
or advantageous relationship, etc.), whether based on common law or otherwise;
claims for emotional distress, mental anguish, personal injury, loss of
consortium, and any and all claims that may be asserted on EMPLOYEE'S behalf by
others. The foregoing list is meant to be illustrative rather than inclusive.
This release does not preclude EMPLOYEE from seeking to obtain any benefits to
which he may be entitled under any employee welfare benefit plan or retirement
or profit sharing plan sponsored by CBI, but his entitlement to such benefits,
if any, will be determined in accordance with the plan documents.
If I initiate or participate in any legal action in violation
of this release, CBI may reclaim any amounts paid in respect of my termination,
without waiving the release granted herein, and terminate any benefits or
payments that are due to me, in addition to any other remedies. This release
shall be construed in accordance with the laws of the State of Illinois,
applicable to contracts made and entirely to be performed therein.
EMPLOYEE ACKNOWLEDGES AND AGREES THAT THIS RELEASE IS A FULL
AND FINAL BAR TO ANY AND ALL CLAIM(S) OF ANY TYPE THAT HE MAY NOW HAVE AGAINST
CBI. EMPLOYEE FURTHER ACKNOWLEDGES THAT HE HAS BEEN GIVEN FORTY-FIVE (45) DAYS
TO CONSIDER WHETHER TO EXECUTE THIS RELEASE, THAT HE HAS SEVEN (7) DAYS TO
RESCIND THIS RELEASE AFTER ITS EXECUTION, WHICH SHALL BE EFFECTED BY WRITTEN
NOTICE TO CBI DELIVERED WITHIN SUCH SEVEN (7) DAY PERIOD, AND THAT HE HAS BEEN
ADVISED THAT HE SHOULD SPEAK WITH COUNSEL REGARDING THE SIGNIFICANCE OF THIS
RELEASE.
10
<PAGE>
Dated:____________________ Signed:_____________________
11
<PAGE>
January 31, 1997
Mr. Timothy J. Wiggins
2505 Hanford Lane
Aurora, IL 60504
Change of Control Severance Agreement
-------------------------------------
Dear Mr. Wiggins:
Chicago Bridge & Iron Company (the "Company") is a wholly owned
subsidiary of Praxair, Inc. (the "Parent"). The Parent is contemplating the
possible direct or indirect sale of all or a substantial part of its interests
in the Company. The Company recognizes that members of senior management may
become concerned about the effect of such action on their job and financial
security. The Company considers the maintenance of a sound and vital management
to be essential to protecting and enhancing the best interests of the Company
and its Parent. Accordingly, the Board of Directors of the Company has
determined to enter into this agreement (your "Agreement") to provide you with
severance benefits in the event your employment with the Company ter-minates
following a Change of Control (as defined below) under certain circumstances.
The purpose of entering into this Agreement is to induce you to
remain in the employ of the Company pending and after any direct or indirect
sale by the Parent of the Company or an intermediate holding corporation to
which the Parent has transferred the majority of the Company's stock, measured
by either or both vote and value (the "Holding Corporation") to an unrelated
third party or the consummation of an initial public offering ("IPO") for the
Company's stock or the stock of the Holding Corporation. Therefore, in
consideration of your continued employment with the Company under these
circumstances, the Company and you agree as follows:
1. Termination Benefits.
--------------------
(a) Basic Benefits. In the event your employment with the
--------------
Company and any subsidiary of the Company terminates by reason of a Qualifying
Termination within two years after a Change of Control, you shall receive,
within thirty days after your employment terminates, a lump sum amount equal to
One Million Dollars ($1,000,000.00). In addition, if your employment with the
Company and any subsidiary by which you are employed is terminated by the
Company or any such subsidiary for any reason (other than your willful
misconduct or gross negligence in the performance of your duties as an employee
which results
<PAGE>
in a material detriment to either the Company or the Holding Corporation) within
six months prior
<PAGE>
to the occurrence of a Change of Control, you shall be paid the lump sum
referred to in the immediately preceding sentence, minus the gross amount of any
severance benefits otherwise paid to you, within ten days following such Change
of Control.
(b) Outplacement. In the event of a Qualifying Termination
------------
(or a termination of your employment prior to a Change of Control with respect
to which you are entitled to receive a payment under Section 1(a) of this
Agreement), the Company agrees that, upon a written request from you, it will
engage on your behalf an outplacement or similar firm of your choice to provide
you with customary services and support in seeking other appropriate employment.
(c) Certain Further Payments.
------------------------
(i) Additional Payments in Respect of Excise Taxes. In the
----------------------------------------------
event that a Change of Control occurs at the time that either the Company or the
Holding Corporation has a class of equity securities registered under Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any
amount or benefit paid or distributed to you pursuant to this Agreement, taken
together with any amounts or benefits otherwise paid or distributed to you, are
or become subject to the tax (the "Excise Tax") imposed under Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), or any similar tax
that may hereafter be imposed, the Company shall pay you, at the same time as it
pays the severance benefit described above, an additional amount (the "Tax
Reimbursement Payment") such that the net amount retained by you with respect to
such Covered Payments, after deduction of any Excise Tax on the Covered Payments
and any Federal, state and local income or employment tax and Excise Tax on the
Tax Reimbursement Payment provided for by this Section 1(b), but before
deduction for any Federal, state or local income or employment tax withholding
on such Covered Payments, shall be equal to the amount of the Covered Payments.
(ii) Calculation of the Excise Tax. For purposes of
-----------------------------
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax,
(A) all "parachute payments" in excess of the "base amount"
(as defined under Section 280G(b)(3) of the Code) shall be treated as
subject to the Excise Tax, unless, and except to the extent that, in the
good faith judgment of the Company's independent certified public
accountants appointed prior to the Change of Control or tax coun-sel
selected by such Accountants (the "Accountants"), the Company has a
reasonable basis to conclude that such Covered Payments (in whole or in
part) represent reasonable compensation for personal services actually
rendered (within
<PAGE>
the meaning of Section 280G(b)(4)(B) of the Code) in excess of the "base
amount," or such "parachute payments" are otherwise not subject to such
Excise Tax, and
(B) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accountants in accordance
with the principles of Section 280G of the Code.
(iii) Calculation of the Tax Reimbursement Payment. For
--------------------------------------------
purposes of determining the amount of the Tax Reimbursement Payment, you shall
be deemed to pay:
(A) Federal income taxes at the highest applicable marginal
rate of Federal income taxation for the calendar year in which the Tax
Reimbursement Payment is to be made, and
(B) any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the calendar year in
which the Tax Reimbursement Payment is to be made, net of the maximum
reduction in Federal income taxes which could be obtained from the
deduction of such state or local taxes if paid in such year.
(d) Adjustments to Tax Reimbursement Payment. In the event
----------------------------------------
that the Excise Tax is subsequently determined by the Accountants or pursuant to
any proceeding or negotiations with the Internal Revenue Service to be less than
the amount taken into account hereunder in calculating the Tax Reimbursement
Payment made, you shall repay to the Company, at the time that the amount of
such reduction in the Excise Tax is finally determined, the portion of such
prior Tax Reimbursement Payment that would not have been paid if such Excise Tax
had been applied in initially calculating such Tax Reimbursement Payment, plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any
portion of the Tax Reimbursement Payment to be refunded to the Company has been
paid to any Fed-eral, state or local tax authority, repayment thereof shall not
be required until actual refund or credit of such portion has been made to you.
You and the Company shall mutually agree upon the course of action to be pursued
if your good faith claim for refund or credit is denied; provided that the
--------
Company shall bear the cost of any expenses incurred which are related to
pursuing any recovery of any amount paid in respect of the Excise Tax.
In the event that the Excise Tax is later determined by the
Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to exceed the
<PAGE>
amount taken into account hereunder at the time the Tax Reimbursement Payment is
made (including, but not limited to, by reason of any payment the existence or
amount of which cannot be determined at the time of the Tax Reimbursement
Payment), the Company shall make an additional Tax Reimbursement Payment in
respect of such excess (plus any interest or penalty payable with respect to
such excess) at the time that the amount of such excess is finally determined.
2. Definitions.
-----------
(a) Change of Control When the Company or the Holding
-------------------------------------------------
Corporation is Not Public. At any time that neither the Company nor the Holding
- -------------------------
Corporation has any equity securities registered under Section 12 of the
Exchange Act, a "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such
terms are used in Section 13 of the Exchange Act), other than the Parent,
the Holding Corporation, the Company or any majority-owned subsidiary of
either the Parent, the Holding Corporation or the Company, becomes the
"beneficial owner" (as such term is used in Section 13 of the Exchange
Act) of 50% or more of either (x) the total number of the common shares
of the Holding Corporation or the Company then outstanding or (y) the
voting power of all of the voting securities of the Holding Corporation
or the Company then outstanding; or
(ii) upon the consummation of (A) any merger or other
business combination of the Company or the Holding Corporation with or
into another company pursuant to which the stockholders of the Company or
the Holding Corporation, as the case may be, do not own, immediately
after the transaction, more than 50% of the voting power and the value of
the stock of the company that survives, or (B) the sale, exchange or
other disposition of all or substantially all of the assets of the
Company or the Holding Corporation.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have
occurred by reason of a transfer of the Company's stock to the Holding
Corporation or any public offering of the equity securities of the Company or
Holding Corporation, so long as, immediately following such transfer or the
consummation of such offering, no person or group (as such terms are used in
Section 13 of the Exchange Act) other than the Parent or one of its majority
owned subsidiaries owns, directly or indirectly, more than 25% of the Company's
or the Holding Corporation's equity securities.
<PAGE>
(b) Change of Control When the Company or the Holding
-------------------------------------------------
Corporation is Public. At any time one or more classes of the equity securities
- ---------------------
of the Company or the Holding Corporation are registered under Section 12 of the
Exchange Act, a "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such
terms are used in Section 13 of the Exchange Act), other than the Parent,
the Holding Corporation, the Company or any majority owned subsidiary of
the Parent, the Holding Corporation or the Company, becomes the
"beneficial owner" (as such term is used in Section 13 of the Exchange
Act) of 25% or more of the total voting power of the Company's or the
Holding Corporation's outstanding securities;
(ii) upon the consummation of (A) any merger or other
business combination of the Company or the Holding Corporation with or
into another company pursuant to which the stockholders of the Company or
the Holding Corporation as the case may be, do not own, immediately after
the transaction, more than 50% of the voting power and the value of the
stock of the Company that survives, or (B) the sale, exchange or other
disposition of all or substantially all of the assets of the Company or
the Holding Corporation; or
(iii) if, during any period of two years or less,
individuals who at the beginning of such period constituted the Board of
Directors of the Company or the Holding Corporation, as the case may be,
cease for any reason to constitute at least a majority thereof; provided
that any new director who is elected to, or nominated for election to,
the Board of Directors with the approval of at least 75% of the directors
then still in office who were directors at the beginning of the period
shall be treated as though having been a director at the beginning of
such period.
(c) "Qualifying Termination" means the termination of your
employment with the Company and any of its subsidiaries by which you are
employed (i) by the Company or any such subsidiary for any reason other than
your willful misconduct or gross negligence in the performance of your duties as
an employee which results in a material detriment to the Company or the Holding
Corporation or (ii) by you within 180 days following the occurrence of any of
the following events (without your prior written consent):
<PAGE>
(A) any significant reduction in your positions,
duties, titles, responsibilities and status with the Company and its
subsidiaries from those in effect immediately prior to such Change of
Control;
(B) a reduction in your base salary, a reduction in
your annual bonus opportunity or a material reduction in the aggregate
value of your participation in the Company's employee benefits programs,
as each was in effect immediately prior to such Change of Control; or
(C) your principal place of employment is moved to a
location more than 50 miles from your principal place of employment
immediately prior to such Change of Control or you are required in the
performance of your duties to travel to an extent substantially more
burdensome than your travel obligations immediately prior to such Change
of Control.
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
3. Miscellaneous.
-------------
(a) Arbitration; Related Expenses. Any dispute or controversy
-----------------------------
arising under or in connection with this Agreement shall be settled exclusively
by arbitration held in accordance with the rules of the American Arbitration
Association pertaining to the resolution of employment disputes. Any such
arbitration shall be held in Chicago, Illinois or such other location which the
parties have mutually agreed to in writing. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The Company shall pay on a
current basis all legal expenses (including attorneys' fees) incurred by you in
connection with such arbitration, subject to your obligation to repay such
amounts, plus interest at the short-term annual Applicable Federal Rate (as
determined under Section 1274(b) of the Code as in effect on the date your
employment terminates), if you should not prevail as to at least one material
issue adjudicated in such proceeding.
(b) No Offset; No Mitigation. The Company's obligation to
------------------------
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim,
<PAGE>
recoupment, defense or other right which the Company may have against you or
others whether by reason of your subsequent employment or otherwise. You shall
not be obligated to mitigate any damages you incur by reason of any Qualifying
Termination and the amounts payable hereunder shall not be reduced by any
amounts received by you as a result of your employment or self-employment
following your termination hereunder.
(c) Entire Obligation of Company. In the event your
----------------------------
employment with the Company and any subsidiary of the Company by which you are
employed terminates following a Change of Control, the amounts payable to you
hereunder and any vested amounts or benefits owing to you under the Company's
otherwise applicable employee benefit plans and programs and any accrued
vacation pay not yet paid, shall constitute the entire obligation of the Company
and its affiliates to you. Payment or other satisfaction thereof shall be
contingent upon your execution of a release in favor of the Company
substantially in the form attached hereto as Exhibit A, stating that the
payments and other benefits referred to in the immediately preceding sentence
constitute full settlement of any claim under law or in equity that you might
otherwise assert against the Company or any of its subsidiaries on account of
such termination.
(d) Employment at Will. This Agreement shall neither obligate
------------------
the Company or any subsidiary of the Company to continue you in its employ (or
to employ you in any particular office or to perform any specified
responsibility) nor obligate you to continue in the employ of the Company or any
subsidiary of the Company.
(e) Successors. This Agreement shall be binding upon and
----------
inure to the benefit of you, your estate and the Company and any successor of
the Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by you.
(f) Governing Law. This Agreement shall be governed by the
-------------
laws of the State of Illinois, applied without reference to principles of
conflict of laws.
(g) Severability. If any provision of this contract as
------------
applied to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
of this Agreement.
(h) Waiver. No provision of this Agreement may be modified,
------
waived or discharged unless such modification, waiver or discharge is agreed to
in a writing signed by you and such officer as may be specifically designated by
the Board of Directors of the Company or a duly authorized Committee thereof. No
waiver by either party hereto at any time of any breach
<PAGE>
by the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of any other condition or
provision at any time.
(i) Entire Agreement. This Agreement contains the entire
----------------
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
If you are in agreement with the foregoing, please so indicate
by signing and returning to the Company the enclosed copy of this letter,
whereupon this letter shall constitute a binding agreement between you and the
Company.
Very truly yours,
CHICAGO BRIDGE & IRON COMPANY
By________________________________
Agreed:
_______________________________
Employee
<PAGE>
FULL AND FINAL RELEASE
Timothy J. Wiggins (hereinafter "EMPLOYEE"), in exchange for
sufficient consideration, on behalf of himself, his family, his heirs and
assigns, irrevocably and unconditionally releases Chicago Bridge & Iron Company,
any parent corporations, any subsidiary corporations, any affiliated entities
whether or not incorporated, the employees, agents, officers, directors, and
shareholders of all such entities and any person or entity which may succeed to
the rights and liabilities of such persons or entities by assignment or
otherwise (hereinafter "CBI"), from all claims, controversies, liabilities,
demands, causes of action, debts, obligations, promises, acts, agreements,
rights of contribution and/or indemnification, and damages of whatever kind or
nature, whether known or unknown, suspected or unsuspected, foreseen or
unforeseen, liquidated or contingent, actual or potential, joint or individual,
that he has had or now has, based on any and all aspects of EMPLOYEE'S
employment with CBI or his separation from that employment, including, but not
limited to, all claims arising under the Age Discrimination in Employment Act;
Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the
Equal Pay Act; the Americans with Disabilities Act; the Employee Retirement
Income Security Act of 1974; or any federal, state or local laws or regulations
relating to employment or benefits associated with employment, any and all
claims for breach of express or implied contract or the covenant of good faith
and fair dealing (whether written or oral), all claims for retaliation or
violation of public policy, breach of promise, detrimental reliance or tort
(e.g., intentional infliction of emotional distress, defamation, assault,
battery, false imprisonment, wrongful termination, interference with contractual
or advantageous relationship, etc.), whether based on common law or otherwise;
claims for emotional distress, mental anguish, personal injury, loss of
consortium, and any and all claims that may be asserted on EMPLOYEE'S behalf by
others. The foregoing list is meant to be illustrative rather than inclusive.
This release does not preclude EMPLOYEE from seeking to obtain any benefits to
which he may be entitled under any employee welfare benefit plan or retirement
or profit sharing plan sponsored by CBI, but his entitlement to such benefits,
if any, will be determined in accordance with the plan documents.
If I initiate or participate in any legal action in violation
of this release, CBI may reclaim any amounts paid in respect of my termination,
without waiving the release granted herein, and terminate any benefits or
payments that are due to me, in addition to any other remedies. This release
shall be construed in accordance with the laws of the State of Illinois,
applicable to contracts made and entirely to be performed therein.
EMPLOYEE ACKNOWLEDGES AND AGREES THAT THIS RELEASE IS A FULL
AND FINAL BAR TO ANY AND ALL CLAIM(S) OF ANY TYPE THAT HE MAY NOW HAVE AGAINST
CBI. EMPLOYEE FURTHER ACKNOWLEDGES THAT HE HAS BEEN GIVEN FORTY-FIVE (45) DAYS
TO CONSIDER WHETHER TO EXECUTE THIS RELEASE, THAT HE HAS SEVEN (7) DAYS TO
RESCIND THIS RELEASE AFTER ITS EXECUTION, WHICH SHALL BE EFFECTED BY WRITTEN
NOTICE TO CBI DELIVERED WITHIN SUCH SEVEN (7) DAY PERIOD, AND THAT HE HAS BEEN
ADVISED THAT HE SHOULD SPEAK WITH COUNSEL REGARDING THE SIGNIFICANCE OF THIS
RELEASE.
<PAGE>
Dated:____________________ Signed:_____________________
<PAGE>
January 31, 1997
Mr. Robert H. Wolfe
732 Fairfield Court
Westmont, IL 60559
Change of Control Severance Agreement
-------------------------------------
Dear Mr. Wolfe:
Chicago Bridge & Iron Company (the "Company") is a wholly owned
subsidiary of Praxair, Inc. (the "Parent"). The Parent is contemplating the
possible direct or indirect sale of all or a substantial part of its interests
in the Company. The Company recognizes that members of senior management may
become concerned about the effect of such action on their job and financial
security. The Company considers the maintenance of a sound and vital management
to be essential to protecting and enhancing the best interests of the Company
and its Parent. Accordingly, the Board of Directors of the Company has
determined to enter into this agreement (your "Agreement") to provide you with
severance benefits in the event your employment with the Company ter-minates
following a Change of Control (as defined below) under certain circumstances.
The purpose of entering into this Agreement is to induce you to
remain in the employ of the Company pending and after any direct or indirect
sale by the Parent of the Company or an intermediate holding corporation to
which the Parent has transferred the majority of the Company's stock, measured
by either or both vote and value (the "Holding Corporation") to an unrelated
third party or the consummation of an initial public offering ("IPO") for the
Company's stock or the stock of the Holding Corporation. Therefore, in
consideration of your continued employment with the Company under these
circumstances, the Company and you agree as follows:
1. Termination Benefits.
--------------------
(a) Basic Benefits. In the event your employment with the
--------------
Company and any subsidiary of the Company terminates by reason of a Qualifying
Termination within two years after a Change of Control, you shall receive,
within thirty days after your employment terminates, a lump sum amount equal to
Seven Hundred Fifty Thousand Dollars ($750,000.00). In addition, if your
employment with the Company and any subsidiary by which you are employed is
terminated by the Company or any such subsidiary for any reason (other than your
willful misconduct or gross negligence in the performance of your duties as an
employee which
<PAGE>
results in a material detriment to either the Company or the Holding
Corporation) within six months prior
<PAGE>
to the occurrence of a Change of Control, you shall be paid the lump sum
referred to in the immediately preceding sentence, minus the gross amount of any
severance benefits otherwise paid to you, within ten days following such Change
of Control.
(b) Outplacement. In the event of a Qualifying Termination
------------
(or a termination of your employment prior to a Change of Control with respect
to which you are entitled to receive a payment under Section 1(a) of this
Agreement), the Company agrees that, upon a written request from you, it will
engage on your behalf an outplacement or similar firm of your choice to provide
you with customary services and support in seeking other appropriate employment.
(c) Certain Further Payments.
------------------------
(i) Additional Payments in Respect of Excise Taxes. In the
----------------------------------------------
event that a Change of Control occurs at the time that either the Company or the
Holding Corporation has a class of equity securities registered under Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any
amount or benefit paid or distributed to you pursuant to this Agreement, taken
together with any amounts or benefits otherwise paid or distributed to you, are
or become subject to the tax (the "Excise Tax") imposed under Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), or any similar tax
that may hereafter be imposed, the Company shall pay you, at the same time as it
pays the severance benefit described above, an additional amount (the "Tax
Reimbursement Payment") such that the net amount retained by you with respect to
such Covered Payments, after deduction of any Excise Tax on the Covered Payments
and any Federal, state and local income or employment tax and Excise Tax on the
Tax Reimbursement Payment provided for by this Section 1(b), but before
deduction for any Federal, state or local income or employment tax withholding
on such Covered Payments, shall be equal to the amount of the Covered Payments.
(ii) Calculation of the Excise Tax. For purposes of
-----------------------------
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax,
(A) all "parachute payments" in excess of the "base amount"
(as defined under Section 280G(b)(3) of the Code) shall be treated as
subject to the Excise Tax, unless, and except to the extent that, in the
good faith judgment of the Company's independent certified public
accountants appointed prior to the Change of Control or tax coun-sel
selected by such Accountants (the "Accountants"), the Company has a
reasonable basis to conclude that such Covered Payments (in whole or in
part) represent reasonable compensation for personal services actually
rendered (within
3
<PAGE>
the meaning of Section 280G(b)(4)(B) of the Code) in
excess of the "base amount," or such "parachute payments" are otherwise
not subject to such Excise Tax, and
(B) the value of any non-cash benefits or any deferred
payment or benefit shall be deter-mined by the Accountants in accordance
with the principles of Section 280G of the Code.
(iii) Calculation of the Tax Reimbursement Payment. For
--------------------------------------------
purposes of determining the amount of the Tax Reimbursement Payment, you shall
be deemed to pay:
(A) Federal income taxes at the highest applicable marginal
rate of Federal income tax-ation for the calendar year in which the Tax
Reimbursement Payment is to be made, and
(B) any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the calendar year in
which the Tax Reimbursement Payment is to be made, net of the maximum
reduction in Federal income taxes which could be obtained from the
deduction of such state or local taxes if paid in such year.
(d) Adjustments to Tax Reimbursement Payment. In the event
----------------------------------------
that the Excise Tax is subsequently determined by the Accountants or pursuant to
any proceeding or negotiations with the Internal Revenue Service to be less than
the amount taken into account hereunder in calculating the Tax Reimbursement
Payment made, you shall repay to the Company, at the time that the amount of
such reduction in the Excise Tax is finally determined, the portion of such
prior Tax Reimbursement Payment that would not have been paid if such Excise Tax
had been applied in initially calculating such Tax Reimbursement Payment, plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any
portion of the Tax Reimbursement Payment to be refunded to the Company has been
paid to any Fed-eral, state or local tax authority, repayment thereof shall not
be required until actual refund or credit of such portion has been made to you.
You and the Company shall mutually agree upon the course of action to be pursued
if your good faith claim for refund or credit is denied; provided that the
--------
Company shall bear the cost of any expenses incurred which are related to
pursuing any recovery of any amount paid in respect of the Excise Tax.
In the event that the Excise Tax is later determined by the
Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to exceed the
4
<PAGE>
amount taken into account hereunder at the time the Tax Reimbursement Payment is
made (including, but not limited to, by reason of any payment the existence or
amount of which cannot be determined at the time of the Tax Reimbursement
Payment), the Company shall make an additional Tax Reimbursement Payment in
respect of such excess (plus any interest or penalty payable with respect to
such excess) at the time that the amount of such excess is finally determined.
2. Definitions.
-----------
(a) Change of Control When the Company or the Holding
-------------------------------------------------
Corporation is Not Public. At any time that neither the Company nor the Holding
- -------------------------
Corporation has any equity securities registered under Section 12 of the
Exchange Act, a "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such
terms are used in Section 13 of the Exchange Act), other than the
Parent, the Holding Corporation, the Company or any majority-owned
subsidiary of either the Parent, the Holding Corporation or the
Company, becomes the "beneficial owner" (as such term is used in
Section 13 of the Exchange Act) of 50% or more of either (x) the
total number of the common shares of the Holding Corporation or the
Company then outstanding or (y) the voting power of all of the voting
securities of the Holding Corporation or the Company then
outstanding; or
(ii) upon the consummation of (A) any merger or other
business combination of the Company or the Holding Corporation with
or into another company pursuant to which the stockholders of the
Company or the Holding Corporation, as the case may be, do not own,
immediately after the transaction, more than 50% of the voting power
and the value of the stock of the company that survives, or (B) the
sale, exchange or other disposition of all or substantially all of
the assets of the Company or the Holding Corporation.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have
occurred by reason of a transfer of the Company's stock to the Holding
Corporation or any public offering of the equity securities of the Company or
Holding Corporation, so long as, immediately following such transfer or the
consummation of such offering, no person or group (as such terms are used in
Section 13 of the Exchange Act) other than the Parent or one of its majority
owned subsidiaries owns, directly or indirectly, more than 25% of the Company's
or the Holding Corporation's equity securities.
5
<PAGE>
(b) Change of Control When the Company or the Holding
-------------------------------------------------
Corporation is Public. At any time one or more classes of the equity securities
- ---------------------
of the Company or the Holding Corporation are registered under Section 12 of the
Exchange Act, a "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such
terms are used in Section 13 of the Exchange Act), other than the Parent,
the Holding Corporation, the Company or any majority owned subsidiary of
the Parent, the Holding Corporation or the Company, becomes the
"beneficial owner" (as such term is used in Section 13 of the Exchange
Act) of 25% or more of the total voting power of the Company's or the
Holding Corporation's outstanding securities;
(ii) upon the consummation of (A) any merger or other
business combination of the Company or the Holding Corporation with or
into another company pursuant to which the stockholders of the Company or
the Holding Corporation as the case may be, do not own, immediately after
the transaction, more than 50% of the voting power and the value of the
stock of the Company that survives, or (B) the sale, exchange or other
disposition of all or substantially all of the assets of the Company or
the Holding Corporation; or
(iii) if, during any period of two years or less,
individuals who at the beginning of such period constituted the Board of
Directors of the Company or the Holding Corporation, as the case may be,
cease for any reason to constitute at least a majority thereof; provided
that any new director who is elected to, or nominated for election to,
the Board of Directors with the approval of at least 75% of the directors
then still in office who were directors at the beginning of the period
shall be treated as though having been a director at the beginning of
such period.
(c) "Qualifying Termination" means the termination of your
employment with the Company and any of its subsidiaries by which you are
employed (i) by the Company or any such subsidiary for any reason other than
your willful misconduct or gross negligence in the performance of your duties as
an employee which results in a material detriment to the Company or the Holding
Corporation or (ii) by you within 180 days following the occurrence of any of
the following events (without your prior written consent):
6
<PAGE>
(A) any significant reduction in your positions,
duties, titles, responsibilities and status with the Company and its
subsidiaries from those in effect immediately prior to such Change of
Control;
(B) a reduction in your base salary, a reduction in
your annual bonus opportunity or a material reduction in the aggregate
value of your participation in the Company's employee benefits programs,
as each was in effect immediately prior to such Change of Control; or
(C) your principal place of employment is moved to a
location more than 50 miles from your principal place of employment
immediately prior to such Change of Control or you are required in the
performance of your duties to travel to an extent substantially more
burdensome than your travel obligations immediately prior to such Change
of Control.
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
3. Miscellaneous.
-------------
(a) Arbitration; Related Expenses. Any dispute or controversy
-----------------------------
arising under or in connection with this Agreement shall be settled exclusively
by arbitration held in accordance with the rules of the American Arbitration
Association pertaining to the resolution of employment disputes. Any such
arbitration shall be held in Chicago, Illinois or such other location which the
parties have mutually agreed to in writing. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The Company shall pay on a
current basis all legal expenses (including attorneys' fees) incurred by you in
connection with such arbitration, subject to your obligation to repay such
amounts, plus interest at the short-term annual Applicable Federal Rate (as
determined under Section 1274(b) of the Code as in effect on the date your
employment terminates), if you should not prevail as to at least one material
issue adjudicated in such proceeding.
(b) No Offset; No Mitigation. The Company's obligation to
------------------------
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim,
7
<PAGE>
recoupment, defense or other right which the Company may have against you or
others whether by reason of your subsequent employment or otherwise. You shall
not be obligated to mitigate any damages you incur by reason of any Qualifying
Termination and the amounts payable hereunder shall not be reduced by any
amounts received by you as a result of your employment or self-employment
following your termination hereunder.
(c) Entire Obligation of Company. In the event your
----------------------------
employment with the Company and any subsidiary of the Company by which you are
employed terminates following a Change of Control, the amounts payable to you
hereunder and any vested amounts or benefits owing to you under the Company's
otherwise applicable employee benefit plans and programs and any accrued
vacation pay not yet paid, shall constitute the entire obligation of the Company
and its affiliates to you. Payment or other satisfaction thereof shall be
contingent upon your execution of a release in favor of the Company
substantially in the form attached hereto as Exhibit A, stating that the
payments and other benefits referred to in the immediately preceding sentence
constitute full settlement of any claim under law or in equity that you might
otherwise assert against the Company or any of its subsidiaries on account of
such termination.
(d) Employment at Will. This Agreement shall neither obligate
------------------
the Company or any subsidiary of the Company to continue you in its employ (or
to employ you in any particular office or to perform any specified
responsibility) nor obligate you to continue in the employ of the Company or any
subsidiary of the Company.
(e) Successors. This Agreement shall be binding upon and
----------
inure to the benefit of you, your estate and the Company and any successor of
the Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by you.
(f) Governing Law. This Agreement shall be governed by the
-------------
laws of the State of Illinois, applied without reference to principles of
conflict of laws.
(g) Severability. If any provision of this contract as
------------
applied to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
of this Agreement.
(h) Waiver. No provision of this Agreement may be modified,
------
waived or discharged unless such modification, waiver or discharge is agreed to
in a writing signed by you and such officer as may be specifically designated by
the Board of Directors of the Company or a duly authorized Committee thereof. No
waiver by either party hereto at any time of any breach
8
<PAGE>
by the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of any other condition or
provision at any time.
(i) Entire Agreement. This Agreement contains the entire
----------------
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
If you are in agreement with the foregoing, please so indicate
by signing and returning to the Company the enclosed copy of this letter,
whereupon this letter shall constitute a binding agreement between you and the
Company.
Very truly yours,
CHICAGO BRIDGE & IRON COMPANY
By________________________________
Agreed:
_______________________________
Employee
9
<PAGE>
FULL AND FINAL RELEASE
Robert H. Wolfe (hereinafter "EMPLOYEE"), in exchange for
sufficient consideration, on behalf of himself, his family, his heirs and
assigns, irrevocably and unconditionally releases Chicago Bridge & Iron Company,
any parent corporations, any subsidiary corporations, any affiliated entities
whether or not incorporated, the employees, agents, officers, directors, and
shareholders of all such entities and any person or entity which may succeed to
the rights and liabilities of such persons or entities by assignment or
otherwise (hereinafter "CBI"), from all claims, controversies, liabilities,
demands, causes of action, debts, obligations, promises, acts, agreements,
rights of contribution and/or indemnification, and damages of whatever kind or
nature, whether known or unknown, suspected or unsuspected, foreseen or
unforeseen, liquidated or contingent, actual or potential, joint or individual,
that he has had or now has, based on any and all aspects of EMPLOYEE'S
employment with CBI or his separation from that employment, including, but not
limited to, all claims arising under the Age Discrimination in Employment Act;
Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the
Equal Pay Act; the Americans with Disabilities Act; the Employee Retirement
Income Security Act of 1974; or any federal, state or local laws or regulations
relating to employment or benefits associated with employment, any and all
claims for breach of express or implied contract or the covenant of good faith
and fair dealing (whether written or oral), all claims for retaliation or
violation of public policy, breach of promise, detrimental reliance or tort
(e.g., intentional infliction of emotional distress, defamation, assault,
----
battery, false imprisonment, wrongful termination, interference with contractual
or advantageous relationship, etc.), whether based on common law or otherwise;
claims for emotional distress, mental anguish, personal injury, loss of
consortium, and any and all claims that may be asserted on EMPLOYEE'S behalf by
others. The foregoing list is meant to be illustrative rather than inclusive.
This release does not preclude EMPLOYEE from seeking to obtain any benefits to
which he may be entitled under any employee welfare benefit plan or retirement
or profit sharing plan sponsored by CBI, but his entitlement to such benefits,
if any, will be determined in accordance with the plan documents.
If I initiate or participate in any legal action in violation
of this release, CBI may reclaim any amounts paid in respect of my termination,
without waiving the release granted herein, and terminate any benefits or
payments that are due to me, in addition to any other remedies. This release
shall be construed in accordance with the laws of the State of Illinois,
applicable to contracts made and entirely to be performed therein.
EMPLOYEE ACKNOWLEDGES AND AGREES THAT THIS RELEASE IS A FULL
AND FINAL BAR TO ANY AND ALL CLAIM(S) OF ANY TYPE THAT HE MAY NOW HAVE AGAINST
CBI. EMPLOYEE FURTHER ACKNOWLEDGES THAT HE HAS BEEN GIVEN FORTY-FIVE (45) DAYS
TO CONSIDER WHETHER TO EXECUTE THIS RELEASE, THAT HE HAS SEVEN (7) DAYS TO
RESCIND THIS RELEASE AFTER ITS EXECUTION, WHICH SHALL BE EFFECTED BY WRITTEN
NOTICE TO CBI DELIVERED WITHIN SUCH SEVEN (7) DAY PERIOD, AND THAT HE HAS BEEN
ADVISED THAT HE SHOULD SPEAK WITH COUNSEL REGARDING THE SIGNIFICANCE OF THIS
RELEASE.
Dated:____________________ Signed:_____________________
10
<PAGE>
EXHIBIT 10.11
SEPARATION AGREEMENT
--------------------
SEPARATION AGREEMENT (the "Agreement") dated as of January 1, 1997
between Praxair, Inc., a Delaware corporation ("Praxair") and Chicago Bridge &
Iron Company, a Delaware corporation ("CB&I").
WITNESSETH
----------
WHEREAS, in 1996 Praxair acquired all of the outstanding shares of CBI
Industries, and CB&I became an indirect subsidiary of Praxair; and
WHEREAS, upon the filing of a Certificate of Ownership and Merger with
the Secretary of State of Delaware on December 19, 1996, CBI Industries was
merged with and into Praxair; and
WHEREAS, Praxair intends to sell some or all of its interest in CB&I,
and, in anticipation of such sale, Praxair and CB&I desire to define their
respective rights and obligations with respect to the assumption of liabilities
and indemnification;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein and other good, valuable and sufficient
consideration, the receipt of which is hereby acknowledged, the parties,
intending to be legally bound, hereby agree as follows:
I.Definitions
-----------
(a) As used in this Agreement, the following terms shall have the
meanings set forth below:
"CB&I Companies" shall mean CB&I and its direct and indirect
subsidiaries, and any other entities (including any corporations, partnerships,
trusts or joint ventures) in which they or any of them now hold or heretofore
held a direct or indirect equity or similar ownership interest, including, but
not limited to, those subsidiaries and entities listed on Schedule 1 hereto, but
excluding MQS Inspection, Inc., Cooperheat, Inc. and Ershigs, Inc.
"CB&I Group" shall mean the CB&I Companies and their directors,
officers, employees, agents, consultants, representatives, successors,
transferees, or assignees.
<PAGE>
"Claims and Liabilities" shall mean any and all actual or alleged
claims, liabilities, obligations, losses, costs, expenses, litigations,
proceedings, fines, taxes, levies, imposts, duties, deficiencies, assessments,
charges, penalties, allegations, demands, damages (including, but not limited
to, actual, punitive or consequential, foreseen or unforeseen, known or unknown
damages), settlements or judgments of any kind or nature whatsoever, regardless
of when they arose or arise or whether the facts on which they are based
occurred prior or subsequent to the Separation Date, and regardless of where or
against whom they are asserted or determined or whether they are asserted or
determined prior or subsequent to the Separation Date, and regardless of whether
they are known or unknown, fixed or contingent, asserted or unasserted,
including, but not limited to, those with respect to environment (including, but
not limited to, the outdoor or indoor environment, soil, groundwater, surface
water, air and noise emissions, and the generation, disposal, discharge, release
or threatened release of any hazardous, toxic, or dangerous substance, chemical,
waste, material, or constituent that could give rise to liability), health,
safety, personal injury, death, property damage, employment, those arising out
of contracts, product liability, warranty, merchantability or fitness for any
particular purpose of goods, conformity of goods to contractual requirements or
any other breach or violation of any obligation or requirement.
"Internal Costs" shall mean salaries and reasonable allocated overhead
attributable to employees of an Indemnitee (as defined in Section 4(a) below),
to the extent such salaries and allocated overhead are attributable to time
spent by such employees in assisting the Indemnitor (as defined in Section 4(a)
below) in carrying out its indemnification obligations hereunder.
"Praxair Companies" shall mean Praxair and its direct and indirect
subsidiaries, and any other entities (including any corporations, partnerships,
trusts or joint ventures) in which they or any of them hold or heretofore held
any direct or indirect equity or similar ownership interest (including, but not
limited to, CBI Industries and its affiliates (other than the CB&I Companies)
before the merger of CB&I Industries with and into Praxair) but excluding the
CB&I Companies. "Praxair Companies" shall include but not be limited to MQS
Inspection, Inc., Cooperheat, Inc. and Ershigs, Inc.
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<PAGE>
"Praxair Group" shall mean the Praxair Companies and any of such
entities' directors, officers, employees, agents, consultants, representatives,
successors, transferees, or assignees.
"Separation Date" shall mean January 1, 1997.
"Service Agreements" shall mean the agreements and arrangements listed
on Schedule 1 hereto.
"Third Party Proceeding" shall mean any of the following which are
subject to a Notice of Claim as defined in Section 4(b) hereof: any claim
asserted by a third party, any litigation or proceeding brought by a third
party, and any third party allegation or demand.
Section 2. Liabilities and
Indemnification; CB&I.
---------------------
(a) Except as otherwise provided herein (including, but not limited to
Section 5 hereof) or in the Service Agreements, upon, from and after the
Separation Date, CB&I shall, without any further responsibility or liability of
or recourse to the Praxair Group, absolutely and irrevocably assume, retain and
be solely liable and responsible for any and all Claims and Liabilities arising
out of or relating to ownership, operations, business, activities, or assets of
the CB&I Companies (the "CB&I Liabilities").
(b) CB&I shall indemnify each member of the Praxair Group for, and
shall hold each member of the Praxair Group harmless from, any and all CB&I
Liabilities (including, but not limited to, reasonable fees and expenses of
counsel, but excluding Internal Costs) of any kind or nature whatsoever.
(c) CB&I shall indemnify the Praxair Group for, and shall hold each of
them harmless from, any and all Claims and Liabilities (excluding Internal
Costs) which may arise out of any violation of this Agreement by CB&I.
(d) If any event shall occur or circumstances shall exist which would
entitle a member of the Praxair Group to indemnification or reimbursement
hereunder, any proceeds recovered or recoverable by such member or any of its
parents, subsidiaries or affiliates (other than the CB&I Group) from any third
party (including, but not limited to, any insurance company) with respect
thereto shall be assigned to CB&I, and any
-3-
<PAGE>
claims or rights with respect to such proceeds shall be subrogated to CB&I (to
the extent such proceeds are actually recovered from such third party).
Notwithstanding the foregoing, except as otherwise provided in the Service
Agreements, amounts expended by any member of the Praxair Group for self
insurance costs whether through fronting vehicles or otherwise shall not be
assigned to CB&I, and such costs shall be remain as a claim for indemnification
against CB&I. The relevant members of the Praxair Group shall use reasonable
efforts to effect any such recovery and otherwise effectively to secure for CB&I
the benefit of any such rights to such proceeds.
Section 3. Liabilities and
Indemnification; Praxair.
------------------------
(a) Except as otherwise provided herein including but not limited to
Section 5 hereof or in the Service Agreements, upon, from and after the
Separation Date, Praxair shall, without any further responsibility or liability
of or recourse to the CB&I Group, absolutely and irrevocably assume, retain and
be solely liable and responsible for any and all Claims and Liabilities arising
out of or relating to the ownership, operations, business, activities or assets
of the Praxair Group (collectively, the "Praxair Liabilities").
(b) Praxair shall indemnify the CB&I Group for, and shall hold each
member of the CB&I Group harmless from, any and all Praxair Liabilities
(including, but not limited to, reasonable fees and expenses of counsel, but
excluding Internal Costs) of any kind or nature whatsoever.
(c) Praxair shall indemnify the CB&I Companies for, and shall hold
each of them harmless from, any and all Claims and Liabilities (excluding
Internal Costs) which may arise out of any violation of this Agreement by
Praxair.
(d) If any event shall occur or circumstances shall exist which would
entitle a member of the CB&I Group to indemnification or reimbursement
hereunder, any proceeds recovered or recoverable by such member or any of its
parents, subsidiaries or affiliates (other than the Praxair Companies) from any
third party (including, but not limited to, any insurance company) with respect
thereto shall be assigned to Praxair, and any claims or rights with respect to
such proceeds shall be subrogated to Praxair (to the extent such proceeds are
actually recovered from such third party). Notwithstanding the foregoing,
except as otherwise provided in the Service Agreements,
-4-
<PAGE>
amounts expended by any member of the CB&I Group for self insurance costs
whether through fronting vehicles or otherwise shall not be assigned to Praxair,
and such costs shall be remain as a claim for indemnification against Praxair.
The relevant members of the CB&I Group shall use reasonable efforts to effect
any such recovery and otherwise effectively to secure for Praxair the benefit of
any such rights to such proceeds.
Section 4. Indemnification Procedure.
-------------------------
(a) Notwithstanding anything contained herein to the contrary, a
member of the CB&I Group or the Praxair Group that may otherwise be entitled to
indemnification or reimbursement thereunder (the "Indemnitee") with respect to
any Claims and Liabilities (an "Indemnifiable Claim") shall not be entitled to
indemnification or reimbursement hereunder with respect to such Indemnifiable
Claim unless the Indemnitee gives to the party who may be obligated for such
indemnification or reimbursement (the "Indemnitor") written notice of such
Indemnifiable Claim (a "Notice of Claim") promptly after the Indemnitee has
obtained actual knowledge of such Claims and Liabilities and has determined that
it has given or could give rise to claim for indemnification or reimbursement
under Section 2 or 3 hereof; provided, however, that a failure to give or a
delay in giving such Notice of Claim shall only release the Indemnitor from its
obligations under Section 2 or 3 hereof, as the case may be, to the extent of
any prejudice to the Indemnitor attributable to such failure or delay. Each
Notice of Claim shall set forth in reasonable detail the nature and any
particulars of the Indemnifiable Claim described therein. The Indemnitor shall,
within thirty (30) days after its receipt of a Notice of Claim, either (i)
satisfy its obligations under Section 2 or 3 hereof, as the case may be, with
respect to such Indemnifiable Claim or (ii) object to any request for
indemnification hereunder by giving written notice of such objection to the
Indemnitee (which objection shall be resolved in accordance with Section 6);
provided, however, that, unless the parties shall have otherwise agreed or
Indemnitee is required by court order or similar process to pay or incur any
Claims and Liabilities, so long as the Indemnitor is in good faith (i) defending
such Indemnifiable Claim pursuant to Section 4(b) hereof, (ii) performing its
obligations under Section 4(c) hereof, or (iii) objecting to such Indemnifiable
Claim in accordance with the procedures set forth in Section 6 hereof, its
obligations with respect thereto under Section 2 or 3 hereof, as the case may
be, shall have been met; it being
-5-
<PAGE>
understood that this proviso will not prevent indemnification or reimbursement
for out-of-pocket costs, fees and expenses previously incurred with respect to
which the Indemnitee is entitled to indemnification or reimbursement by the
Indemnitor hereunder.
(b) Whenever a Third Party Proceeding is brought, the Indemnitor
shall, in good faith and at its own expense, have the sole and exclusive right
and obligation to defend, contest or otherwise protect against such Third Party
Proceeding with legal counsel of its own selection, which counsel shall be
reasonably satisfactory to the Indemnitee. Notwithstanding the foregoing, the
Indemnitee shall have the right, but not the obligation, to defend, contest or
otherwise protect against a Third Party Proceeding at its own expense if, and to
the extent, such Third Party Proceeding seeks relief other than money damages,
and, if the Indemnitee takes such action, such part of the Third Party
Proceeding will not constitute an Indemnifiable Claim hereunder, but the
Indemnitee will not waive its right to require the Indemnitor to defend, contest
and otherwise protect against such Third Party Proceeding in accordance with the
provisions set forth above with respect to that part of the Third Party
Proceeding as to which the Indemnitee does not exercise its rights as provided
in this sentence. In the case of any Third Party Proceeding, the Indemnitee
shall have the right, but not the obligation, to participate, at its own
expense, in such Third Party Proceeding with counsel of its own selection and
shall have the right, but not the obligation, to assert at its own expense any
and all crossclaims or counterclaims which it may have; provided, that in any
--------
Third Party Proceeding in which the named parties to such proceeding (including
any impleaded parties) include both the Indemnitee and the Indemnitor and the
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them, the Indemnitee shall have
the right to select its own counsel, and the Indemnitor shall reimburse the
Indemnitee for the reasonable costs and expenses of such counsel. So long as the
Indemnitor is in good faith defending, contesting or otherwise protecting
against such Third Party Proceeding, the Indemnitee shall at all times cooperate
in all reasonable ways with, make its relevant files and records available for
inspection and copying by, make its employees available to and otherwise render
reasonable assistance to the Indemnitor in connection therewith at the expense
of Indemnitor with respect to third-party charges. If the Indemnitor fails to
defend, contest or otherwise protect against such Third Party proceeding
-6-
<PAGE>
in good faith as provided herein, or in the circumstances contemplated by the
second sentence of this Section 4(b) after notice to the Indemnitor specifying
such failure and giving Indemnitor a reasonable opportunity to cure the same,
the Indemnitee shall have the right, but not the obligation, to defend, contest,
assert crossclaims or counterclaims or otherwise protect against such Third
Party Proceeding and to make any compromise or settlement thereof and shall be
entitled to recover from the Indemnitor, and to be indemnified by the Indemnitor
for, the entire cost thereof, including, without limitation, legal expenses,
disbursements and all amounts paid as a result of such Third Party Proceeding or
any compromise or settlement hereof, but excluding any allocation for costs
relating to in-house personnel. If the Indemnitor fails to defend against a
Third Party Proceeding, the Indemnitee has the right to do whatever it deems
appropriate to defend itself and may settle such Third Party Proceeding on such
terms as it deems appropriate; provided that in doing so the Indemnitee acts in
good faith and not in collusion with such third party. Notwithstanding the
foregoing, in no event may an Indemnitee settle the Third Party Proceeding if
such settlement includes an assignment to the third party of the Indemnitee's
rights under this Agreement. The parties hereto agree that with respect to any
Third Party Proceeding for which an Indemnitor is required to provide legal
counsel (or reimbursement therefor) pursuant to this section, an Indemnitor
shall only be responsible for the fees and expenses of one firm to represent all
entities of the Indemnitee party to such Third Party Proceeding.
(c) Except as otherwise set forth in the Service Agreements, the
Indemnitor, upon the request of or after consultation with the Indemnitee,
shall have the right and obligation, in good faith and at its own expense, to
cure, remediate, mitigate, remedy or otherwise handle any event or circumstance
which gives rise to an Indemnifiable Claim (other than a Third Party
Proceeding), including events and circumstances which can be cured, remediated,
mitigated or remedied through the expenditure of money and events and
circumstances which give rise to an Indemnifiable Claim which can be measured in
terms of money. Such right and obligation shall include, without limitation,
(i) the right to investigate any such event or circumstance, and (ii) the right
and obligation to cure, mitigate, remediate, remedy and otherwise handle any
such event or circumstance on such terms and conditions and by such means as the
Indemnitor may reasonably determine, after consultation with the Indemnitee,
whose consent to such terms, conditions, and means shall
-7-
<PAGE>
not be unreasonably withheld. The Indemnitor shall promptly inform the
Indemnitee of all material developments related to any such event or
circumstance. So long as the Indemnitor is in good faith performing its
obligations under this Section 4(c), the Indemnitee shall at all times, at the
expense of the Indemnitor with respect to third-party charges, cooperate in all
reasonable ways with, make its and their relevant files and records available
for inspection and copying by, make its and their employees reasonably available
to and allow the Indemnitor reasonable access to its and their properties
(including for the purpose of invasive testing and remediation) and otherwise
render reasonable assistance to the Indemnitor upon request. If the Indemnitor
fails to perform its obligations under this Section 4(c), the Indemnitee shall
have the right, but not the obligation, upon notifying the Indemnitor in writing
to take the actions which the Indemnitor would have had the right to take in
connection with the performance of such obligations and, if the Indemnitee is
entitled to indemnification hereunder in respect of the event or circumstance as
to which the Indemnitee takes such actions, then the Indemnitor shall also
indemnify the Indemnitee for all of the legal, accounting and other costs, fees
and expenses reasonably and actually incurred in connection therewith, but
excluding any allocation for costs relating to in-house personnel.
Section 5. Mitigation; Indemnification
Limited to Agreement
---------------------------
Notwithstanding anything contained herein to the contrary, each party
shall use, and shall cause its subsidiaries to use, all reasonable efforts to
mitigate any and all Claims and Liabilities in respect of which it may be
entitled to indemnification or reimbursement hereunder. In addition, subject to
Section 10(d), this Agreement and the Service Agreements shall constitute the
only agreements between the parties hereto with regard to indemnification and
the other matters covered hereby, and no party shall, for any reason or under
any legal theory, be liable to any other party or any other person entitled to
indemnification or reimbursement, for special, indirect, incidental or
consequential damages incurred or sustained by any such other party or person
whether arising under contract, tort (including negligence), strict liability or
other theory of law, except with respect to wilful misconduct or gross
negligence of a party and except to the extent incurred or sustained by a third
party and sought to be recovered against such other party or person entitled to
indemnification.
-8-
<PAGE>
Section 6. Dispute Resolution.
------------------
(a) Unless specifically set forth in a Service Agreement, resolution
of any and all disputes ("Disputes") arising from or in connection with this
Agreement of any of the Service Agreements shall be exclusively governed by and
settled in accordance with the provisions of this Section 6; provided, however,
-------- -------
that nothing contained herein shall preclude either party from seeking or
obtaining (a) injunctive relief or (b) other non monetary equitable or judicial
relief to enforce the provisions hereof or to preserve the status quo pending
resolution of Disputes hereunder.
(b) Praxair or CB&I (each a "Party") may commence proceedings
hereunder by delivering a written notice to the other Party providing a
reasonable description of the Dispute to the other (the "Demand").
(c) Promptly following a Demand, the Dispute shall be referred to
representatives of the parties for decision, each party being represented by a
senior executive officer who has no direct operational responsibility for the
matters contemplated by this Agreement (the "Representatives"). The
Representatives shall promptly meet in a good faith effort to resolve the
dispute. If the Representatives do not agree upon a decision within thirty (30)
calendar days after reference of the matter to them, each of Praxair and CB&I
shall be free to exercise the remedies available to them at law.
Section 7. Confidentiality.
---------------
Except as provided in the Service Agreements, each party hereto agrees
to refrain from using in any manner, and to use its best efforts to keep
confidential, any and all information and data concerning the business of the
other party or its affiliates which it has received, or which it may in the
performance of this Agreement or any of the Service Agreements receive in the
future, except to the extent that such party can demonstrate that the
information (a) is generally available to the public as evidenced by prior
written publication through no act or failure to act by it, (b) was already
known to it on a non-confidential basis on the date of receipt as evidenced by
written and dated records made by it prior to such date of receipt (provided
that this exception shall only apply from and after the sale by Praxair of some
or all of its interest in CB&I and only with respect to records made after such
sale by the receiving party in the conduct of its business in the
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<PAGE>
ordinary course), or (c) is disclosed to it on a non-confidential basis by a
third party not having a confidential relationship with said other party with
respect to such information. Notwithstanding the foregoing, each of the parties
hereto shall be free to disclose any such information or data to the extent and
only to the extent (a) required by applicable law, and (b) during the course of
or in connection with any litigation, governmental investigation, arbitration or
other proceeding based upon or in connection with the subject matter of this
Agreement. Prior to any disclosure pursuant to the preceding sentence, the
disclosing party shall be required to give reasonable prior notice to the other
party to this Agreement of such intended disclosure and, if requested by such
party, to use its best efforts at such other party's expense to obtain a
protective order or similar protection for such other party.
Section 8. Retention of Records: Access.
-----------------------------
In accordance with its then current record retention policy, both
Praxair and CB&I shall (a) retain records, documents, accounting data and other
information relating to the businesses of the Praxair Group and the CB&I Group,
respectively; and (b) give to the other reasonable access to such records,
documents, accounting data and other information and to its personnel (insuring
their cooperation) and premises, for the purpose of the review of such
information in connection with any claim or dispute under, with respect to or
indemnifiable under this Agreement.
Section 9. Notices.
-------
Any notices or communications permitted or required hereunder shall be
deemed sufficiently given if hand-delivered, or sent (i) postage prepaid by
registered or certified mail return receipt requested, or (ii) by telecopy, to
the respective parties as set forth below, or to such other address as any party
may notify the other of in writing:
if to CB&I, to: Chicago Bridge & Iron Company
1501 North Division Street
Plainfield, Illinois 60544
Attn: General Counsel
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<PAGE>
if to Praxair, to: Praxair, Inc.
39 Old Ridgebury Road
Danbury, Connecticut 06817-0001
Attn: General Counsel
Notices sent by registered or certified mail shall be deemed delivered
on the fourth day after deposit in the U.S. mail and notices sent by telecopy
shall be deemed given on the day of transmission provided that a duplicate copy
is sent on the same day by first class U.S. mail.
Section 10. Miscellaneous.
-------------
(a) No person other than the members of the CB&I Group or the Praxair
Group shall be or be deemed to be a third party beneficiary of this Agreement.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without reference to its conflicts of
laws rules or principles. Any action to enforce, or which arises out of or is
in any way related to, any of the provisions of this Agreement shall be
brought and prosecuted in such court or courts located within the State of New
York as may be provided by law. The parties consent to the jurisdiction of such
court or courts and to service of process by registered mail, return receipt
requested, or such other manner as may be provided by law.
(c) This Agreement constitutes the entire understanding of the parties
and cancels and supersedes all previous agreements and understandings, oral or
written, between the parties with respect to the subject matter hereof.
(d) Notwithstanding anything to the contrary in this Agreement, this
Agreement shall not apply to any loss, cost, expense or other liability which is
the subject of any of the Service Agreements, any contract or arrangement with
respect to products, materials or services purchased by any Praxair company or
any CB&I company from the other, or any other written agreement or arrangement
or course of dealing between the parties with respect to their inter-company
accounts (including but not limited to, inter-company advances, loans,
dividends, and other similar matters) in existence as of the date hereof; and
nothing in this Agreement shall limit, expand or otherwise affect any of the
respective rights and obligations of the parties under the foregoing.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed and delivered by its duly authorized representatives as of the day
and year first written above.
PRAXAIR, INC.
By /s/Robert F.X. Fusaro
----------------------------
Title Attorney-in-Fact
-------------------------
CHICAGO BRIDGE & IRON COMPANY
By /s/Robert H. Wolfe
----------------------------
Title Vice President
-------------------------
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<PAGE>
SCHEDULE 1
Service Agreements
------------------
1. Cooperheat Separation Agreement
2. MQS Separation Agreement
3. Ershigs Separation Agreement
4. Argentina Separation Provisions
5. Tax Disaffiliation Agreement
6. Employee Benefits Agreement
7. Registration Rights Agreement
8. Chicago Bridge & Iron Company Promissory
Note in original principal amount of $55 million
9. Cash Management Operating Agreement
10. Insurance Agreement
11. Patent Arrangements
12. Support Agreement
13. Management fee letters, dated February 27, 1997
<PAGE>
EXHIBIT 10.12
3/17/97
AMENDED AND RESTATED TAX DISAFFILIATION AGREEMENT, dated as of by
and between Praxair, Inc., a Delaware corporation having its principal
offices at 39 Old Ridgebury Road, Danbury, Connecticut 06810-5113 ("PX") and
Chicago Bridge & Iron Company, a Delaware corporation having its principal
offices at 1501 North Division Street, Plainfield, Illinois 60544 ("Old CBIC")
and BIMV, Inc., a Delaware corporation to be renamed Chicago Bridge & Iron
Company ("New CBIC").
WHEREAS, Old CBIC was a wholly-owned subsidiary of, and a member of the
affiliated group under Section 1504 of the Internal Revenue Code of 1986 as
amended ("Section 1504") of CBI Industries, Inc., a Delaware corporation
("Industries"); and
WHEREAS, on January 12, 1996 PX acquired a majority of the common stock
of Industries and as a result Industries and its subsidiaries (including Old
CBIC) became members of PX's affiliated group under Section 1504; and
WHEREAS, in December 1996 Industries was merged into PX; and
WHEREAS, PX's wholly-owned subsidiary, Chi Bridge Holdings, a Delaware
corporation ("Holdings") owns all the outstanding shares of Old CBIC, and
Whereas, Old CBIC has declared a distribution of its Domestic Stock (as
defined in the Assignment Agreement #5) to Holdings; and
Whereas, Holdings owns all of the outstanding capital stock of New CBIC
and makes an additional capital contribution of certain assets to New CBIC (as
defined in the Contribution and Assumption Agreement #6); and
WHEREAS, PX intends to cause Chi Bridge to divest all or a majority of
its interest in New CBIC; and, as a consequence, New CBIC and the New CBIC
subsidiaries will no longer be members of PX's affiliated group under Section
1504; and
WHEREAS, PX and New CBIC desire to set forth their rights and
obligations with respect to taxes due for periods both before and after the date
on which New CBIC ceases to be a member of Praxair's affiliated group under
Section 1504.
NOW THEREFORE, for and in consideration of the premises and the mutual
covenants herein, the parties hereto agree as follows:
<PAGE>
3/17/97
Article I
Definitions
-----------
For the purpose of this Agreement,
1.01 "affiliated group" shall have the meaning set forth in Section
----------------
1504 of the Code.
1.02 the "amount" of any liability for, or refund of, taxes shall be
-------
determined in accordance with applicable tax principles (and without regard to
the amount recorded for financial statement purposes) and shall mean the amount
in United States dollars or, if expressed in foreign currency, its value in
United States dollars at the translation rate based on the noon spot rates of
exchange quoted by Chase Manhattan Bank, New York, New York (or its successor),
on the last business day which is five business days prior to the date of the
settlement for such item.
1.03 "CB&I Companies" shall have the meaning as given to such term in
---------------
the Separation Agreement.
1.04 "New CBIC Retained Tax Liabilities" shall mean the liabilities of
---------------------------------
New CBIC set out in Section 2.02.
1.05 "Code" shall mean the Internal Revenue Code of 1986, as amended.
------
1.06 "Date of Transfer" shall mean the last day on which New CBIC is a
----------------
member of the affiliated group of which PX is the common parent within the
meaning of Section 1504(a) of the Code, such membership ceasing because of the
Transfer. The close of the Date of Transfer shall be 11:59 PM on the date of
transfer.
1.07 "Deemed Dividend" shall mean any income generated under Section 951
-----------------
of the Code.
1.08 "Final Determination" shall mean with respect to any issue (1) a
-------------------
decision, judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order has become final
and not subject to further appeal, (2) a closing agreement entered into under
Section 7121 of the Code or any other binding settlement agreement (whether or
not with the Internal Revenue Service) entered into in connection with or in
contemplation of an administrative or judicial proceeding, or (3) the completion
of the highest level of administrative proceedings if a judicial contest is not
or is no longer available.
1.09 "Formula" shall have the meaning set forth in Section 3.02(b)
-------
hereof.
1.10 "Other Party" shall have the meaning set forth in Section 5.01
-----------
hereof.
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1.11 "Period After Transfer" shall mean any taxable year or other
---------------------
taxable period beginning after the close of the Date of Transfer and, in the
case of any taxable year or other taxable period that includes the Date of
Transfer but does not end on such date, that part of the taxable year or other
taxable period that begins after the close of the Date of Transfer.
1.12 "Period Before Transfer" shall mean any taxable year or other
----------------------
taxable period that ends on or before the Date of Transfer and, in the case of
any taxable year or other taxable period that includes the Date of Transfer,
that part of the taxable year or other taxable period through the close of the
Date of Transfer.
1.13 "PX Retained Tax Liabilities" shall mean the liabilities of PX set
---------------------------
out in Section 2.04.
1.14 "Responsible Party" shall have the meaning set forth in Section
-----------------
5.01 hereof.
1.15 "Reverse Timing Adjustment" shall mean an audit or other adjustment
-------------------------
with respect to the CB&I Companies for a Period Before Transfer that is
available to reduce the taxes of Old CBIC or a Subsidiary of Old CBIC for any
Period Before Transfer (whether or not the affiliated group of which PX is the
common parent is actually able to use such adjustment to reduce the affiliated
group's tax for any period) and which may increase the taxes of New CBIC or a
Subsidiary of New CBIC for any Period After Transfer.
1.16 "Separation Agreement" shall mean the Separation Agreement of even
--------------------
date herewith by and between PX and Old CBIC and other persons who become
party thereto, as from time to time amended.
1.17 "Subsidiary" shall mean a corporation, partnership, joint venture
----------
for other business entity if 10% or more of the outstanding equity or voting
power of the entity is owned directly or indirectly by the corporation with
respect to which such term is used. For purposes of this Agreement, (i) MQS
Inspections, Inc., Cooperheat, Inc. and Ershigs, Inc. shall not be considered to
be Subsidiaries of Old CBIC or New CBIC; instead, each of those three companies
shall be deemed, with respect to the Period Before Transfer when any is a member
of the affiliated group under Section 1504 of either PX or Industries, to be a
wholly-owned subsidiary of Chi Bridge and (ii) except as otherwise specifically
stated the Subsidiaries of PX shall not include Old CBIC or New CBIC or their
Subsidiaries.
1.18 "tax" or "taxes" whether used in the form of a noun or adjective
--- -----
shall mean taxes on or measured by income, franchise, gross receipts, sales,
use, excise, payroll, personal property, real property, ad-valorem, value-added,
leasing, leasing use or other taxes, levies, imposts, duties, charges or
withholdings of any nature. Whenever
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3/17/97
the term "tax" or "taxes" is used, whether modified or not, it shall include
penalties, fines, additions to tax and interest thoreon.
1.19 "Tax Sharing Practice" means the practice of sharing the tax
--------------------
liabilities of PX, Industries, Old CBIC, New CBIC and their respective
Subsidiaries for taxes on, or measured by, income that are reported on a
consolidated, combined, unitary or similar basis, as more fully described in
Section 2.01 hereof.
1.20 "Timing Adjustment" shall mean an audit or other adjustment with
-----------------
respect to the CB&I Companies for a Period Before Transfer that is available to
reduce the taxes of New CBIC or a Subsidiary of New CBIC for any Period After
Transfer (whether or not New CBIC or a Subsidiary of New CBIC is actually able
to use such adjustment to reduce its tax liability currently or in the future),
including without limitation a disallowance of foreign tax credits claimed for
a Period Before Transfer that are eligible to be carried forward and used by New
CBIC or a Subsidiary of New CBIC in a Period After Transfer.
1.21. "Transfer" shall mean Chi Bridge's transfer of sufficient shares
--------
of New CBIC to cause New CBIC to no longer be a member of PX's affiliated group
under Section 1504.
Article II
Liabilities for, and Refunds of, Taxes
--------------------------------------
2.01 Tax Sharing Practice. Payments and Termination.
----------------------------------------------
(a) PX and New CBIC acknowledge that the Tax Sharing Practice
requires New CBIC in the case of consolidated, combined, unitary or similar tax
returns to pay to PX the amount of taxes on, or measured by income, for which
Old CBIC would be liable if it filed such a return as the common parent (or
similar agent) for its affiliated (or similar) group, except that
(i) dividends or Deemed Dividends from Old CBIC's foreign
Subsidiaries are not includible in income of Old CBIC or any
Subsidiaries of Old CBIC;
(ii) New CBIC is liable for that proportion of the
consolidated alternative minimum tax liability of the affiliated
group of which PX or Industries is the common parent that the
alternative minimum taxable income of Old CBIC and its Subsidiaries
(determined under the terms of the Tax Sharing Practice as modified
by this Article II) bears to the consolidated alternative minimum
taxable income of the affiliated group of which PX or Industries is
the common parent;
(iii) New CBIC is liable for that proportion of environmental
tax liability, as defined in and pursuant to Code Section 59A, of
the affiliated group of which PX is the common parent that the
modified alternative
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3/17/97
minimum taxable income of Old CBIC and its Subsidiaries (determined
under the terms of the Tax Sharing Practice as modified by this
Article II) bears to the consolidated modified alternative minimum
taxable income of the affiliated group of which PX or Industries is
the common parent;
(iv) PX pays New CBIC thirty five percent (35%) of any net
operating losses or capital losses of Old CBIC (determined under
the terms of the Tax Sharing Practice as modified by this Article
II) which actually reduce the amount of tax liability of the
affiliated group of which PX or Industries is the common parent;
(v) PX pays New CBIC for any general business credits (as
defined in Code Section 38) of Old CBIC (determined under the terms
of the Tax Practice as modified by this Article II) that actually
reduce the tax liability of the affiliated group of which PX or
Industries is the common parent; and
(vi) minimum tax credit (as defined in Code Section 53) is
allocated to New CBIC in the same proportion as the allocation of
consolidated alternative minimum tax liability; and
(vii) Old CBIC's taxable income shall not include any item of
income arising out of (A) any disposition or other transfer of MQS
Inspections, Inc., Cooperheat, Inc. or Ershigs, Inc., (B) any
disposition or other transfer in connection with the
Reorganization, as defined in the Form S-1 Registration Statement
of Chicago Bridge & Iron Company N.V., as amended or (C) New CBIC's
ceasing to be a member of a consolidated, combined, unitary or
similar tax group as a result of the Transfer; and
(viii) PX shall receive the tax benefit related to Industries
restricted stock and stock options held by the employees of Old
CBIC and its Subsidiaries.
(b) Subject to the provisions of Article 7, PX, with cooperation of
New CBIC, shall initially determine the amount owed to PX or New CBIC under the
Tax Sharing Practice as modified by this Article II for the last two Periods
Before Transfer within 30 (thirty) calendar days after the filing of the tax
returns that include those periods, based upon the tax shown as due on PX tax
returns as originally filed and taking into account any prior estimated taxes
paid by either. PX and New CBIC acknowledge that PX and Old CBIC have made
quarterly estimated payments pursuant to the Tax Sharing Practices through the
Date of Transfer. If such payment exceed Old CBIC's liability pursuant to the
Tax Sharing Practice with respect to any applicable Period Before Transfer, PX
shall refund such excess to New CBIC. After returns are filed by PX or
Industries with respect to any Period Before Transfer, Sections 2.02, 2.03,
2.04, 2.06 and 3.01 shall be the sections of this Agreement governing the
consequences of adjustments to such returns.
(c) Except as set forth in this Section 2.01(c), any and all prior
tax sharing agreements or practices between Old CBIC or any of its Subsidiaries
with PX or Industries or any of their Subsidiaries, shall be terminated with
respect to New CBIC
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<PAGE>
3/17/97
and its Subsidiaries as of the Date of Transfer and, from and after the Date of
Transfer, neither New CBIC or any of its Subsidiaries nor PX or any of its
Subsidiaries shall have any further rights or liabilities thereunder. The Tax
Sharing Practice as described in Section 2.01 (a) shall continue in effect as
set forth in Sections 2.01(b), 2.02(c) and 2.04(b) of this Agreement. Nothing
in this Section 2.01(c) shall be construed to terminate the Separation
Agreement.
2.02 "Liability of New CBIC" New CBIC shall be liable for, and shall
---------------------
indemnify, defend and hold PX (on its own behalf and as the successor of
Industries) and its Subsidiaries, harmless against,
(a) in the case of any Period Before Transfer;
(i) any liability for federal income taxes caused by a (A)
computational error in reporting items of income, gain, loss,
deduction or credit (such as an unintentional erroneous exclusion
of an item of income or a double inclusion of the same item of
deduction) of Old CBIC or its Subsidiaries for federal income tax
purposes, (B) Timing Adjustments with respect to the CB&I
Companies, whether operated by Old CBIC or its Subsidiaries, (C)
disallowance of research and development credits for federal income
tax purposes claimed by Old CBIC or its Subsidiaries (after giving
effect to any deduction for research and development expenses
allowed, if any, as a direct result of the disallowance of such
research and development credits) to the extent such credits were
actually utilized in a consolidated tax return filed by PX or
Industries;
(ii) any liability for state or local taxes on or measured by
income caused by an item described in (a)(i)(A) or (B) above if for
purposes of such tax a consolidated, combined or unitary return
that included Old CBIC or a Subsidiary of Old CBIC and PX (or
Industries) or a subsidiary of PX (or Industries) was filed;
(iii) any liability with respect to separate returns for state
or local taxes on or measured by income filed by PX (or Industries)
or any of PX (or Industries) Subsidiaries to the extent caused by a
Timing Adjustment with respect to the CB&I Companies (such as the
disallowance of a deduction claimed by PX (or Industries) or any of
PX (or Industries) Subsidiary that is available to New CBIC or a
New CBIC Subsidiary in a Period After Transfer);
(iv) any sales, use, property, transfer, value added, excise
and similar taxes with respect to the CB&I Companies;
(v) any payroll taxes with respect to employees of Old CBIC and
its Subsidiaries;
(vi) any liability for taxes attributable to fraudulent acts of
Old CBIC or any Old CBIC Subsidiaries, or an employee of the CB&I
Companies while acting as an employee of the CB&I Companies; and
(vii) any liability for taxes in foreign jurisdictions incurred
by any foreign Subsidiaries of Old CBIC.
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<PAGE>
3/17/97
(b) in the case of any Periods After Transfer, any liabilities of
New CBIC and its Subsidiaries for taxes; and
(c) in the case of the last two Periods Before Transfer, the amount
(if any) owed by New CBIC under the Tax Sharing Practice as modified by Section
2.01 and Section 2.01(b).
The foregoing liabilities of New CBIC as set forth in paragraphs (a) through (c)
above (hereinafter referred to as "New CBIC Retained Tax Liabilities") shall
apply regardless of when they arose or arise or whether the facts on which they
are based occurred prior or subsequent to the Transfer and regardless of where
or against whom they are asserted or determined or whether they are asserted or
determined prior or subsequent to the Transfer and regardless of whether they
are known or unknown, fixed or contingent, accrued or unaccrued, asserted or
unasserted. Provided, however, that New CBIC shall have no liability pursuant to
this Section 2.02, except to the extent arising out of adjustments determined as
a result of an audit or other official examination made by a taxing authority.
2.03 Refunds of Taxes.
----------------
(a) New CBIC shall be entitled to any refunds, credits, losses,
deductions or other tax items in favor of Old CBIC or a Subsidiary of Old CBIC
or attributable to the CB&I Companies which are related to or associated with
New CBIC Retained Tax Liabilities and are received by PX or its Subsidiaries
other than refunds of taxes on, or measured by, income for periods for which Old
CBIC or the Subsidiary of Old CBIC was included in a consolidated, combined or
unitary return that included PX (or Industries) or a Subsidiary of PX (or
Industries). The amount of any refund due New CBIC for any Period Before
Transfer shall be determined through a recalculation of New CBIC Retained Tax
Liabilities under the principles of Section 2.02. With respect to taxes on, or
measured by, income for Periods Before Transfer for which consolidated, combined
or unitary returns that included Old CBIC or a Subsidiary of Old CBIC and PX (or
Industries) or a Subsidiary of PX (or Industries) were filed, New CBIC shall be
entitled to any refund of taxes, without regard to actual receipt by PX,
attributable to (i) a computational error in reporting items of income, gain,
loss, deduction or credit (such as an unintentional erroneous double inclusion
of the same item of income or an exclusion of an item of deduction) of Old CBIC
or its Subsidiaries, (ii) a Reverse Timing Adjustment with respect to the CB&I
Companies, whether operated by Old CBIC or its Subsidiaries, or (iii) any
increase in research and development credits for federal income tax purposes of
Old CBIC or its Subsidiaries (after giving effect to any deduction for research
and development expenses disallowed, if any, as a direct result of the increase
of the allowance of such research and development credits). New CBIC shall be
entitled to any refund of taxes of New CBIC or its Subsidiaries for any Period
After Transfer.
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(b) Except as otherwise provided in Section 2.03(a) or 3.01, PX
shall have the sole and exclusive right to receive, retain and use all refunds,
credits, losses, deductions or other tax items associated with or related to
taxes for Periods Before Transfer regardless of when or by whom they are
received, regardless of when or in favor of whom they arise or arose, regardless
of whether the facts on which they are based occurred before or after the
Transfer, regardless of whether they are attributable to carrybacks or
otherwise, and regardless of whether they are determined prior or subsequent to
the Date of Transfer.
2.04 Liability of PX. PX shall be liable for, and shall indemnify,
---------------
defend and hold New CBIC and its Subsidiaries harmless against,
(a) any liability for taxes of PX and Subsidiaries or of Old CBIC
and its Subsidiaries for Periods Before Transfer other than the New CBIC
Retained Tax; Liabilities;
(b) in the case of the last two Periods Before Transfer, the amount
(if any) owed by PX and its Subsidiaries other than Old CBIC and Old CBIC
Subsidiaries' liability under the Tax Sharing Practice and Section 2.01(b);
(c) any liability for taxes attributable to fraudulent acts of PX
or Industries or any Subsidiary of PX or Industries, or to any employees
thereof; except to the extent such acts result from or are done by any employee
of the CB&I Companies or are based upon information provided by any employee of
the CB&I Companies; and
(d) in the case of any Periods After Transfer, any liabilities of
PX and its Subsidiaries for taxes;
(e) any tax liability arising out of any of the events described
in Section 2.01(a)(vii); and
(f) any transactional tax liability generated by the transfer of
the interest of CMP Holdings B.V. held by New CBIC's wholly owned subsidiary CBI
Na-Con, Inc.
The foregoing tax liabilities of PX as set forth in paragraphs (a) through (e)
above (hereinafter referred to as "PX Retained Tax Liabilities") shall apply
regardless of when they arose or arise or whether the facts on which they are
based occurred subsequent to the Transfer and regardless of where or against
whom they are asserted or determined or whether they are asserted or determined
prior or subsequent to the Transfer and regardless of whether they are known or
unknown, fixed or contingent, accrued or unaccrued, asserted or unasserted.
2.05 Period that Includes the Date of Transfer. Whenever it is necessary
----------------------------------------------
for purposes of this Agreement or the Tax Sharing Practice to determine the
income tax
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liability of New CBIC or Old CBIC or a Subsidiary of New CBIC for a taxable year
that begins on or before and ends after the Date of the Transfer, the
determination shall be made by assuming that New CBIC or Old CBIC or their
Subsidiaries had a taxable year which ended at the close of the Date of the
Transfer, except that exemptions, allowances or deductions that are calculated
on an annual basis shall be apportioned on a time basis.
2.06 Payments After Tax. Any payment required to be made by New CBIC or
------------------
PX under this Agreement (other than under Section 9.01 ) shall be increased so
that the net amount retained by the corporation to which payment is due, after
deduction of any tax due thereon (taking into account any available deduction or
exclusion), shall be equal to the amount otherwise due. In determining the
amount of any adjustment required under this Section 2.06, a rate equal to the
then maximum federal marginal corporate income tax rate plus five (5) percentage
points shall be used. All parties agree to report payments to each other
hereunder as non-includible and non-deductible to the extent permitted under
applicable law.
Article III
Carrybacks and Carryovers
-------------------------
3.01 Carrybacks. If New CBIC or any Subsidiary of New CBIC has an US
----------
Federal net operating or capital loss or unused foreign tax or other credit for
a Period After Transfer, it shall not, and shall not permit any of its
subsidiaries to, without the prior written consent of PX, claim, use or apply
any carryback from Periods After Transfer to Periods Before Transfer if such
claim, use or application would, in PX's sole judgment, affect PX's tax
liabilities for any period. Notwithstanding the foregoing, if the Code or other
applicable statute requires such an item first to be carried back to a Period
Before Transfer (and such item cannot by the making of an election or otherwise
be carried forward without first being carried back), or if PX shall give New
CBIC prior written consent to claim, use or apply any carryback to a Period
Before Transfer for which an election to waive the carryback is available, such
item shall be so carried back and, when and to the extent that such carryback
shall result in a decrease in PX's cumulative income taxes paid, PX will pay to
New CBIC or the Subsidiary of New CBIC fifty percent (50%) of the amount of such
decrease at the time such decrease is realized by refund or otherwise plus any
interest that is received on any decrease realized by refund or that would have
been received had such decrease not resulted in a reduction in a liability for
income taxes. If the carryback is subsequently disallowed on audit, New CBIC
shall reimburse PX in an amount equal to the amount of carryback refund and
interest PX paid to New CBIC plus interest thereon at the rate under applicable
statute paid by PX thereon.
3.02 Carryovers.
----------
(a) If PX and its Subsidiaries (including for these purposes Old
CBIC and its Subsidiaries) or if Industries and its Subsidiaries (including for
these purposes
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Old CBIC and its Subsidiaries) have a federal consolidated net operating loss,
capital loss, excess foreign tax paid or other unused credits for a Period
Before Transfer, the amount of any carryover of such item that is apportioned to
New CBIC or a Subsidiary of New CBIC for a Period After Transfer shall be
determined in accordance with Treasury Regulations section 1.1502-79 or any
similar provisions of state or local law. If New CBIC or a Subsidiary of New
CBIC is permitted pursuant to this Section 3.02 to carry over any net operating
losses, tax credits or similar items from a Period Before Transfer to Periods
After Transfer for which PX has previously given credit to, or paid, Old CBIC or
Old CBIC has previously received the benefit thereof, under the Tax Sharing
Practice as modified hereby, New CBIC shall reimburse PX in the amount of such
previous credit or payment (or benefit)
(b) New CBIC and its Subsidiaries shall carryover their share of
consolidated unused minimum tax credits for any Period Before Transfer
determined by the proportion that the alternative minimum taxable income of Old
CBIC and its Subsidiaries (determined as though Old CBIC filed a consolidated
federal income tax return as the common parent of an affiliated group) bears to
the consolidated alternative minimum taxable income of the affiliated group of
which PX or Industries is the common parent (the "Formula").
Article IV
Returns: Payments of Liabilities
--------------------------------
4.01 Obligations to File. New CBIC shall file or cause to be filed when
-------------------
due all returns in respect of taxes of New CBIC and its Subsidiaries falling due
(taking into account all extensions), except that PX shall file or cause to be
filed, for any taxable year or period that begins on or before the Date of
Transfer, consolidated federal income tax returns for the affiliated group of
corporations of which PX is the common parent and any combined, consolidated or
unitary state or local tax return that includes Old CBIC or any of its
Subsidiaries and PX or any of its Subsidiaries. Consistent with the Tax Sharing
Practice (as modified hereby), New CBIC and its Subsidiaries shall agree to any
election or consent reasonably requested by PX in connection with such returns
and further agree not to elect to be excluded from any such return and PX shall
include in any return the income, activities, operations and transactions of New
CBIC and/or any Subsidiary or Subsidiaries that is eligible to be included.
4.02 Cooperation When Filing Returns. PX and New CBIC shall cooperate
-------------------------------
with each other in the filing of any returns and shall execute such documents,
consent to such elections and make available such documents as are necessary to
carry out the provisions of this Agreement.
4.03 Payments. Payments under Sections 2.02(c) or 2.04(b) shall be due
--------
in the case of a payment by PX not later than five (5) business days prior to
the filing of the tax return to which the payment relates, and in the case of a
payment by New CBIC upon twenty (20) business days' notice (but not earlier than
twenty (20) business days
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prior to the filing of the tax return to which the payment relates). Other
payments under Sections 2.02 and 2.04 shall be due not later than twenty (20)
business days after receipt of notice of a Final Determination that the
indemnified party is liable for an indemnified cost. Payments under Sections
2.03, 3.01 and 3.02 shall be due not later than twenty (20) business days after
the applicable benefit is realized by refund or otherwise.
4.04 Notice. PX and New CBIC shall give each other prompt notice of any
------
payment that may be due under this Agreement. However, failure to give prompt
notice of any payment that may be due under this Agreement shall not be
considered justifiable reason for nonpayment or forgiveness of any obligation
under this Agreement.
Article V
Tax Audits
----------
5.01 Conduct. Subject to Section 5.02 hereof, New CBIC shall have
-------
responsibility for all audits or other proceedings involving New CBIC Retained
Tax Liabilities, except that PX shall be solely responsible for and solely
control any audit or other proceeding involving a return which was (or which the
taxing authority alleges should have been) filed on a consolidated, combined or
unitary basis and included Old CBIC or a Subsidiary of Old CBIC and PX or a
Subsidiary of PX, including, but not limited to, the consolidated federal income
tax return to be filed by Industries for the year ended December 31, 1995 and
prior years, the consolidated federal income tax return to be filed by PX for
the year ending December 31, 1996 and a return of PX or Subsidiary of PX for any
period which included any part of the CB&I Companies. The party responsible for
the audit or other proceeding (hereafter, the "Responsible Party") shall use all
reasonable efforts to resist any deficiency assertions by any taxing authority
regardless of the party who is ultimately responsible for any such tax under
this Agreement. The Responsible Party shall be entitled to receive, at least
twenty (20) business days in advance of any payment that it makes in connection
with the settlement or other disposition of such proceeding, the part of any
such payment for which the other party (hereafter, the "Other Party") is liable
under Article II hereof.
5.02 Notification, etc. The Responsible Party shall give the Other Party
-----------------
prompt notice of any proposed adjustment and any discussions that are likely to
result in a proposed adjustment to a return that may result in an aggregate
liability of the Other Party under Article II of this Agreement of more than $1
million for any taxable year in the case of federal income taxes, $500,000 for
any taxable year in the case of state and local income or franchise taxes, and
$100,000 for any taxable year in the case of sales and use taxes, payroll taxes
and property taxes. Once the Other Party is entitled to notice pursuant to the
preceding sentence, the Responsible Party shall involve the Other Party in the
disposition of the matter by, among other things, providing the Other Party with
information about the nature and amounts of the proposed adjustments (including
as they are revised from time to time), permitting the Other Party to prepare
submissions to the taxing authority or court which may propose such an
adjustment
-11-
<PAGE>
3/17/97
and, in the sole discretion of the Responsible Party, permitting the Other Party
to take up the proposed adjustment directly with such taxing authority. The
Responsible Party will not agree, without the consent of the Other Party, to any
proposed adjustment to a return that would result in an aggregate liability of
the Other Party under Article II of more than $1 million for any taxable year in
the case of federal income taxes, $250,000 for any taxable year in the case of
state and local income and franchise taxes, and $100,000 for any taxable year in
the case of sales and use taxes, payroll taxes and property taxes. The Other
Party shall have 30 business days after receipt of notice from the Responsible
Party that the tax authority has formally proposed an adjustment within which to
consent or not to consent thereto, and if the Other Party, acting reasonably and
in good faith, notifies the Responsible Party within such 30 day period that it
does not consent to such proposed adjustment, it shall assume the conduct of any
such audit, with counsel selected by it (and satisfactory to Responsible Party),
at Other Party's sole expense, insofar as the audit relates to items for which
the Other Party may incur a liability under Article II, and thereafter the Other
Party and the Responsible Party shall jointly be responsible for the conduct of
such audit and any further proceedings with respect to such items. Failure to
respond to the Responsible Party within such 30 day period or thereafter to
assume responsibility for the conduct of the audit or other proceeding shall
entitle the Responsible Party to agree to the proposed adjustment. If the Other
Party has assumed responsibility for the conduct of the audit or other
proceeding, no payment shall be required under Article II until there is a Final
Determination; provided, however, if the Other Party desires to conduct the
-------- -------
proceeding or contest in a manner requiring payment of the proposed tax
deficiency, the Other Party must advance the appropriate amount of funds to the
Responsible Party on an interest-free basis.
5.03 Cooperation. PX and New CBIC shall cooperate with each other in the
-----------
conduct of any audit or other proceeding and each shall execute and deliver such
powers of attorney and make available such other documents as are necessary to
carry out the provisions of this Agreement. Each party agrees to notify the
other party of any audit adjustments which do not result in tax liability but
can be reasonably expected to affect tax returns of the other party, or any of
the Subsidiaries, for a Period After Transfer.
Article VI
Retention of Records: Access
----------------------------
In accordance with its then current record retention policy, both PX and
its Subsidiaries, and New CBIC and its Subsidiaries shall (a) retain records,
documents, accounting data and other information (including computer data)
necessary for the preparation and filing of all returns in respect of taxes of
PX, Old CBIC and New CBIC or for the audit of such returns; and (b) give to the
other reasonable access to such records, documents, accounting data and other
information (including computer data) and to its personnel (insuring their
cooperation) and premises, for the purpose of the review or audit of such
returns. Each party shall make available, at no cost to the other, such forms
and other information as are necessary to enable the other to meet
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<PAGE>
3/17/97
its obligations under Article IV on time and to file accurate and timely income
tax returns that the other is required to file under Article IV.
Article VII
Disputes
--------
If PX and New CBIC cannot agree on any calculation of PX Retained Tax
Liabilities or New CBIC Retained Tax Liabilities required under this Agreement,
such calculation shall be made by any independent public accounting firm
acceptable to both PX and New CBIC. The decision of such firm shall be final and
binding. The fees and expenses incurred in connection with such calculation
shall be borne equally by PX and New CBIC.
Article VIII
Termination of Liabilities
--------------------------
Notwithstanding any other provision in this Agreement, any PX Retained
Tax Liabilities and New CBIC Retained Tax Liabilities determined under this
Agreement shall not terminate any earlier than the expiration of the applicable
statute of limitation for such liability. A11 covenants under this Agreement
shall survive indefinitely.
Article IX
Miscellaneous Provisions
------------------------
9.01 Certain Expenses. Except as otherwise provided in this
----------------
Agreement, each party agrees to pay its own expenses, fees, costs (including
without limitation, legal, accounting and consulting expenses) incurred in
connection with the execution and performance of this Agreement.
9.02 Notices. All notices required or permitted to be given
-------
pursuant to this Agreement shall be given in writing, shall be transmitted by
personal delivery, by registered or certified mail, return receipt requested, or
by telecopier or other electronic means and shall be addressed as follows:
When PX is the intended recipient:
Praxair, Inc.
Director of Taxes
39 Old Ridgebury Road
Danbury, Connecticut O6810-5113
Telecopy No. (203) 837-2559
When New CBIC is the intended recipient:
Chicago Bridge & Iron Company
Director of Taxes
1501 North Division Street
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<PAGE>
3/17/97
Plainfield, Illinois 60544
Telecopy No. (815) 439-4040
A party may designate a new name or a new address to which notices required or
permitted to be given pursuant to this Agreement shall thereafter be transmitted
by giving written notice to that effect to the other party. Each notice
transmitted in the manner described in this Section 9.02 shall be deemed to have
been given, received and become effective for all purposes at the time it shall
have been (i) delivered to the addressee as indicated by the return receipt (if
transmitted by mail), the receipt of the messenger (if transmitted by personal
delivery) or the answer back or call back (if transmitted by telecopier or other
electronic means) or (ii) presented for delivery to the addressee as so
indicated during normal business hours, if such delivery shall have been refused
for any reason.
9.03 Governing Law.
-------------
The validity, interpretation, performance and enforcement of this
Agreement shall be governed by the law of the state of New York, without regard
to its conflict of law provisions.
9.04 Binding Effect; No Assignment; Third Party Beneficiaries.
--------------------------------------------------------
This Agreement shall be binding on the parties and their respective
successors and assigns and shall inure to the benefit of the parties and their
respective successors and assigns. Neither PX nor New CBIC shall assign any of
its rights or delegate any of its duties under this Agreement without the prior
written consent of the other party. No person (including, without limitation,
any employee of a party or any stockholder of a party) shall be, or shall be
deemed to be, a third party beneficiary of this Agreement.
9.05 Duplicate Liability.
-------------------
Notwithstanding anything herein to the contrary, no party shall be
liable to pay twice to the other party for the same liability incurred by the
other party.
9.06 Entire Understanding
--------------------
This Agreement constitutes the entire understanding of the parties
hereto concerning the tax liabilities of the parties and their Subsidiaries. No
modification of this Agreement or waiver of the terms, conditions and rights
hereunder will be binding on either party unless signed in writing by an
authorized representative of such party.
This Agreement supercedes and replaces the Tax Disaffiliation
Agreement dated January 1, 1997 by and between PX and Old CBIC. Each of PX and
Old CBIC and New CBIC, by executing this Agreement (i) agree and acknowledge
that the agreement being superceded and replaced shall be null and void as if it
had not been executed and delivered by each of them and (ii) hereby waive all of
their respective rights pursuant to the agreement being superceded and replaced
and release each other from all obligations thereunder.
-14-
<PAGE>
3/17/97
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement.
PRAXAIR, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
CHICAGO BRIDGE & IRON CO.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
taxdisaf.sam/wfm
-15-
<PAGE>
EXHIBIT 10.13
EMPLOYEE BENEFITS AGREEMENT
---------------------------
AGREEMENT, dated as of January 1, 1997, by and between PRAXAIR, INC.,
a Delaware corporation (hereinafter referred to as "Praxair") and CHICAGO BRIDGE
& IRON COMPANY, a Delaware corporation (hereinafter referred to as "Bridge").
(Bridge and all its subsidiaries are hereinafter referred to as the "Bridge
Group.")
W I T N E S S E T H:
WHEREAS, as a result of an Agreement and Plan of Merger among Praxair,
PX Acquisition Corporation and CBI Industries, Inc., a Delaware corporation,
("CBI Industries"), dated as of December 22, 1995, Praxair acquired all of the
common stock of CBI Industries, and Bridge became an indirect subsidiary of
Praxair; and
WHEREAS, upon the filing of a Certificate of Ownership and Merger with
the Secretary of State of Delaware on December 19, 1996, CBI Industries was
merged with and into Praxair; and
WHEREAS, Praxair intends to sell some or all of its interest in
Bridge, and, in anticipation of such sale, Praxair and Bridge desire to define
their respective rights and obligations with respect to certain employee benefit
plans and liabilities;
<PAGE>
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein and other good, valuable and sufficient consideration, the
receipt of which is hereby acknowledged, the parties, intending to be legally
bound, hereby agree as follows:
1. (a) Effective as of the January 1, 1997 (hereinafter the
"Effective Date"), Praxair will assume sponsorship of the CBI Pension Plan, and
have sole responsibility for making required contributions to such Plan. Bridge
shall, and shall cause its United States subsidiaries to, continue to
participate in the CBI Pension Plan. Neither Bridge nor any of its United
States subsidiaries may cease such participation without Praxair's express
written approval. Bridge will pay to Praxair, with respect to the benefits
under the CBI Pension Plan, the principal sum of seventeen million two hundred
seventy thousand dollars ($17,270,000.00), plus interest accrued from the
Effective Date at the rate of seven and one-half percent (7 1/2%) per annum.
Subject to Paragraph 9(a) of this Agreement, such payments shall constitute
Bridge's total and sole obligation with respect to CBI Pension Plan and its
related trust for all present and future benefits accrued under the CBI Pension
Plan for any participant and all costs and expenses related thereto. The
principal shall be paid in twelve annual payments commencing on December 1, 1997
and continuing on each December 1st until and including December 1, 2008. Each
such payment shall consist of a principal repayment of one million four hundred
thirty-nine thousand one hundred sixty-six dollars and sixty-six cents
($1,439,166.66), plus all interest accrued to the date of such payment.
-2-
<PAGE>
(b) Praxair shall have sole authority to administer and amend the CBI
Pension Plan, and to manage the assets thereof; provided, however, that (unless
such amendment is required by law) no amendment shall be made which affects the
benefits of Bridge Group employees without the consent of Bridge, which consent
shall not unreasonably be withheld. Bridge shall not be, and shall not be
deemed to be, either the plan administrator, a contributing sponsor or a named
fiduciary for any purpose under the CBI Pension Plan.
2. (a) Praxair will retain sole responsibility for retiree life and
medical benefits for individuals who retired with an immediate entitlement to
such benefits from CBI Industries or its affiliates prior to the Effective Date
("Retiree Benefits"). Bridge will pay to Praxair, with respect to the Retiree
Benefits, the principal sum of twenty-one million four hundred thousand dollars
($21,400,000.00), plus interest accrued from the Effective Date at the rate of
seven and one-half percent (7 1/2%) per annum. Subject to Paragraph 9(a) of
this Agreement, the sum of such payments, plus the payment of the amounts set
forth in Schedule 2(b) hereto, shall constitute Bridge's total and sole
obligation with regard to the Retiree Benefits for all present and future
benefits accrued under the Retiree Benefits for any participant and all costs
and expenses related thereto. The principal shall be paid in twelve annual
payments, commencing on December 1, 1997 and continuing on each December 1st
until and including December 1, 2008. Each such payment shall consist of a
principal repayment of one million seven hundred eighty-three thousand three
hundred thirty three dollars and thirty-three cents ($1,783,333.33), plus all
interest accrued to the date of such payment.
-3-
<PAGE>
(b) During calendar year 1997, Bridge shall provide administrative
services with respect to the Retiree Benefits. Effective 1998, and continuing
thereafter, Praxair shall have responsibility for providing such services.
Bridge's compensation for providing such services for 1997, and Praxair's
compensation for providing such services for 1998, shall be deemed for purposes
of this Agreement to be equal, and neither party shall owe the other with
respect to the provision of such services during those two years. Commencing in
1999, Bridge shall pay Praxair for its share of such services. Although such
services will be provided by Praxair for a protracted period of time, the
parties have agreed that Bridge shall pay Praxair for its share of such services
for the entire time they are provided by Praxair, but that such payments shall
be paid to Praxair by Bridge over a period extending from December 1, 1999 to
December 1, 2009, inclusive, as set forth in Schedule 2(b) hereto. Bridge may
make prepayments of such amounts only as agreed to by the parties from time to
time. Except to the extent it acts a fiduciary during 1997, Bridge shall not
be, and shall not be deemed to be, either the plan administrator or a named
fiduciary for any purpose under the Retiree Benefits.
(c) The parties acknowledge that the payments to Praxair under
Paragraph 2(a) have been calculated on the assumption that benefits under the
Retiree Benefits will not be reduced by amendment in the future. In the event
Praxair amends the Retiree Benefits to reduce the benefits available thereunder,
such payments to be made to Praxair by Bridge will be recalculated commensurate
with such benefit reduction.
(d) During calendar year 1997, Bridge shall maintain certain required
medical, life insurance, and long-term disability benefits for which Praxair has
financial
-4-
<PAGE>
responsibility for (i) eligible former employees of CBI Industries and
affiliates who terminated employment prior to the Effective Date, (ii) retirees
entitled to Retiree Benefits, and (iii) employees of MQS Inspection, Inc. and
Cooperheat, Inc. (collectively, "Non-Bridge Participants"). Bridge shall pay
from its general assets, all claims, insurance premiums, and third party
provider fees ("Welfare Benefits Payments") for such Non-Bridge Participants.
Praxair shall reimburse Bridge for such Welfare Benefits Payments on a monthly
basis. For purposes of such reimbursement, Welfare Benefits Payments will also
include all claims, insurance premiums, and third party provider fees paid with
respect to CBI Industries welfare benefits plans on behalf of then active
employees of CBI Industries and affiliates, but only to the extent that such
claims or payments are incurred in, or paid with respect to, periods prior to
the Effective Date.
3. Praxair shall retain all liabilities which exist as of the
Effective Date under the CBI Industries, Inc. Supplemental Survivors' Benefit,
Executive Life Insurance and Benefit Restoration Trust (the "Rabbi Trust"), and
no assets of the Rabbi Trust shall be transferred to the Bridge Group, except
where otherwise agreed through individual arrangements entered into by specific
participants. Active Bridge Group employees will accrue no further benefits
under any plans covered by the Rabbi Trust on or after the Effective Date, and
neither the Rabbi Trust nor Praxair shall be obligated to make any premium
payments for any active Bridge Group employees under any Executive Life
Insurance policies on or after the date that Bridge ceases to be part of the
Praxair controlled group.
-5-
<PAGE>
4. Bridge shall be solely responsible and liable for the amount of
any and all variable compensation for Bridge Group employees.
5. Bridge shall be solely liable for, and shall indemnify Praxair and
its subsidiaries which are not part of the Bridge Group, from and against any
liability for, any termination payments made to, or claims for termination
payments made by, any employee or former employee of Bridge or any of its direct
or indirect subsidiaries (excluding MQS Inspection, Inc., Cooperheat, Inc. and
Ershigs, Inc.) and any other entities in which they or any of them hold or
heretofore held a direct or indirect interest (collectively referred to
hereinafter as the "Bridge Companies"), regardless of when such payments are
made or when such claim is presented, and regardless of when such termination
occurred.
6. Bridge shall be solely responsible for any liability in connection
with multiemployer plan withdrawal where such liability arose from a complete or
partial withdrawal at any time from such a plan by any of the Bridge Companies,
as defined in Paragraph 5.
7. The Bridge Group shall not participate in any Praxair benefit
plans and programs as of the Effective Date other than the CBI Pension Plan.
-6-
<PAGE>
8. Except where otherwise stated, nothing in this Agreement shall be
construed or interpreted to restrict Praxair's or Bridge's individual right or
authority to amend or terminate any benefit plans, policies or programs,
maintained by such party, effective as of a date following the Effective Date.
9. (a) Notwithstanding any other provision of this Agreement, if any
amount payable hereunder to Praxair is not paid when due, then from and after
such due date interest shall accrue on the overdue amount until paid at the
greater of (i) the rate of seven and one-half percent (7 1/2%) per annum, and
(ii) a fluctuating interest rate equal to two percent (2%) plus the prime, base
or comparable rate of interest announced by Citibank N. A. (or its successor) in
New York City from time to time (but in no event greater than the highest
applicable non-usurious rate permitted under the laws of the State of New York).
(b) Bridge may at any time and from time to time prepay its
obligations under Paragraphs 1(a) and 2(a) of this Agreement in full or in part,
provided that any partial prepayment shall be in the amount of at least one
million dollars ($1,000,000.00) and shall be accompanied by a statement from
Bridge designating which obligation(s) under this Agreement are being prepaid.
Prepayments shall be applied first against accrued and unpaid interest with
respect to the obligation being prepaid, and then against installments of such
obligation in the inverse order in which such installments become due.
-7-
<PAGE>
10. Other than the failure to pay monies when due hereunder, neither
Praxair nor Bridge shall be liable for its failure to perform hereunder to the
extent that its performance is made impracticable, delayed or prevented, in
whole or in part, due to any occurrence beyond its reasonable control,
including, without limitation; acts of God; inclement weather; floods;
accidents; strikes; lockouts; fires; wars; equipment failures; labor disputes;
labor shortages; riots; demonstrations; sabotage; laws, ordinances, rules,
regulations, standards or decrees of governmental or other authorities, whether
valid or invalid (including, without limitation, import or export prohibitions
or priorities, requisitions, allocations and price adjustment restrictions);
inability to obtain or unavoidable delay in obtaining necessary power,
materials, facilities, services or equipment; interruption or unavoidable delay
in communication or transportation; or any other similar or dissimilar
occurrence which would have a material adverse impact on the ability of Praxair
or Bridge to perform hereunder. If a party fails to perform hereunder as a
result of any occurrence described in the preceding sentence, such affected
party shall (i) give written notice to that effect to the other party promptly
after such occurrence together with a statement setting forth reasonably full
particulars concerning such occurrence and (ii) use reasonable efforts to remedy
such occurrence as quickly as possible. The requirement that such occurrence be
so remedied shall not require the settlement of strikes, lockouts, or other
labor difficulties. To the extent required by any such occurrence, the
performance by the affected party shall be suspended during the continuance of
any such occurrence (but for no longer period) and this Agreement shall
otherwise remain unaffected. If at any time during the term of this Agreement
such occurrence is remedied, the affected party shall promptly notify the other
party and any such suspension shall end.
-8-
<PAGE>
11. Each party agrees to refrain and to cause its subsidiaries and
affiliates to refrain from using in any manner, and to use reasonable efforts to
keep confidential and to cause its subsidiaries and affiliates to use reasonable
efforts to keep confidential, any and all information and data relating to any
employees or concerning the business and affairs of the other party or its
subsidiaries or affiliates received as a result of this Agreement, except to the
extent that such party can demonstrate that the information or data (i) is
generally available to the public as evidenced by prior written publication
through no act or failure to act by it or its subsidiaries or affiliates or (ii)
is subsequently disclosed to it or its subsidiaries or affiliates on a non-
confidential basis by a third party not having a confidential relationship with
such other party or its subsidiaries or affiliates with respect to such
information. Notwithstanding the foregoing, each of the parties and their
subsidiaries and affiliates shall be free to disclose any such information or
data to the extent, but only to the extent, (i) required by applicable law or by
a government in a duly authorized investigation or (ii) necessary to establish a
position in any litigation or any arbitration or other proceedings based upon or
in connection with the subject matter of this Agreement. Prior to any
disclosure pursuant to the preceding sentence, the disclosing party shall give
reasonable prior notice to the other party of such intended disclosure and, if
requested by such other party, shall use all reasonable efforts to obtain a
protective order or similar protection for such other party. In applying this
Paragraph 11, members of the Bridge Group shall not be considered to be
subsidiaries or affiliates of Praxair.
-9-
<PAGE>
12. Bridge shall hold harmless, indemnify and defend Praxair from and
against any and all costs, expenses, claims, damages, lawsuits, attorneys' and
accountants' fees, losses, deficiencies, assessments, administrative orders,
fines, penalties, actions, proceedings, judgments, liabilities and obligations
of any kind or description (a "Claim" or "Claims") asserted against, incurred or
required to be paid by Praxair (regardless of when asserted or by whom),
associated with or arising under any employee benefit plan or policy
established, adopted or maintained by Bridge on or after the Effective Date.
Praxair shall hold harmless, indemnify and defend Bridge from and
against any and all Claims, asserted against, incurred or required to be paid by
Bridge (regardless of when asserted or by whom), associated with or arising
under any employee benefit plan or policy maintained by Praxair and not
expressly assumed by Bridge pursuant to this Agreement.
13. Each party shall furnish, or shall cause to be furnished, to the
other party all plan participant and employee data or information in its
possession which is necessary for such other party to maintain and implement any
employee benefit plan or arrangement covered by this Agreement, or to comply
with the provisions of this Agreement, and which is not otherwise readily
available to such other party.
-10-
<PAGE>
14. This Agreement shall be binding upon, and inure to the benefit
of, the parties and their respective successors and permitted assigns. Nothing
contained herein shall be deemed to create any third-party beneficiary rights in
any individual who or entity which is not a party to this Agreement. Any
assignment or delegation of this Agreement by either party without the prior
written consent of the other party, which shall not unreasonably be withheld,
shall be void. Notwithstanding the foregoing, no consent shall be required for
Praxair to assign its right to receive payments hereunder. No assignment of an
obligation hereunder shall act to release the assigning party as primary obligor
therefor.
15. The validity, interpretation and performance of this Agreement
shall be governed by and construed in all respects in accordance with the law of
the State of New York, without reference to its conflicts of laws rules or
principles.
16. This Agreement constitutes the entire understanding of the
parties with respect to the subject matter hereof and supersedes as of the
Effective Date all previous agreements and understandings, oral or written,
between the parties to the extent such previous agreements address such subject
matter. No modification of this Agreement or waiver of any provision hereof or
right hereunder will be binding upon either party unless signed in writing by an
authorized representative of such party. This Agreement will continue in force
on the terms and conditions described herein until terminated or amended by
mutual agreement of the parties.
-11-
<PAGE>
17. Notwithstanding anything in this Agreement to the contrary, all
actions contemplated by this Agreement with respect to employee benefit plans
which are to be consummated pursuant to this Agreement shall be subject to such
notices to, and/or approvals by, the Internal Revenue Service ("IRS"), Pension
Benefit Guaranty Corporation (or other governmental agency or entity) as are
required or deemed appropriate by the plan's sponsor. Praxair and Bridge each
agrees to use its best efforts to cause all such notices and/or approvals to be
filed or obtained, as the case may be.
18. The provisions of this Agreement are severable. The invalidity,
in whole or in part, of any provision of this Agreement shall not affect the
validity or enforceability of any other of its provisions. If one or more
provisions hereof shall be declared invalid or unenforceable, the remaining
provisions shall remain in full force and effect and shall be construed in the
broadest possible manner to effectuate the purposes hereof. The parties further
agree to replace such void or unenforceable provisions of this Agreement with
valid and enforceable provisions which will achieve, to the extent possible, the
economic, business and other purposes of the void or unenforceable provisions.
19. From and after the Effective Date, each of Praxair and Bridge
shall cause to be performed, and hereby guarantees the performance and payment
of, all actions, agreements, obligations and liabilities set forth herein to be
performed or paid by its
-12-
<PAGE>
subsidiaries. For purposes of this Paragraph 19, no Bridge Group member shall be
considered to be a subsidiary of Praxair.
20. No failure or delay on the part of Praxair or Bridge in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement
nor consent to any departure by Praxair or Bridge therefrom shall in any event
be effective unless the same shall be in writing, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
21. For the convenience of the parties, any number of counterparts of
this Agreement may be executed by the parties hereto, and each such executed
counterpart shall be deemed to be an original instrument.
22. All communications, notices, and disclosures required or
permitted by this Agreement shall be in writing and shall be deemed to have been
given at the earlier of (i) the date actually delivered to an officer of the
other party or (ii) when postmarked in the case of a notice, etc., deposited in
the United States mail, first class postage prepaid, and
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<PAGE>
addressed as follows (unless and until either party notifies the other in
accordance with this
Paragraph 22, of a change in address):
If to Praxair, Inc.:
39 Old Ridgebury Road
Danbury, Connecticut 06817-0001
Attention: Vice President, Human Resources
If to Chicago Bridge & Iron Company:
1501 North Division Street
Plainfield, IL 60544
Attention: General Counsel
IN WITNESS WHEREOF, the parties have duly executed and entered into
this Agreement, as of the date first above written.
PRAXAIR, INC.
By: /s/ Robert F.X. Fusaro
-----------------------------
Name: Robert F.X. Fusaro
----------------------------
Title: Attorney-in-Fact
--------------------------
CHICAGO BRIDGE & IRON COMPANY
By: /s/ Robert H. Wolfe
-----------------------------
Name: Robert H. Wolfe
----------------------------
Title: Vice President
----------------------------
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<PAGE>
SCHEDULE 2(b)
Payment Due Date Payment Amount
- ---------------- --------------
December 1, 1999 $109,358.00
December 1, 2000 $109,358.00
December 1, 2001 $109,358.00
December 1, 2002 $109,358.00
December 1, 2003 $109,358.00
December 1, 2004 $109,358.00
December 1, 2005 $109,358.00
December 1, 2006 $109,358.00
December 1, 2007 $109,358.00
December 1, 2008 $109,358.00
December 1, 2009 $109,358.00
-15-
<PAGE>
EXHIBIT 10.14
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), which shall
be effective as of January 1, 1997, is made and entered into by and among
Chicago Bridge & Iron Company N.V., a corporation organized under the laws of
The Netherlands (the "Company") and Praxair, Inc., a Delaware corporation (the
"Investor"). As used herein, the term "Investor" shall include Investor's
successors, assigns or other transferees of its rights hereunder.
RECITALS
WHEREAS, the Company is a wholly-owned subsidiary of the Investor;
and
WHEREAS, the Company contemplates conducting an initial public
offering and, in connection therewith, the Investor desires to have future
registration rights covering the Registrable Securities (as such term is
defined in Section 1) of the Investor and certain of their transferees;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement:
a. the term "Bona Fide Public Offering" means an underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the "1933 Act"), covering the offer and sale of Common
Shares of the Company;
b. the term "Common Shares" means the Company's authorized common shares,
NLG.01 par value, and any class of securities issued in exchange for the Common
Shares or into which the Common Shares are converted;
c. the term "IPO" means the initial Bona Fide Public Offering whereby the
Investor sells Common Shares held by it;
<PAGE>
-2-
d. the term "Registrable Securities" means: (i) the total number of Common
Shares owned by the Investor as of the date hereof, and (ii) any Common Shares
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such Common Shares, excluding in
all cases, however, any Common Shares that are sold by any person other than the
Investor in a transaction in which its rights under this Agreement are not
assigned;
e. the term "Registration Expenses" means all reasonable fees and
disbursements of counsel to the Investor and all expenses incurred by the
Company in complying with Sections 2, 3 and 4 hereof, including, but not
limited to, all registration and filing fees, underwriters' expense allowances,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, and the expense of any special audits incident to or
required by any such registration (but not including the compensation of
regular employees of the Company which shall be paid in any event by the
Company); provided, however, that this term does not include Selling Expenses
and also does not include any amounts incurred in any transaction in which the
Investor does not intend to sell Registrable Securities and provided, further,
that travel, meal, lodging and similar expenses incurred in connection with any
"road show" in support of the Sale of Registrable Securities shall not be
considered as Registration Expenses;
f. the terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and the declaration or
ordering of the effectiveness of such registration statement or document by the
Securities and Exchange Commission (the "SEC");
g. the term "Selling Expenses" means all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities; and
h. the number of Common Shares "Then Outstanding" shall be the number of
Common Shares outstanding as of any date of determination excluding Common
Shares outstanding that are subject to the restrictions imposed by the
<PAGE>
-3-
Company's Management Plan (as defined in the registration statement relating to
the IPO).
2. DEMAND REGISTRATION RIGHTS.
a. If the Company shall receive, at any time and from time to time after
the consummation of the IPO, a written request from the Investor with respect
to the Registrable Securities, that the Company file a registration statement
under the 1933 Act covering the registration of at least 5% of the Common
Shares Then Outstanding (or any lesser percentage if such percentage represents
all outstanding Registrable Securities), the Company shall as soon as
practicable (and in any event within the time periods set forth in Section 4),
subject to the limitations of this Section 2, file a registration statement
covering such securities and use its best efforts to cause such registration
statement to become effective under the 1933 Act. Notwithstanding the
foregoing, if the Company shall furnish to the Investor a certificate signed by
the Chief Financial Officer of the Company stating that in the good faith
judgment of the Supervisory Board of the Company such filing and the related
offering would (i) materially adversely affect or interfere with any proposed
or pending financing, acquisition, corporate reorganization or other
transaction or the conduct or outcome of any litigation, in each case, that
involves the Company or any subsidiary thereof and is material to the Company
and its subsidiaries taken as a whole, or (ii) require disclosure of
information material to the Company which the Company is not otherwise
obligated to disclose and which the Company has a bona fide business purpose
for preserving as confidential, then, in any such case, the Company's
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed 60 days; provided, however, that the
-------- -------
Company shall not obtain any deferral more than once in any 12-month period
commencing with the 12-month period beginning on the date hereof.
b. In the event that the requested registration is to be a Bona Fide
Public Offering, either the Investor or the other persons owning the
Registrable Securities included in the registration request (together with the
Company as provided in Section 5(e)) shall enter into an underwriting agreement
in customary form (and no more burdensome to the Investor or such other persons
owning
<PAGE>
-4-
Registrable Securities than the underwriting agreement entered into in
connection with the IPO) with the representative of the underwriter or
underwriters selected for such underwriting by mutual agreement of the Investor
and the Company, which underwriter or underwriters shall in any event be a
nationally recognized investment bank or banks. Such underwriting agreement
shall provide for indemnification by the Company as to all matters customarily
provided for in such an indemnity except for information in the prospectus
required to be provided by the selling shareholder and actually provided by the
selling shareholder in writing expressly for use in the prospectus.
Notwithstanding any other provisions of this Section 2, if such representative
advises the Company in writing that marketing factors require a limitation of
the total number of shares to be underwritten, the Company shall so advise the
Investor. No Registrable Securities excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such registration.
Unless the underwriters inform the Company and the Investor that marketing
factors require a limitation of the total number of shares to be underwritten,
the Company may include Common Shares to be offered for its own account or the
account of others in such registration; provided that the number of Registrable
--------
Securities which would otherwise have been included in such registration and
underwriting (before giving operative effect to the exclusion of shares provided
for in this Section 2(b)) will not thereby be limited; provided, further that
-------- -------
the underwriters first exclude all of the Common Shares sought to be included by
the Company or others before excluding any of the Registrable Securities from
such registration and underwriting.
c. No request pursuant to Section 2(a) hereof may be made within 120 days
after the Investor has been notified in writing that the Company proposes to
make a registration of the Securities as described in the second sentence of
Section 3(a) hereof.
3. PIGGY-BACK REGISTRATION RIGHTS. a.At any time during the
three-year period beginning on the date the IPO is consummated, if the number
of outstanding Registrable Securities which have not been registered under the
1933 Act pursuant to the terms of this Agreement equals or exceeds 10% of the
number of Common Shares Then Outstanding, the Company shall not cause any
Common Shares (or similar security) to be registered under the 1933 Act (or
make any filing in connection with the
<PAGE>
-5-
registration of Common Shares) without the prior written consent of the
Investor. If, at any time the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Investor) any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration form
relating to a registration of a stock option, share purchase or compensation or
incentive plan (other than the Management Plan) or of stock issued or issuable
pursuant to any such plan, in each case, for employees of the Company or its
subsidiaries or a dividend investment plan); then (i) upon the request of the
Investor, the Company shall, subject to the provisions of Section 7 (in the case
of an underwritten offering), cause to be included in such registration under
the 1933 Act all of the Registrable Securities that the Investor requests to be
included in such registration; provided, however, that if such proposed
-------- -------
registration is to be a Bona Fide Public Offering and the representative of the
underwriters advises the Company in writing that marketing factors require a
limitation of the total number of shares to be underwritten, the Company shall
so advise the Investor and any such reduction shall be effected on a pro rata
--- ----
basis among the prospective sellers of Common Shares based upon the number of
Common Shares each then intends to sell; provided, however, that if the Common
-------- -------
Shares intended to be registered include Common Shares of participants in the
Management Plan, such proration shall be accomplished in the following order of
priority: (A) first, the Common Shares offered for sale by participants in the
Management Plan but only for such number of Common Shares which the applicable
selling participant in the Management Plan reasonably expects to be required to
be sold to obtain the funds necessary to pay such participant's taxes that will
become due as a result of the lapse of restrictions on Common Shares under the
Management Plan, and then (B) pro rata among the other selling shareholders
--- ----
(using, for the purposes of determining under this clause B the number of shares
to be sold by participants in the Management Plan, the net amount of Common
Shares intended to be sold by participants in the Management Plan after
subtraction of the Common Shares referred to in the preceding clause A); and
(ii) the Company shall qualify all such securities under applicable state
securities laws.
b. Without the prior written consent of the Investor, the Company
shall cause no Common Shares (or similar security) to be registered under the
1933 Act (or make any filing in connection with the registration of Common
Shares) if any written request pursuant to Section 2 hereof has been made,
<PAGE>
-6-
such request has not been revoked in writing and the sale of Registrable
Securities contemplated by such request has not yet been consummated.
4. OBLIGATIONS OF THE COMPANY. Whenever required under this
Agreement to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible, and in any event within any
time period set forth in this Section 4:
a. Prepare and file with the SEC a registration statement with respect to
such Registrable Securities within 60 days of the Investor's request therefor
and use its best efforts to cause such registration statement to become
effective within 60 days of such filing and to cause such registration
statement to remain effective for so long as is necessary to complete the
distribution of such Registrable Securities, not to exceed 90 days;
b. Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the 1933 Act with respect to the disposition of all securities covered by such
registration statement;
c. Furnish to the Investor, other persons selling Registrable Securities
and any underwriters engaged in connection therewith copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as they may reasonably request in order to
facilitate the disposition of the Registrable Securities;
d. Use its best efforts to register and qualify the securities covered by
such registration statement under the securities laws of such jurisdictions
within the United States as the Company believes shall be reasonably
appropriate for the distribution of the securities covered by the registration
statement and such jurisdictions within the United States as the Investor or
its affiliates or the underwriters shall reasonably request, as well as, if
requested, under the securities laws of each other jurisdiction where Common
Shares were registered or qualified in connection with the IPO, provided
--------
that the Company will not be required pursuant to this Agreement to (i) qualify
generally to do business in any jurisdiction
<PAGE>
-7-
where it would not otherwise be required to qualify but for this Section, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction;
e. In the event of any Bona Fide Public Offering, enter into and perform
its obligations under an underwriting agreement on customary terms generally
satisfactory to the managing underwriter of such offering (including an
indemnity no less favorable to the selling shareholder than described in
Section 2(b));
f. Take such action as is necessary or advisable in order to obtain the
listing of the Registrable Securities on the securities exchanges or quotation
systems on which any Common Shares are traded; and
g. Engage in such marketing and other activities in connection with the
proposed sale of any Registrable Securities as is reasonably recommended by the
underwriter or other primary financial advisor engaged in connection with such
proposed sale.
5. FURNISH INFORMATION. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Agreement
that the Investor or its affiliates shall furnish to the Company such
information regarding themselves, the Registrable Securities, and the intended
method of disposition of such securities as shall be required to effect the
registration of the Registrable Securities. In that connection, the Investor
or any such affiliate, as the case may be, shall be required to represent to the
Company that all such information which is given is both complete and accurate
in all material respects.
6. EXPENSES OF REGISTRATION. All Registration Expenses and all
Selling Expenses incurred in connection with any registration, qualification or
compliance pursuant to this Agreement shall be borne by the sellers of the
securities in such registration in proportion to the respective values of the
securities then proposed to be sold by such sellers; provided that to the
extent the aggregate of all Registration Expenses which would otherwise be
payable by the Investor is (other than those relating to the IPO) $2,000,000 or
less, such Registration Expenses of the Investor shall be borne by the Company.
All Registration Expenses incurred in connection with the IPO shall be borne by
the Company; provided that to the extent the
<PAGE>
-8-
aggregate of Registration Expenses incurred in connection with the IPO exceeds
$2,000,000, such excess shall be borne by the Investor. Travel, meals, lodging
and similar expenses incurred in connection with any "road show" in support of
the sale of Registrable Securities shall not be included in applying the above
provisions, but such amounts shall be allocated as follows: The Company shall
pay all such costs incurred by its employees and representatives; the Investor
shall pay all such costs incurred by its employees and representatives; and all
such costs incurred by the underwriters and their representatives shall be borne
by the sellers of the securities being sold pursuant to such Registration
Statement in proportion to the respective values of the securities then proposed
to be so sold by such Sellers.
7. INDEMNIFICATION. If any Registrable Securities are included
in a registration statement under this Agreement:
a. The Company will indemnify and hold harmless the Investor and each of
their affiliates (the "Investor Group"),the officers, directors, partners
and representatives of each member of the Investor Group, any underwriter
(as defined in the 1933 Act) for the Investor Group and each person, if any,
who controls any member of the Investor Group or underwriter within the
meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act"), against any losses, claims, damages, or liabilities (joint
or several) to which they or any of them may become subject under the 1933
Act, the 1934 Act or any other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of
or are based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in any registration statement filed
by the Company with the SEC and by which Registrable Securities are
registered for sale under the 1933 Act, including any preliminary prospectus
or final prospectus contained therein (or otherwise used in connection
therewith) or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading; or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any state securities law or any rule or regulation promulgated
under the 1933 Act, the 1934 Act or any state securities law; and
<PAGE>
-9-
the Company will reimburse the Investor Group, each such officer, director
or partner, underwriter or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 7 shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of
the Company (which consent shall not be unreasonably withheld), nor shall
the Company be liable to a member of the Investor Group in any such case for
any such loss, claim, damage, liability, or action to the extent that it
arises from or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished by the Investor which
clearly states that it is furnished expressly for use in connection with
such registration by the Investor Group.
b. Each person selling Registrable Securities (and, if the person selling
Registrable Securities is a direct or indirect subsidiary of the Investor,
the Investor) will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement,
each person, if any, who controls the Company within the meaning of the 1933
Act, any underwriter (within the meaning of the 1933 Act) for the Company or
any person who controls such underwriter against any losses, claims, damages
or liabilities to which the Company or any such director, officer,
controlling person, or underwriter may become subject, under the 1933 Act,
the 1934 Act or any other federal or state law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise from or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by the Investor which clearly states that it
is furnished expressly for use in connection with such registration; and the
Investor or such other person, as the case may be, will reimburse any legal
or other expenses reasonably incurred by the Company or any such director,
officer, controlling person in connection with investigation or defending
any such loss, claim, damage, liability, or action; provided, however, that
the indemnity agreement contained in this Section 7 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or
action if such
<PAGE>
-10-
settlement is effected without the consent of the Investor (which consent
shall not be unreasonably withheld); and further, provided, that in no event
shall any indemnity under this Section 7(b) exceed the net proceeds from the
relevant offering received by the Investor or other person selling
Registrable Securities.
c. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 7 is
applicable but for any reason is held to be unavailable from the Company or
the Investor, the Company and the Investor or other person participating in
the registration shall contribute to the aggregate losses, claims, damages
and liabilities (including any investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claims asserted) to which the Company and
the Investor or other person selling Registrable Securities may be subject
in such proportion so that the Investor or other person selling Registrable
Securities is responsible for that portion of the foregoing amount
represented by the relative fault of the Investor or other person selling
Registrable Securities in the offering, on the one hand, and the Company, on
the other hand, in connection with the Violation, it being understood that
in assessing such relative fault consideration shall be given to the
differing levels of access of the parties to information regarding the
Company and the significant efforts by the Investor in, and significant
benefits to the Company of, taking the Company public in its initial public
offering; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7(c), each
person, if any, who controls the Company or any member of the Investor Group
within the meaning of the 1933 Act and each officer, director, partner and
representative of the Company or the Investor Group shall have the same
rights to contribution as the Company or the Investor Group, as the case may
be. In no event shall any contribution by the Investor or other person
selling Registrable Securities exceed the net proceeds from the relevant
offering received by the Investor or other person selling Registrable
Securities.
<PAGE>
-11-
d. No settlement of any action or proceeding for which indemnification is
required to be provided hereunder shall be effected without the prior written
consent of the Investor unless (i) the obligations of the Company for
indemnification or contribution pursuant to this Agreement survive and are not
extinguished by reason of the settlement and remain in full force and effect
under applicable federal and state laws, rules, regulations and orders to the
same extent as prior to such settlement, or (ii) all claims and actions against
the Investor and each person who controls the Investor within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act in such action or
proceeding are extinguished by the settlement and the indemnifying party obtains
a full release of all claims and actions against the Investor and each such
control person, which release shall be to the reasonable satisfaction of the
Investor.
e. Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 7, notify the indemnifying
party in writing of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
parties; provided, however, that an indemnified party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be, in the reasonable judgment of
counsel to the indemnified party, inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to notify an
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 7, but the omission so to notify the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 7.
<PAGE>
-12-
f. The obligations of the Company and the Investor under this Section 7
shall survive through the completion of any offering of Registrable Securities
in a registration statement made under the terms of this Agreement and
otherwise.
g. The provisions of this Section 7 shall apply to the IPO and the
offering of Common Shares pursuant to the IPO as if such Common Shares were
Registrable Securities included in a registration statement under this
Agreement.
8. REPORTS UNDER SECURITIES ACT OF 1934. With a view toward
making available to the Investor the benefits of Rule 144 promulgated under the
1933 Act and any other rule or regulation of the SEC that may at any time
permit the Investor to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
a. use its best efforts to make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times after the
effective date of the first underwritten public offering of equity securities
of the Company;
b. use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the 1933 Act and the
1934 Act;
c. furnish to the Investor so long as the Investor owns any Registrable
Securities, forthwith upon request: (i) a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any time
beginning 90 days after the effective date of the first underwritten public
offering of equity securities of the Company), the 1933 Act and the 1934 Act
(at any time after it has become subject to such reporting requirements) or
that it qualifies as a Registrant where securities may be resold pursuant to
Form S-3 (at any time after it so qualifies); (ii) a copy of the most recent
annual or quarterly report of the Company and all other reports and documents
filed by the Company with the SEC; and (iii) such other information as may be
reasonably requested in availing the Investor of any rule or regulation of the
SEC which permits the selling of any such securities without registration;
<PAGE>
-13-
d. take such action, including the voluntary registration of its common
shares under Section 12 of the 1934 Act, as is necessary to enable the Investor
to use Form S-3 for the sale of its Registrable Securities, such action to be
taken as soon as practicable after the first registration statement filed by
the Company for the offering of its equity securities to the general public is
declared effective; and
e. use its best efforts to maintain the listing of the Common Shares on
the New York Stock Exchange and the Amsterdam Stock Exchange and to take such
action as is necessary or advisable in order to obtain the listing of the
Registrable Securities to be registered pursuant hereto on the securities
exchanges or quotation systems on which any Common Shares are traded.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Agreement may be
assigned by the Investor or another transferee who obtained such rights
pursuant to this Section 9 to a transferee or assignee of such securities to
the extent such transferee or assignee acquires at least 10% of the Registrable
Securities outstanding on the date hereof held by the transferor provided the
Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
provided, however, that no such assignment of rights shall be effective if,
immediately following the transfer, the transferee is, in the opinion of
counsel, free to dispose of all of such securities without regard to any
restrictions imposed under the 1933 Act (including, without limitation, the
volume limitations of Rule 144 promulgated under the 1933 Act). No such
assignment shall be effective unless and until such permitted transferee or
assignee has executed and delivered to the Company a counterpart of this
Agreement.
10. ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
will not take any action with respect to the Registrable Securities which would
adversely affect the ability of the Investor or any other person with rights
hereunder to include such Registrable Securities in a registration undertaken
pursuant to this Agreement without the written consent of each person so
affected, except when such adjustments are otherwise required by law, including
disclosure obligations under federal securities laws.
<PAGE>
-14-
11. REMEDIES. The Investor, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to seek specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
and hereby agrees to waive the defense in any action for specific performance
that a remedy of law would be adequate.
12. AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Investor.
13. NOTICES. All notices, demands and requests required by this
Agreement shall be in writing and shall be deemed to have been given for all
purposes (a) upon personal delivery, (b) one business day after being sent, when
sent by professional overnight courier service from and to locations within the
continental United States, or (c) five days after posting when sent by
registered or certified mail (return receipt requested), addressed to the
Company or the Investor at his, her or its address set forth on the signature
pages hereof. Any party hereto may from time to time by notice in writing served
upon the others as provided herein, designate a different mailing address or a
differing person to which such notices or demands are thereafter to be addressed
or delivered.
14. SUCCESSORS AND ASSIGNS. Subject to Section 9, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent holders of Registrable Securities to which the
registration rights granted by this Agreement have been assigned as permitted
herein.
15. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which shall be deemed to be an original, and when
executed, separately or together, shall constitute a single original
instrument, effective in the same manner as if the parties hereto had executed
one and the same instrument.
<PAGE>
-15-
16. CAPTIONS. Captions are provided herein for convenience only
and they are not to serve as a basis for interpretation or construction of this
Agreement, nor as evidence of the intention of the parties hereto.
17. CROSS-REFERENCES. All cross-references in this Agreement,
unless specifically directed to another agreement or document, refer to
provisions within this Agreement.
18. GOVERNING LAW. This Agreement shall be governed by,
interpreted under, and construed and enforced in accordance with the internal
laws, and not the laws pertaining to conflicts or choice of laws, of the State
of New York applicable to agreements made and to be performed wholly within the
State of New York.
19. SEVERABILITY. The provisions of this Agreement are
severable. The invalidity, in whole or in part, of any provision of this
Agreement shall not affect the validity or enforceability of any other of its
provisions. If one or more provisions hereof shall be declared invalid or
unenforceable, the remaining provisions shall remain in full force and effect
and shall be construed in the broadest possible manner to effectuate the
purposes hereof. The parties further agree to replace such void or unenforceable
provisions of this Agreement with valid and enforceable provisions which will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provisions.
20. ENTIRE AGREEMENT. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof and supersedes all prior written and oral agreements, understandings,
commitments and practices between the parties, including all prior agreements
with respect to registration rights.
<PAGE>
-16-
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement with the intent and agreement that the same shall
be effective as of the day and year first above written.
THE COMPANY:
CHICAGO BRIDGE &
IRON COMPANY N.V.
By: /s/Robert F.X. Fusaro
------------------------
Robert F.X. Fusaro
Managing Director
Address: P.O. Box 74658
1070 BR Amsterdam
The Netherlands
Attn: Managing Director
with a copy to:
Chicago Bridge & Iron Company
1501 North Division Street
Plainfield, IL 60544
Attn: General Counsel
THE INVESTOR:
PRAXAIR, INC.
By: /s/Robert F.X. Fusaro
------------------------
Robert F.X. Fusaro
Attorney-In-Fact
Address: 39 Old Ridgebury Road
Danbury, CT 06810
Attention: Chief
Financial Officer
<PAGE>
-17-
ACKNOWLEDGED AND ACCEPTED
CHICAGO BRIDGE & IRON COMPANY
By: /s/Robert H. Wolf
--------------------
Robert H. Wolfe
Vice President
<PAGE>
EXHIBIT 10.15
PROMISSORY NOTE
---------------
$55,000,000. September 30, 1996
FOR VALUE RECEIVED, CHICAGO BRIDGE & IRON COMPANY (the "Company") hereby
promises to pay to the order of CHI BRIDGE HOLDINGS, INC. (the "Holder") fifty
five million dollars ($55,000,000), together with interest accrued thereon from
the date hereof at the rate of seven percent (7%) per annum (computed on the
basis of a year of 360 days and paid for the actual number of days elapsed);
provided, however, that such rate of seven percent (7%) per annum on and after
- -------- -------
the date on which Praxair, Inc. ceases to directly or indirectly own a majority
of the Company's outstanding shares. Interest shall be paid quarterly in
arrears, with the first payment of interest becoming due on March 31, 1997.
Principal shall become due and be payable upon demand by the Holder, which
demand may not be made before January 1, 1998. The Company may prepay this Note
in whole or in part at any time without premium or penalty. Any partial
prepayment shall be applied first in satisfaction of accrued and unpaid
interest.
All payments of principal and interest hereunder shall be made by electronic
transfer of immediately available funds for the account of Praxair, Inc. at
Chase Manhattan Bank, New York, NY as follows: "ABA #021-000-021; Account:
Praxair, Inc.; Account #134-0-93062; For Further Credit to: Chi Bridge Holdings,
Inc."
All amounts due under this Note shall automatically become immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Company in the event (i) the Company
shall commence any bankruptcy, reorganization or similar case or proceeding
relating to it or its property under the law of any jurisdiction, or a trustee
or receiver shall be appointed for the Company or any substantial part of its
property, (ii) any involuntary bankruptcy, reorganization or similar case or
proceeding under the law of any jurisdiction shall have been commenced against
the Company or any substantial part of its property and such case or proceeding
shall not have been dismissed within 60 days.
Any overdue payment of principal or interest hereunder shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to two percent (2%) in excess of the
<PAGE>
-2-
Prime Rate announced by Chase Manhattan Bank to be in effect for such day at
Chase Manhattan Bank's Manhattan, New York office. If any amount owed under
this Note is not paid when due, the Company agrees to pay all reasonable costs
and expenses of collection, including attorney's fees.
This Note shall be governed by and construed in accordance with the law
of the State of New York.
CHICAGO BRIDGE & IRON COMPANY
By: /s/ Robert H. Wolfe
---------------------------
Robert H. Wolfe
Vice-President
<PAGE>
EXHIBIT 10.16
CONFORMING AGREEMENT
--------------------
THIS IS AN AGREEMENT dated February 28, 1997 by and among Chicago
Bridge & Iron Company N.V., a corporation organized under the law of The
Netherlands (the "Issuer"); Chicago Bridge & Iron Company, a corporation
organized under the law of Delaware ("Delaware"); Chi Bridge Holdings, Inc., a
corporation organized under the law of Delaware ("Chi Bridge"); and Praxair,
Inc., a corporation organized under the law of Delaware ("Praxair").
WHEREAS, in 1996 Praxair acquired CBI Industries, Inc.;
WHEREAS, Chi Bridge is an indirect wholly-owned subsidiary of Praxair and
the owner of all the outstanding shares of Delaware;
WHEREAS, Praxair has announced its intention to dispose of some or all of
its interests in Delaware and of entities in which Delaware holds ownership
interests;
WHEREAS, in furtherance of such disposition strategy, parties hereto and
certain of their affiliates have entered into agreements to separate the
business and obligations of Delaware and entities in which Delaware has or has
had ownership interests from the business and obligations of Praxair and its
other affiliates; and
WHEREAS, the form of Praxair's disposition of interests in Delaware and
Delaware's affiliates has changed, resulting in a need to modify certain of the
above-mentioned agreements and arrangements in the manner hereinafter described.
NOW THEREFORE, intending to be legally bound, the parties agree as follows:
1. Definitions
-----------
As used herein, the following terms shall have the meanings set forth
below:
"Reorganization" means the reorganization described in Section 2 below.
<PAGE>
-2-
"Sale Date" means the date on which Praxair ceases to own directly or
indirectly less than a majority of the Issuer's outstanding shares.
"Separation Agreement" means the Separation Agreement dated as of January
1, 1997 by and between Delaware and Praxair, as from time to time heretofore or
hereafter amended.
"Service Agreements" means the Service Agreements as defined in the
Separation Agreement.
2. Reorganization
--------------
Prior to the Sale Date, the following actions (hereinafter
collectively referred to as the "Reorganization") shall be completed:
(a) Delaware shall declare and pay to Chi Bridge a dividend consisting
of all the shares and other equity interests owned by Delaware in other entities
(the "Dividended Shares").
(b) In exchange for shares of Chicago Bridge & Iron Company B.V., a
wholly-owned subsidiary of the Issuer ("CBICBV"), Chi Bridge shall contribute to
CBICBV, Dividended Shares which represent interests in entities incorporated or
existing under the laws of any non-US jurisdiction.
(c) Chi Bridge shall incorporate a Delaware corporation ("NewCo") and
become its sole shareholder.
(d) Chi Bridge shall transfer to NewCo all of the Dividended Shares not
previously transferred by it in accordance with Section 2(ii) above in exchange
for shares of NewCo.
(e) Delaware, NewCo, the Issuer, Praxair and Chi Bridge shall enter into
an Assignment and Assumption Agreement pursuant to which (a) all the assets of
Delaware (except for a cash amount equal to its stated capital) will be
transferred to NewCo, (b) NewCo will assume all the liabilities of Delaware
(including, but not limited to, liability for all intragroup amounts due to
Praxair) and (c) the Issuer will guarantee and cause its
<PAGE>
-3-
subsidiaries to guarantee the payment and performance of all such assumed
liabilities.
(f) Chi Bridge shall contribute to the Issuer, in exchange for shares of
the Issuer, all the shares of NewCo and CBICBV owned by Chi Bridge.
3. Revision of Separation Agreement
and Certain Service Agreements
--------------------------------
Not later than the Sale Date, Praxair, the Issuer and their respective
affiliates shall execute and deliver such amendments, restatements or novations
of the Separation Agreement and the Service Agreements as are necessary or
appropriate to cause the Issuer and its affiliates (including but not limited to
NewCo) to have the same rights and obligations as though (i) Delaware had become
a wholly-owned subsidiary of the Issuer prior to the Sale Date and (ii) the
Issuer and its subsidiaries had irrevocably and unconditionally guaranteed the
payment and performance by Delaware and the other CB&I Companies (as defined in
the Separation Agreement) of all their duties and obligations under the
Separation Agreement and the Service Agreements.
4. Notices
-------
Any notices or communications permitted or required hereunder shall be
deemed sufficiently given if hand-delivered, or sent (i) postage prepaid by
registered or certified mail -return receipt requested, or (ii) by telecopy, to
the respective parties as set forth below, or to such other address as any party
may notify the other of in writing:
if to the Issuer, to: Chicago Bridge & Iron Company N.V.
c/o Chicago Bridge & Iron Company
1501 North Division Street
Plainfield, Illinois 60544
Attn: General Counsel
if to Praxair, Praxair, Inc.
Chi Bridge or 39 Old Ridgebury Road
Delaware to: Danbury, Connecticut 06817-0001
Attn: General Counsel
Notices sent by registered or certified mail shall be deemed delivered
on the fourth day after deposit in the U.S. mail and notices sent by telecopy
shall be deemed given on the
<PAGE>
-4-
day of transmission provided that a duplicate copy is sent on the same day by
first class U.S. mail.
5. Miscellaneous
-------------
(a) No person who is not a party to this Agreement shall be or be
deemed to be a third party beneficiary of this Agreement.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without reference to its conflicts of
laws rules or principles. Any action to enforce, or which arises out of or is
in any way related to, any of the provisions of this Agreement shall be brought
and prosecuted in such court or courts located within the State of New York as
may be provided by law. The parties consent to the jurisdiction of such court
or courts and to service of process by registered mail, return receipt
requested, or such other manner as may be provided by law.
(c) This Agreement constitutes the entire understanding of the parties
and cancels and supersedes all previous agreements and understandings, oral or
written, between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed and delivered by its duly authorized representatives as of the day
and year first written above.
PRAXAIR, INC.
By /s/ Robert F.X. Fusaro
-----------------------------
Title Attorney-in-Fact
--------------------------
CHICAGO BRIDGE & IRON COMPANY
By /s/ Robert H. Wolfe
-----------------------------
Title Vice President
--------------------------
<PAGE>
-5-
CHICAGO BRIDGE & IRON COMPANY N.V.
By Robert F.X. Fusaro
-----------------------------
Title Managing Director
--------------------------
CHI BRIDGE HOLDINGS, INC.
By Robert F.X. Fusaro
-----------------------------
Title Attorney-in-Fact
--------------------------
<PAGE>
CONFORMED COPY
EXHIBIT 10.17
CREDIT AGREEMENT
dated as of
March 6, 1997
among
CHICAGO BRIDGE & IRON COMPANY N.V.
The Lenders Party Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
___________________________
CHASE SECURITIES INC.,
as Arranger
[CS&M # 6700-500]
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms............................ 1
SECTION 1.02. Classification of Loans and Borrowings... 25
SECTION 1.03. Terms Generally.......................... 26
SECTION 1.04. Accounting Terms; GAAP................... 26
ARTICLE II
The Credits
-----------
SECTION 2.01. Commitments.............................. 26
SECTION 2.02. Loans and Borrowings..................... 26
SECTION 2.03. Requests for Revolving Borrowings........ 28
SECTION 2.04. Competitive Bid Procedure................ 29
SECTION 2.05. Letters of Credit........................ 32
SECTION 2.06. Funding of Borrowings.................... 40
SECTION 2.07. Interest Elections....................... 41
SECTION 2.08. Termination and Reduction of
Commitments............................ 42
SECTION 2.09. Repayment of Loans; Evidence of Debt..... 43
SECTION 2.10. Prepayment of Loans...................... 44
SECTION 2.11. Fees..................................... 45
SECTION 2.12. Interest................................. 47
SECTION 2.13. Alternate Rate of Interest............... 48
SECTION 2.14. Increased Costs.......................... 49
SECTION 2.15. Break Funding Payments................... 51
SECTION 2.16. Taxes.................................... 52
SECTION 2.17. Payments Generally; Pro Rata Treatment;
Sharing of Set-offs.................... 53
SECTION 2.18. Mitigation Obligations; Replacement of
Lenders................................ 55
SECTION 2.19. Borrowing Subsidiaries................... 56
<PAGE>
2
ARTICLE III
Representations and Warranties
------------------------------
the Subsidiaries.
SECTION 3.01. Organization; Powers..................... 57
SECTION 3.02. Authorization; Enforceability............ 57
SECTION 3.03. Governmental Approvals; No Conflicts..... 58
SECTION 3.04. Financial Condition; No Material Adverse
Change................................. 58
SECTION 3.05. Properties............................... 59
SECTION 3.06. Litigation and Environmental Matters..... 59
SECTION 3.07. Compliance with Laws and Agreements...... 60
SECTION 3.08. Investment and Holding Company Status.... 60
SECTION 3.09. Taxes.................................... 60
SECTION 3.10. ERISA.................................... 61
SECTION 3.11. Disclosure............................... 61
SECTION 3.12. Subsidiaries............................. 61
SECTION 3.13. Use of Proceeds.......................... 62
SECTION 3.14. Solvency................................. 62
SECTION 3.15. Federal Reserve Regulations.............. 62
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date........................... 63
SECTION 4.02. Each Credit Event........................ 65
SECTION 4.03. Initial Borrowing by Each Borrowing
Subsidiary............................. 65
ARTICLE V
Affirmative Covenants
---------------------
SECTION 5.01. Financial Statements and Other
Information............................ 66
SECTION 5.02. Notices of Material Events............... 68
SECTION 5.03. Existence; Conduct of Business........... 68
SECTION 5.04. Payment of Obligations................... 69
SECTION 5.05. Maintenance of Properties; Insurance..... 69
SECTION 5.06. Books and Records; Inspection Rights..... 69
SECTION 5.07. Compliance with Laws..................... 70
SECTION 5.08. Use of Proceeds and Letters of Credit.... 70
SECTION 5.09. Further Assurances....................... 70
ARTICLE VI
Negative Covenants
------------------
SECTION 6.01. Indebtedness............................. 71
SECTION 6.02. Liens.................................... 72
SECTION 6.03. Sale and Lease-Back Transactions......... 74
SECTION 6.04. Fundamental Changes...................... 74
SECTION 6.05. Investments, Loans, Advances,
Guarantees and Acquisitions............ 75
SECTION 6.06. Hedging Agreements....................... 75
<PAGE>
3
SECTION 6.07. Restricted Payments and Issuances........ 76
SECTION 6.08. Transactions with Affiliates............. 76
SECTION 6.09. Restrictive Agreements................... 77
SECTION 6.10. Capital Expenditures..................... 77
SECTION 6.11. Consolidated Interest Coverage Ratio..... 78
SECTION 6.12. Consolidated Leverage Ratio.............. 78
SECTION 6.13. Consolidated Tangible Net Worth.......... 78
ARTICLE VII
Events of Default........................ 78
-----------------
ARTICLE VIII
The Administrative Agent................. 82
------------------------
ARTICLE IX
Guarantee................................ 85
---------
ARTICLE X
Miscellaneous
-------------
SECTION 10.01. Notices.................................. 87
SECTION 10.02. Waivers; Amendments...................... 88
SECTION 10.03. Expenses; Indemnity; Damage Waiver....... 89
SECTION 10.04. Successors and Assigns................... 91
SECTION 10.05. Survival................................. 92
SECTION 10.06. Counterparts; Integration;
Effectiveness.......................... 93
SECTION 10.07. Severability 96
SECTION 10.08. Right of Setoff 96
SECTION 10.09. Governing Law; Jurisdiction; Consent
to Service of Process.................. 96
SECTION 10.10. WAIVER OF JURY TRIAL 97
SECTION 10.11. Headings 97
SECTION 10.12. Confidentiality 98
SECTION 10.13. Interest Rate Limitation 99
SECTION 10.14. Conversion of Currencies 99
SCHEDULES:
- ---------
Schedule 1.01 -- Material Subsidiaries
Schedule 2.01 -- Commitments
Schedule 3.06 -- Litigation and Environmental Matters
Schedule 3.07 -- Compliance with Laws and Agreements
Schedule 3.12 -- Subsidiaries
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.09 -- Existing Restrictions
<PAGE>
4
EXHIBITS:
- --------
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Opinion of U.S. Counsel for the
Borrowers
Exhibit C -- Form of Opinion of Netherlands Counsel for the
Borrowers
Exhibit D -- Form of Borrowing Subsidiary Agreement
Exhibit E -- Form of Borrowing Subsidiary Termination
Exhibit F -- Guarantor Agreement
<PAGE>
CREDIT AGREEMENT dated as of March 6, 1997, among
CHICAGO BRIDGE & IRON COMPANY N.V., the BORROWING
SUBSIDIARIES party hereto, the LENDERS party hereto, and
THE CHASE MANHATTAN BANK, as Administrative Agent.
The Borrowers (such term and each other capitalized term used but not
otherwise defined herein having the meaning assigned to it in Article I) have
requested the Lenders to establish the credit facilities provided for herein to
be used to repay the Praxair Indebtedness and for the general corporate purposes
of the Borrowers. The Lenders are willing to establish such credit facilities
upon the terms and subject to the conditions set forth herein. Accordingly, the
parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms. As used in this Agreement, the following
--------------
terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to whether
---
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Alternate Base Rate.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for
------------------
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means The Chase Manhattan Bank, in its capacity as
--------------------
administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire in a
----------------------------
form supplied by the Administrative Agent.
<PAGE>
2
"Affiliate" means, with respect to a specified Person, another Person that
---------
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Agreement Currency" has the meaning assigned to such term in Section
------------------
10.14.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
-------------------
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change
in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such change in the Prime
Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
"Applicable Creditor" has the meaning assigned to such term in Section
-------------------
10.14.
"Applicable Percentage" means, with respect to any Lender, the percentage
---------------------
of the total Commitments represented by such Lender's Commitment. If the
Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"Applicable Rate" means, for any day, with respect to the Eurodollar
---------------
Revolving Loans, the facility fees payable hereunder or the Committed Letters of
Credit, as the case may be, the applicable rate per annum set forth below under
the caption "Eurodollar Spread", "Facility Fee Rate", or "L/C Participation
Fees", as the case may be, based upon the Consolidated Leverage Ratio as set
forth below:
<TABLE>
<CAPTION>
Consolidated Leverage Eurodollar Facility Fee L/C Participation Fees
--------------------- ---------- ------------ -----------------------
Categories: Ratio Spread Rate Performance L/Cs Standby L/Cs
- ---------- ----- ------ ---- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Category 1 Less than 1.0 to 1.0 .325% .175% .200% .325%
- ----------
Category 2 Greater than or equal to .625% .250% .400% .625%
- ---------- 1.0
Category 3 to 1.0 but less than 1.5 to .750% .250% .525% .750%
- ---------- to 1.0 but less than 2.0 to
1.0
Category 4 Greater than or equal to .875% .250% .650% .875%
- ---------- 2.0 to 1.0
</TABLE>
Except as set forth below, the Consolidated Leverage Ratio used on any date to
determine the Applicable Rate shall be that in effect at the fiscal quarter end
next preceding the Financial Statement Delivery Date occurring on or most
recently prior to such date; provided that from the date hereof until the
--------
Financial Statement Delivery Date next following June 30, 1997, the Eurodollar
Spread, Facility Fee
<PAGE>
3
and L/C Participation Fees will be determined by reference to Category 2;
provided further, that if any Financial Statement Delivery Date shall have
- -------- -------
occurred and the financial statements required to have been delivered under
Section 5.01(a) or (b) by such date have not yet been delivered, the Applicable
Rate shall, until such financial statements shall have been delivered, be
determined by reference to the Category next below that in effect immediately
prior to such Financial Statement Delivery Date.
"Assessment Rate" means, for any day, the annual assessment rate in effect
---------------
on such day that is payable by a member of the Bank Insurance Fund classified as
"well-capitalized" and within supervisory subgroup "B" (or a comparable
successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any
successor provision) to the Federal Deposit Insurance Corporation for insurance
by such Corporation of time deposits made in dollars at the offices of such
member in the United States; provided that if, as a result of any change in any
--------
law, rule or regulation, it is no longer possible to determine the Assessment
Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall
be determined by the Administrative Agent to be representative of the cost of
such insurance to the Lenders.
"Assignment and Acceptance" means an assignment and acceptance entered into
-------------------------
by a Lender and an assignee (with the consent of any party whose consent is
required by Section 10.04), and accepted by the Administrative Agent, in the
form of Exhibit A or any other form approved by the Administrative Agent.
"Availability Period" means the period from and including the Effective
-------------------
Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate
------------
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"Board" means the Board of Governors of the Federal Reserve System of the
-----
United States of America.
"Borrower" means the Company or any Borrowing Subsidiary.
--------
"Borrowing" means (a) Revolving Loans of the same Type, made, converted or
---------
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect or (b) a Competitive Loan or group of
Competitive Loans of the same Type made on the same date and as to which a
single Interest Period is in effect.
<PAGE>
4
"Borrowing Request" means a request by a Borrower for a Revolving Borrowing
-----------------
in accordance with Section 2.03.
"Borrowing Subsidiary" means, at any time, any Subsidiary of the Company
--------------------
designated as a Borrowing Subsidiary by the Company pursuant to Section 2.19
that has not ceased to be a Borrowing Subsidiary pursuant to such Section or
Article VII.
"Borrowing Subsidiary Agreement" means a Borrowing Subsidiary Agreement
------------------------------
substantially in the form of Exhibit D.
"Borrowing Subsidiary Termination" means a Borrowing Subsidiary Termination
--------------------------------
substantially in the form of Exhibit E.
"Business Day" means any day that is not a Saturday, Sunday or other day on
------------
which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a Eurodollar Loan,
--------
the term "Business Day" shall also exclude any day on which banks are not open
------------
for dealings in dollar deposits in the London interbank market.
"Capital Lease Obligations" of any Person means the obligations of such
-------------------------
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations at any time shall be the capitalized amount thereof at such time
determined in accordance with GAAP.
"CBHI" means Chi Bridge Holdings, Inc., a direct, Wholly Owned Subsidiary
----
of Praxair.
"CBICBV" means Chicago Bridge & Iron Company B.V., a direct, Wholly Owned
------
Subsidiary of CBHI that, pursuant to the Reorganization, will become a direct,
Wholly Owned Subsidiary of the Company.
A "Change in Control" will be deemed to have occurred (a) in the event of
-----------------
the acquisition of ownership, directly or indirectly, beneficially or of record,
by any Person or group (within the meaning of the Securities Exchange Act of
1934 and the rules of the Securities and Exchange Commission thereunder as in
effect on the date hereof) other than Praxair and its Affiliates, of shares
representing 25% or more of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of the Company; (b) if at any date
members of the Company's board of directors or comparable governing body who
were members of such board or comparable body for a
<PAGE>
5
twelve month period prior to such date, or who were nominated by 2/3 of the
members then in office who were members for such period or who were so
nominated, shall cease to constitute a majority of such board of directors or
comparable governing body; or (c) after the Reorganization, New CBIC or CBICBV
shall cease to be a Wholly Owned Subsidiary of the Company.
"Change in Law" means (a) the adoption of any law, rule or regulation after
-------------
the date of this Agreement, (b) any change in any law, rule or regulation or in
the interpretation or application thereof by any Governmental Authority after
the date of this Agreement or (c) compliance by any Lender or the Issuing Banks
(or, for purposes of Section 2.14(b), by any lending office of such Lender or by
such Lender's or the Issuing Banks' holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"Class", when used in reference to any Loan or Borrowing, refers to whether
-----
such Loan, or the Loans comprising such Borrowing, are Revolving Loans or
Competitive Loans.
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time.
"Commission" means the United States Securities and Exchange Commission.
----------
"Commitment" means, with respect to each Lender, the commitment of such
----------
Lender to make Revolving Loans and to acquire participations in Committed
Letters of Credit hereunder, expressed as an amount representing the maximum
aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b)
reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 10.04. The initial amount of each Lender's
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Commitment, as applicable.
The initial aggregate amount of the Lenders' Commitments is $100,000,000.
"Committed LC Exposure" means, at any time, the sum of (a) the aggregate
---------------------
undrawn amount of all outstanding Committed Letters of Credit at such time plus
(b) the aggregate amount of all LC Disbursements under Committed Letters of
Credit that have not yet been reimbursed by or on behalf of the applicable
Borrower at such time. The Committed LC Exposure of any Lender at any time
shall be its
<PAGE>
6
Applicable Percentage of the total Committed LC Exposure at such time.
"Committed Letter of Credit" means a Letter of Credit issued pursuant to
--------------------------
Section 2.05(b)(i).
"Company" means Chicago Bridge & Iron Company N.V., a Netherlands
-------
Corporation.
"Competitive L/C Exposure" means, at any time, the sum of (a) the aggregate
------------------------
undrawn amount of all outstanding Competitive Letters of Credit at such time
plus (b) the aggregate amount of all LC Disbursements under Competitive Letters
of Credit that have not yet been reimbursed by or on behalf of the applicable
Borrower at such time. The Competitive LC Exposure of any Lender at any time
shall be the portion of the aggregate Competitive LC Exposure attributable to
Competitive Letters of Credit issued by it.
"Competitive Letter of Credit" means a Letter of Credit issued pursuant to
----------------------------
Section 2.05(b)(ii).
"Competitive Letter of Credit Bid" means an offer by an Issuing Bank to
--------------------------------
issue a Competitive Letter of Credit in accordance with Section 2.05(b)(ii).
"Competitive Letter of Credit Bid Rate" means, with respect to any
-------------------------------------
Competitive Letter of Credit Bid, the fee for which an Issuing Bank would be
willing to issue a Competitive Letter of Credit, expressed as a percentage rate
per annum on the face amount of such Letter of Credit.
"Competitive Letter of Credit Request" means a request by a Borrower for
------------------------------------
Competitive Letter of Credit Bids in accordance with Section 2.05(b)(ii).
"Competitive Loan" means a Loan made pursuant to Section 2.04.
----------------
"Competitive Loan Bid" means an offer by a Lender to make a Competitive
--------------------
Loan in accordance with Section 2.04.
"Competitive Loan Bid Rate" means, with respect to any Competitive Bid, the
-------------------------
Margin or the Fixed Rate, as applicable, offered by the Lender making such
Competitive Bid.
"Competitive Loan Bid Request" means a request by a Borrower for
----------------------------
Competitive Bids in accordance with Section 2.04.
"Consolidated Capital Expenditures" means, for any period, all additions to
---------------------------------
property, plant and equipment and other capital expenditures of the Company and
its
<PAGE>
7
consolidated Subsidiaries (including assets acquired pursuant to capital leases)
that are (or would be) reflected in a consolidated statement of cash flow of the
Company for such period prepared in accordance with GAAP. Consolidated Capital
Expenditures during any period shall exclude up to $6,000,000 of purchases of
equipment in the ordinary course of business to the extent the amount of such
purchases is not in excess of the proceeds of sales during the preceding 12
months of equipment no longer required in connection with existing or completed
projects, but shall not otherwise be reduced by dispositions of property, plant
or equipment during such period.
"Consolidated EBITDA" means, for any period, the Consolidated Net Income of
-------------------
the Company and its consolidated Subsidiaries for such period plus, to the
----
extent deducted in computing such Consolidated Net Income and without
duplication, the sum of (a) income tax expense, (b) Consolidated Interest
Expense, (c) depreciation and amortization expense, (d) any other non-cash
charges, and (e) extraordinary losses during such period, minus, to the extent
-----
added in computing such Consolidated Net Income and without duplication, (y) any
non-cash income and (z) extraordinary gains during such period, all determined
on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the gross interest
-----------------------------
expense of the Company and its consolidated Subsidiaries, including (i) the
portion of any payments or accruals with respect to Capital Lease Obligations
allocable to interest expense, (ii) capitalized interest expense, (iii) pay-in-
kind interest expense and (iv) the amortization of debt discounts, all as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Leverage Ratio" means, at any time, the ratio of (a) Total
---------------------------
Debt at such time to (b) Consolidated EBITDA for the most recent period of four
consecutive fiscal quarters of the Company ended at or prior to such time.
"Consolidated Net Income" means, for any period, the net income (or loss)
-----------------------
of the Company and its consolidated Subsidiaries for such period, determined on
a consolidated basis in accordance with GAAP consistently applied; provided that
--------
in determining Consolidated Net Income there shall be excluded (a) that portion
of the income and expenses of any Subsidiary attributable to a joint interest
therein held by any person, other than the Company or any of the Subsidiaries or
any director holding qualifying shares in accordance with applicable law, and
(b) the income (or loss) of any person accrued prior to the date it becomes a
Subsidiary of the Company or is merged into or consolidated with the Company or
any of the Subsidiaries or the date that
<PAGE>
8
person's assets are acquired by the Company or any of the Subsidiaries.
"Consolidated Tangible Net Worth" means (a) total shareholders' equity of
-------------------------------
the Company and its consolidated Subsidiaries minus (b) the aggregate amount of
-----
all intangible assets of the Company and its consolidated Subsidiaries, all as
determined on a consolidated basis in accordance with GAAP.
"Control" means the possession, directly or indirectly, of the power to
-------
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
- ------------ ----------
"Default" means any event or condition which constitutes an Event of
-------
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Designated Subsidiary" has the meaning assigned to such term in Section
---------------------
5.09.
"dollars" or "$" refers to lawful money of the United States of America.
------- -
"Domestic Borrowing Subsidiary" means any Borrowing Subsidiary that is a
-----------------------------
Domestic Subsidiary.
"Domestic Subsidiary" means any Subsidiary that is organized under the laws
-------------------
of any jurisdiction in the United States.
"Effective Date" means the date on which the conditions specified in
--------------
Section 4.01 are satisfied (or waived in accordance with Section 10.02).
"Environmental Laws" means all laws, rules, regulations, codes, ordinances,
------------------
orders, decrees, judgments, injunctions, notices imposing requirements or
binding agreements issued, promulgated or entered into by any Governmental
Authority, which relate in any way to the environment, preservation or
reclamation of natural resources, or the management, release or threatened
release of any Hazardous Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or otherwise
-----------------------
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Company or any Subsidiary resulting from or
based upon (a) violation of any Environmental Law, (b) the generation, use,
handling,
<PAGE>
9
transportation, storage, treatment or disposal of any Hazardous Materials, (c)
exposure to any Hazardous Materials, (d) the release or threatened release of
any Hazardous Materials into the environment or (e) any contract, or legally
enforceable agreement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
---------------
that, together with the Company, is treated as a single employer under Section
414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, is treated as a single employer under Section 414 of
the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section 4043
-----------
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Company or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Company or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Company or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Company or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Company or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing, refers to
----------
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Adjusted LIBO Rate (or, in the case of
a Competitive Loan, the LIBO Rate).
"Event of Default" has the meaning assigned to such term in Article VII.
----------------
<PAGE>
10
"Excluded Foreign Subsidiary" means any Foreign Subsidiary (a) that is
---------------------------
prohibited by applicable law from becoming, or the officers or directors of
which would incur civil or criminal liabilities or penalties under applicable
law in the event it became, a Guarantor, or (b) that cannot become a Guarantor
without incurring, or causing the Company or any of its Subsidiaries to incur,
tax or other liabilities that the Company and the Administrative Agent agree to
be excessive in relation to the benefits that would be conferred on the Lenders
by such Subsidiary becoming a Guarantor.
"Excluded Taxes" means, with respect to the Administrative Agent, any
--------------
Lender, any Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of any Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which a Borrower is located and (c) in the case of
a Foreign Lender (other than an assignee pursuant to a request by a Borrower
under Section 2.18(b)), (I) any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office), except to the extent
that (i) such Foreign Lender (or its assignor, if any) was entitled, at the time
of designation of a new lending office (or assignment), to receive additional
amounts from a Borrower with respect to such withholding tax pursuant to Section
2.16(a) or (ii) such withholding tax is imposed on payments by any Borrowing
Subsidiary that becomes a party to this Agreement after such Foreign Lender
becomes a party hereto and (II) any withholding tax that is attributable to such
Foreign Lender's failure to comply with Section 2.16(e).
"Existing Indebtedness" has the meaning assigned to such term in Section
---------------------
6.01.
"Federal Funds Effective Rate" means, for any day, the weighted average
----------------------------
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the
<PAGE>
11
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
"Financial Officer" of any Person, means the chief financial officer,
-----------------
principal accounting officer, treasurer or controller of such Person.
"Financial Statement Delivery Date" means the 120th day following the end
---------------------------------
of each fiscal year of the Company, and the 60th day following the end of each
of the first three fiscal quarters in each fiscal year of the Company.
"Fixed Rate" means, with respect to any Competitive Loan (other than a
----------
Eurodollar Competitive Loan), the fixed rate of interest per annum specified by
the Lender making such Competitive Loan in its related Competitive Bid.
"Fixed Rate Loan" means a Competitive Loan bearing interest at a Fixed
---------------
Rate.
"Foreign Lender" means, with respect to any Loan, any Lender making such
--------------
Loan that is organized under the laws of a jurisdiction other than the Relevant
Jurisdiction. For purposes of this definition, the United States of America,
each State thereof and the District of Columbia shall be deemed to constitute a
single jurisdiction.
"Foreign Subsidiary" means any Subsidiary that is not organized under the
------------------
laws of any jurisdiction in the United States.
"GAAP" means generally accepted accounting principles in the United States
----
of America.
"Governmental Authority" means the government of the United States of
----------------------
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of government.
"Guarantee" of or by any Person (the "guarantor") means any obligation,
--------- ---------
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, and
---------------
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property,
<PAGE>
12
securities or services for the purpose of assuring the owner of such
Indebtedness or other obligation of the payment thereof, (c) to maintain working
capital, equity capital or any other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term Guarantee shall not include (i) endorsements
--------
for collection or deposit in the ordinary course of business, (ii) guarantees by
the Company or any Subsidiary of Indebtedness of any Subsidiary or the Company,
(iii) guarantees by the Company or any Subsidiary of performance bonds and
letters of credit to secure ordinary course performance obligations of the
Company or a Subsidiary in connection with active construction projects
(including projects about to be commenced) or bids for prospective construction
projects or (iv) guarantees of the obligations of the Company or any Subsidiary
under any Hedging Agreement not prohibited by this Agreement.
"Guarantor Agreement" means a Guarantor Agreement in the form of Exhibit F.
-------------------
"Guarantors" means the Company and the Subsidiary Guarantors.
----------
"Hazardous Materials" means all explosive or radioactive substances or
-------------------
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas at levels regulated by relevant
Governmental Authorities, and all other substances or wastes regulated pursuant
to any Environmental Law.
"Hedging Agreement" means any interest rate protection agreement, foreign
-----------------
currency exchange agreement, commodity price protection agreement or other
interest or currency exchange rate or commodity or security price hedging
arrangement or credit derivative.
"Indebtedness" of any Person means, without duplication, (a) all
------------
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of
<PAGE>
13
business), (f) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person
of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party or
party responsible for reimbursement of payments made in respect of letters of
credit, letters of guaranty and surety bonds and (j) all obligations, contingent
or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
Notwithstanding the foregoing definition, Indebtedness shall not include any
payment or other obligations to Praxair or its Affiliates in respect of employee
benefits under the Employee Benefits Disaffiliation Agreement dated January 1,
1997, between Company and Praxair, as amended from time to time.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
-----------------
"Interest Election Request" means a request by a Borrower to convert or
-------------------------
continue a Revolving Borrowing in accordance with Section 2.07.
"Interest Payment Date" means (a) with respect to any ABR Loan, the last
---------------------
day of each March, June, September and December, (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar Borrowing with an
Interest Period of more than three months' duration, each day prior to the last
day of such Interest Period that occurs at intervals of three months' duration
after the first day of such Interest Period and (c) with respect to any Fixed
Rate Loan, the last day of the Interest Period applicable to the Borrowing of
which such Loan is a part and, in the case of a Fixed Rate Borrowing with an
Interest Period of more than 90 days' duration (unless otherwise specified in
the applicable Competitive Loan Bid Request), each day prior to the last day of
such Interest Period that occurs at intervals of 90 days' duration after the
first day of such Interest Period, and any other dates that are specified in the
applicable Competitive Loan Bid Request as Interest Payment Dates with respect
to such Borrowing.
<PAGE>
14
"Interest Period" means (a) with respect to any Eurodollar Borrowing, the
---------------
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the relevant Borrower may elect, and (b) with respect to any
Fixed Rate Borrowing, the period (which shall not be less than one day or more
than 360 days) commencing on the date of such Borrowing and ending on the date
specified in the applicable Competitive Loan Bid Request; provided, that (i) if
--------
any Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, in the case
of a Eurodollar Borrowing only, such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day and (ii) any Interest Period pertaining to a
Eurodollar Borrowing that commences on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period. For purposes hereof, the date
of a Borrowing initially shall be the date on which such Borrowing is made and,
in the case of a Revolving Borrowing, thereafter shall be the effective date of
the most recent conversion or continuation of such Borrowing.
"Issuing Banks" means the Lenders designated as issuers of Letters of
-------------
Credit in Schedule 2.01 and each other Lender that shall agree from time to time
to serve as an Issuing Bank in an instrument executed by such Lender, the
Company and the Administrative Agent. Each Issuing Bank may, in its discretion,
arrange for one or more Letters of Credit to be issued by Affiliates of such
Issuing Bank, in which case the term "Issuing Banks" shall include any such
Affiliate with respect to Letters of Credit issued by such Affiliate.
"Judgment Currency" has the meaning assigned to such term in Section 10.14.
-----------------
"LC Disbursement" means a payment made by an Issuing Bank pursuant to a
---------------
Letter of Credit.
"LC Exposure" means the aggregate amount of the Committed LC Exposure and
-----------
the Competitive LC Exposure.
"Lenders" means the Persons listed on Schedule 2.01 and any other Person
-------
that shall have become a party hereto pursuant to an Assignment and Acceptance,
other than any such Person that ceases to be a party hereto pursuant to an
Assignment and Acceptance.
<PAGE>
15
"Letter of Credit" means any Committed Letter of Credit or Competitive
----------------
Letter of Credit.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
---------
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
---------
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of trust,
----
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing)
relating to such asset and (c) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
"Loans" means the loans made by the Lenders to the Borrowers pursuant to
-----
this Agreement.
"Margin" means, with respect to any Competitive Loan bearing interest at a
------
rate based on the LIBO Rate, the marginal rate of interest, if any, to be added
to or subtracted from the LIBO Rate to determine the rate of interest applicable
to such Loan, as specified by the Lender making such Loan in its related
Competitive Bid.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, assets, operations, prospects or condition, financial or otherwise, of
the Company and its Subsidiaries taken as a whole or (b) the ability of the
Company to perform its obligations under this Agreement.
<PAGE>
16
"Material Indebtedness" means Indebtedness (other than the Obligations), or
---------------------
obligations in respect of one or more Hedging Agreements, of any one or more of
the Company and its Subsidiaries in an aggregate principal amount exceeding
$5,000,000. For purposes of determining Material Indebtedness, the "principal
amount" of the obligations of the Company or any Subsidiary in respect of any
Hedging Agreement at any time shall be the maximum aggregate amount that the
Company or such Subsidiary would be required to pay if such Hedging Agreement
were terminated at such time.
"Material Subsidiary" means (a) any Borrowing Subsidiary, (b) any
-------------------
Subsidiary that directly or indirectly owns or Controls any Borrowing Subsidiary
or other Material Subsidiary and (c) any other Subsidiary (i) the consolidated
net revenues of which for the most recent fiscal year of the Company for which
audited financial statements have been delivered pursuant to Section 5.01 were
greater than 3% of the Company's consolidated net revenues for such fiscal year
or (ii) the consolidated tangible assets of which as of the end of such fiscal
year were greater than 3% of the Company's consolidated tangible assets as of
such date; provided that, if at any time the aggregate amount of the
--------
consolidated net revenues or consolidated tangible assets of all Subsidiaries
that are not Material Subsidiaries exceeds 10% of the Company's consolidated net
revenues for any such fiscal year or 10% of the Company's consolidated tangible
assets as of the end of any such fiscal year, the Company (or, in the event the
Company has failed to do so within 10 days, the Administrative Agent) shall
designate sufficient Subsidiaries as "Material Subsidiaries" to eliminate such
excess, and such designated Subsidiaries shall for all purposes of this
Agreement constitute Material Subsidiaries. For purposes of making the
determinations required by this definition, revenues and assets of Foreign
Subsidiaries shall be converted into dollars at the rates used in preparing the
consolidated balance sheet of the Company included in the applicable financial
statements. The Material Subsidiaries on the date hereof are identified in
Schedule 1.01 hereto.
"Maturity Date" means the fifth anniversary of the date of this agreement.
-------------
"Moody's" means Moody's Investors Service, Inc.
-------
"Multiemployer Plan" means a multiemployer plan as defined in Section
------------------
4001(a)(3) of ERISA.
"New CBIC" means a newly organized Delaware corporation owned by CBHI that,
--------
pursuant to the Reorganization, will become a direct, Wholly Owned Subsidiary of
the Company.
<PAGE>
17
"Obligations" means all obligations of the Borrowers and the Guarantors
-----------
under this Agreement and the Borrowing Subsidiary Agreements with respect to the
payment of (i) the principal of and interest on the Loans and LC Disbursements
when and as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, and (ii) all other monetary obligations of the
Borrowers and Guarantors hereunder and thereunder.
"Offering" means the sale by CBHI, following the Reorganization, of common
--------
shares representing at least a majority interest in the Company pursuant to an
initial public offering registered with the Securities and Exchange Commission.
"Old CBIC" means Chicago Bridge & Iron Company, a Delaware corporation and
--------
a direct, Wholly Owned Subsidiary of CBHI.
"Other Taxes" means any and all present or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
----
defined in ERISA and any successor entity performing similar functions.
"Performance Letter of Credit" means a Letter of Credit issued to secure
----------------------------
ordinary course performance obligations of the Company or a Subsidiary in
connection with active construction projects (including projects about to be
commenced) or bids for prospective construction projects.
"Permitted Acquisition" means any acquisition by the Company or a
---------------------
Subsidiary of a majority of the capital stock (other than directors' qualifying
shares) of any other Person, or of assets of any Person constituting a division
or other business unit; provided that (a) the Company would be permitted to
--------
engage in the business conducted by such Person or Business unit under Section
6.04(b) and (b) the aggregate consideration (including the fair market value of
non-cash consideration) paid in connection with such acquisition, when taken
together with all previous Permitted Acquisitions, shall not exceed $5,000,000
during any fiscal year of the Company or $15,000,000 in the aggregate during the
term of this Agreement.
<PAGE>
18
"Permitted Encumbrances" means:
----------------------
(a) Liens imposed by law for taxes that are not yet due or are being contested
in compliance with Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and
other like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 60 days or are being
contested in compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of business in compliance
with workers' compensation, unemployment insurance, old age pension and other
social security laws or regulations;
(d) easements, zoning restrictions, rights-of-way and similar encumbrances on
real property imposed by law or arising in the ordinary course of business that
do not secure any monetary obligations and do not materially detract from the
value of the affected property or interfere with the ordinary conduct of
business of the Company or any Subsidiary.
"Permitted Investments" means:
---------------------
(a) direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing within one year
from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the date of
acquisition thereof and having, at such date of acquisition, the highest credit
rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and time
deposits maturing within 180 days from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank organized under the laws
of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000; and
(d) fully collateralized repurchase agreements with a term of not more than 30
days for securities described in clause (a) above and entered into with a
<PAGE>
19
financial institution satisfying the criteria described in clause (c) above.
"Person" means any natural person, corporation, limited liability company,
------
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"Plan" means any employee pension benefit plan (other than a Multiemployer
----
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, and in respect of which the Company or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) a "contributing sponsor" as defined in Section 4001
(a)(13) of ERISA.
"Praxair" means Praxair, Inc., a Delaware corporation.
-------
"Praxair Indebtedness" means $53,900,000 of long-term Indebtedness owed by
--------------------
Old CBIC to Praxair or its Affiliates and reflected on the consolidated balance
sheet of Old CBIC as of December 31, 1996, included in the Registration
Statement, which Indebtedness will be assumed by New CBIC as part of the
Reorganization.
"Prime Rate" means the rate of interest per annum publicly announced from
----------
time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Register" has the meaning set forth in Section 10.04.
--------
"Registration Statement" means the Registration Statement relating to the
----------------------
Offering, as filed with the Commission on December 17, 1996, as amended by
Amendment No. 1 thereto, filed with the Commission on February 11, 1997, and
Amendment No. 2 thereto, filed with the Commission on February 28, 1997.
"Related Parties" means, with respect to any specified Person, such
---------------
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Relevant Jurisdiction" means (i) in the case of any loan to any Domestic
---------------------
Borrowing Subsidiary, the United States of America, and (ii) in the case of any
Loan to the Company and to any other Borrowing Subsidiary, the
<PAGE>
20
jurisdiction imposing (or having the power to impose) withholding tax on
payments by the Company or such Borrowing Subsidiary under this Agreement.
"Reorganization" means, collectively, (i) the distribution by Old CBIC of
--------------
the capital stock of its non-United States subsidiaries to CBHI, (ii) the
contribution by CBHI of the capital stock of such non-United States subsidiaries
to the CBICBV, (iii) the distribution by Old CBIC of the capital stock of its
United States Subsidiaries to CBHI, (iv) the contribution by CBHI of the capital
stock of such United States Subsidiaries to New CBIC, (v) the contribution by
CBHI of the capital stock of New CBIC and CBICBV to the Company, and (vi) the
acquisition and assumption by New CBIC of any remaining assets and liabilities
of Old CBIC.
"Required Lenders" means, at any time, Lenders having Revolving Credit
----------------
Exposures and unused Commitments representing greater than 50% of the sum of the
total Revolving Credit Exposures and unused Commitments at such time; provided
--------
that, for purposes of declaring the Loans to be due and payable pursuant to
Article VII, and for all purposes after the Loans become due and payable
pursuant to Article VII or the Commitments expire or terminate, the outstanding
Competitive Loans and Competitive LC Exposures of the Lenders shall be included
in their respective Revolving Credit Exposures in determining the Required
Lenders.
"Restricted Payment" means any dividend or other distribution (whether in
------------------
cash, securities or other property) with respect to any shares of any class of
capital stock of the Company or any Subsidiary, or any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any such shares of capital stock or any option, warrant or other
right to acquire any such shares of capital stock.
"Revolving Credit Exposure" means, with respect to any Lender at any time,
-------------------------
the sum of the outstanding principal amount of such Lender's Revolving Loans and
its Committed LC Exposure at such time.
"Revolving Loan" means a Loan made pursuant to Section 2.03.
--------------
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill,
---
Inc.
"Standby Letter of Credit" means any Letter of Credit other than a
------------------------
Performance Letter of Credit.
<PAGE>
21
"Statutory Reserve Rate" means a fraction (expressed as a decimal), the
----------------------
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars of over $100,000 with maturities approximately equal to three months and
(b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.
"subsidiary" means, with respect to any Person (the "parent") at any date,
---------- ------
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent's consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Company.
----------
"Subsidiary Guarantor" means each Subsidiary that is delivering a Guarantor
--------------------
Agreement on the date hereof and each other Subsidiary that becomes a Guarantor
in accordance with Section 5.09.
"Taxes" means any and all present or future taxes, levies, imposts, duties,
-----
deductions, charges or withholdings imposed by any Governmental Authority.
"Three-Month Secondary CD Rate" means, for any day, the secondary market
-----------------------------
rate for three-month certificates of deposit reported as being in effect on such
day (or, if such day is not a Business Day, the next preceding Business
<PAGE>
22
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such
next preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 a.m., New York City time, on such day (or, if
such day is not a Business Day, on the next preceding Business Day) by the
Administrative Agent from three negotiable certificate of deposit dealers of
recognized standing selected by it.
"Total Debt" means, at any date, all Indebtedness of the Company and its
----------
consolidated Subsidiaries on a consolidated basis at such date, other than
performance bonds and letters of credit securing ordinary course performance
obligations of the Company or a Subsidiary in connection with active
construction projects (including projects about to be commenced) or bids for
prospective construction projects.
"Transactions" means the execution, delivery and performance by the
------------
Borrowers and the Guarantors of this Agreement, the Borrowing Subsidiary
Agreements and the Guarantor Agreements, the borrowing of Loans and obtaining of
Letters of Credit, the use of the proceeds of such Loans and the use of such
Letters of Credit, the Reorganization, the repayment of the Praxair
Indebtedness, the Offering and the other transactions contemplated hereby.
"Type", when used in reference to any Loan or Borrowing, refers to whether
----
the rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate, the Alternate Base Rate or,
in the case of a Competitive Loan or Borrowing, the LIBO Rate or a Fixed Rate.
"Wholly Owned Subsidiary" means a subsidiary, all the capital stock of
-----------------------
which (other than directors' qualifying shares), is owned by the Company or
another Wholly Owned Subsidiary.
"Withdrawal Liability" means liability to a Multiemployer Plan as a result
--------------------
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For purposes of
---------------------------------------
this Agreement, Loans may be classified and referred to by Class (e.g., a
----
"Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type
----
(e.g., a "Eurodollar Revolving Loan"). Borrowings
- -----
<PAGE>
23
also may be classified and referred to by Class (e.g., a "Revolving Borrowing")
----
or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a
---- ----
"Eurodollar Revolving Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein shall
----------------
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding mascu line,
feminine and neuter forms. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The word
"will" shall be construed to have the same meaning and effect as the word
"shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
-----------------------
provided, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the
--------
Company notifies the Administrative Agent that the Company requests an amendment
to any provision hereof to eliminate the effect of any change occurring after
the date hereof in GAAP or in the application thereof on the operation of such
provision (or if the Administrative Agent notifies the Company that the Required
Lenders request an amendment to any provision hereof for such purpose),
regardless of whether any such notice is given before or after such change in
GAAP or in the application thereof, then such provision shall be interpreted on
the basis of GAAP as in effect and applied immediately before such change shall
have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith.
<PAGE>
24
ARTICLE II
The Credits
-----------
SECTION 2.01. Commitments. Subject to the terms and conditions set
------------
forth herein, each Lender agrees to make Revolving Loans to the Borrowers from
time to time during the Availability Period in an aggregate principal amount
that will not result in (a) such Lender's Revolving Credit Exposure exceeding
such Lender's Commitment or (b) the sum of the aggregate Revolving Credit
Exposures plus the aggregate principal amount of outstanding Competitive Loans
plus the aggregate Competitive L/C Exposures exceeding the aggregate
Commitments. Within the foregoing limits and subject to the terms and
conditions set forth herein, the Borrowers may borrow, repay and reborrow
Revolving Loans.
SECTION 2.02. Loans and Borrowings. (a) Each Revolving Loan shall
---------------------
be made as part of a Borrowing consisting of Revolving Loans made by the Lenders
ratably in accordance with their respective Commitments. Each Competitive Loan
shall be made in accordance with the procedures set forth in Section 2.04. The
failure of any Lender to make any Loan required to be made by it shall not
relieve any other Lender of its obligations hereunder; provided that the
--------
Commitments and Competitive Bids of the Lenders are several and no Lender shall
be responsible for any other Lender's failure to make Loans as required.
(b) Subject to Section 2.13, (i) each Revolving Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the applicable Borrower
may request in accordance herewith, and (ii) each Competitive Borrowing shall be
comprised entirely of Eurodollar Loans or Fixed Rate Loans as the applicable
Borrower may request in accordance herewith. Each Lender at its option may make
any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of
such Lender to make such Loan; provided, that any exercise of such option shall
--------
not affect the obligation of any Borrower to repay such Loan in accordance with
the terms of this Agreement; provided further, that to the extent any Lender
----------------
shall exercise such option in a manner inconsistent with its mitigation
obligations under Section 2.18(a), such Lender shall not be entitled to
compensation under Section 2.14 or 2.16 for any resulting cost, reduction in
amounts received or receivable or reduction in return.
(c) At the commencement of each Interest Period for any Eurodollar
Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $4,000,000. At the time that
each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate
amount that is an integral multiple of $1,000,000 and not less than $4,000,000;
provided that an
- --------
<PAGE>
25
ABR Revolving Borrowing may be in an aggregate amount that is equal to the
entire unused balance of the total Commitments or that is required to finance
the reimbursement of an LC Disbursement as contemplated by Section 2.05(e). Each
Competitive Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000 and not less than $4,000,000. Borrowings of more than
one Type and Class may be outstanding at the same time; provided that there
--------
shall not at any time be more than a total of seven Eurodollar Revolving
Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, a Borrower
shall not be entitled to request, or to elect to convert or continue, any
Borrowing if the Interest Period requested with respect thereto would end after
the Maturity Date.
SECTION 2.03. Requests for Revolving Borrowings. To request a
----------------------------------
Revolving Borrowing, a Borrower shall notify the Administrative Agent of such
request by telephone (a) in the case of a Eurodollar Borrowing, not later than
11:00 a.m., New York City time, three Business Days before the date of the
proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00
a.m., New York City time, one Business Day before the date of the proposed
Borrowing; provided that any such notice of an ABR Revolving Borrowing to
--------
finance the reimbursement of an LC Disbursement as contemplated by Section
2.05(e) may be given not later than 10:00 a.m., New York City time, on the date
of the proposed Borrowing. Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Borrowing Request in a form approved by the
Administrative Agent and signed by the applicable Borrower. Each such
telephonic and written Borrowing Request shall specify the following information
in compliance with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest Period
to be applicable thereto, which shall be a period contemplated by the
definition of the term "Interest Period"; and
(v) the location and number of the relevant Borrower's account to
which funds are to be disbursed,
<PAGE>
26
which shall comply with the requirements of Section 2.06.
If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period
is specified with respect to any requested Eurodollar Revolving Borrowing, then
the relevant Borrower shall be deemed to have selected an Interest Period of one
month's duration. Promptly following receipt of a Borrowing Request in
accordance with this Section, the Administrative Agent shall advise each Lender
of the details thereof and of the amount of such Lender's Loan to be made as
part of the requested Borrowing.
SECTION 2.04. Competitive Loan Bid Procedure. (a) Subject to the
------------------------------
terms and conditions set forth herein, from time to time during the Availability
Period any Borrower may request Competitive Loan Bids and may (but shall not
have any obligation to) accept Competitive Loan Bids and borrow Competitive
Loans; provided that the sum of the total Revolving Credit Exposures plus the
--------
aggregate principal amount of outstanding Competitive Loans plus the aggregate
Competitive L/C Exposures at any time shall not exceed the total Commitments.
To request Competitive Loan Bids, a Borrower shall notify the Administrative
Agent of such request by telephone, in the case of a Eurodollar Borrowing, not
later than 11:00 a.m., New York City time, four Business Days before the date of
the proposed Borrowing and, in the case of a Fixed Rate Borrowing, not later
than 10:00 a.m., New York City time, one Business Day before the date of the
proposed Borrowing; provided that the Borrowers may submit up to (but not more
--------
than) three Competitive Loan Bid Requests on the same day, but a Competitive
Loan Bid Request shall not be made within five Business Days after the date of
any previous Competitive Loan Bid Request, unless any and all such previous
Competitive Loan Bid Requests shall have been withdrawn or all Competitive Loan
Bids received in response thereto rejected. Each such telephonic Competitive
Loan Bid Request shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Competitive Loan Bid Request in a form
approved by the Administrative Agent and signed by the applicable Borrower.
Each such telephonic and written Competitive Loan Bid Request shall specify the
following information in compliance with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be a Eurodollar Borrowing or a
Fixed Rate Borrowing;
<PAGE>
27
(iv) the Interest Period to be applicable to such Borrowing,
which shall be a period contemplated by the definition of the term
"Interest Period"; and
(v) the location and number of the relevant Borrower's account to
which funds are to be disbursed, which shall comply with the
requirements of Section 2.06.
Promptly following receipt of a Competitive Loan Bid Request in accordance with
this Section, the Administrative Agent shall notify the Lenders of the details
thereof by telecopy, inviting the Lenders to submit Competitive Loan Bids.
(b) Each Lender may (but shall not have any obligation to) make one
or more Competitive Loan Bids to any Borrower in response to a Competitive Loan
Bid Request. Each Competitive Loan Bid by a Lender must be in a form approved by
the Administrative Agent and must be received by the Administrative Agent by
telecopy, in the case of a Eurodollar Competitive Borrowing, not later than 9:30
a.m., New York City time, three Business Days before the proposed date of such
Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than
9:30 a.m., New York City time, on the proposed date of such Competitive Borrow
ing. Competitive Loan Bids that do not conform substantially to the form
approved by the Administrative Agent may be rejected by the Administrative
Agent, and the Administrative Agent shall notify the applicable Lender as
promptly as practicable. Each Competitive Loan Bid shall specify (i) the
principal amount (which shall be a minimum of $4,000,000 and an integral
multiple of $1,000,000 and which may equal the entire principal amount of the
Competi tive Borrowing requested by the applicable Borrower) of the Competitive
Loan or Loans that the Lender is willing to make, (ii) the Competitive Loan Bid
Rate or Rates at which the Lender is prepared to make such Loan or Loans
(expressed as a percentage rate per annum in the form of a decimal to no more
than four decimal places) and (iii) the Interest Period applicable to each such
Loan and the last day thereof.
(c) The Administrative Agent shall promptly and in no event later
than 10:15 a.m. New York time, on the proposed date of borrowing, notify the
relevant Borrower by telecopy of the Competitive Loan Bid Rate and the principal
amount specified in each Competitive Loan Bid and the identity of the Lender
that shall have made such Competitive Loan Bid.
(d) Subject only to the provisions of this paragraph, a Borrower may
accept or reject any Competitive Loan Bid. The relevant Borrower shall notify
the Administrative Agent by telephone, confirmed by telecopy in
<PAGE>
28
a form approved by the Administrative Agent, whether and to what extent it has
decided to accept or reject each Competitive Loan Bid, in the case of a
Eurodollar Competitive Borrowing, not later than 10:30 a.m., New York City time,
three Business Days before the date of the proposed Competitive Borrowing, and
in the case of a Fixed Rate Borrowing, not later than 10:30 a.m., New York City
time, on the proposed date of the Competitive Borrowing; provided that (i) the
--------
failure of such Borrower to give such notice shall be deemed to be a rejection
of each Competitive Loan Bid, (ii) such Borrower shall not accept a Competitive
Loan Bid made at a particular Competitive Loan Bid Rate if such Borrower rejects
a Competitive Loan Bid made at a lower Competitive Loan Bid Rate for the same
Interest Period, (iii) the aggregate amount of the Competitive Loan Bids
accepted by such Borrower shall not exceed the aggregate amount of the requested
Competitive Borrowing specified in the related Competitive Loan Bid Request,
(iv) to the extent necessary to comply with clause (iii) above, such Borrower
may accept Competitive Loan Bids at the same Competitive Loan Bid Rate in part,
which acceptance, in the case of multiple Competitive Loan Bids at such
Competitive Loan Bid Rate, shall be made pro rata in accordance with the amount
of each such Competitive Loan Bid, and (v) except pursuant to clause (iv) above,
no Competitive Loan Bid shall be accepted for a Competitive Loan unless such
Competitive Loan is in a minimum principal amount of $4,000,000 and an integral
multiple of $1,000,000; provided further that if a Competitive Loan must be in
----------------
an amount less than $4,000,000 because of the provisions of clause (iv) above,
such Competitive Loan may be for a minimum of $1,000,000 or any integral
multiple thereof, and in calculating the pro rata allocation of acceptances of
portions of multiple Competitive Loan Bids at a particular Competitive Loan Bid
Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples
of $1,000,000 in a manner determined by such Borrower. A notice given by any
Borrower pursuant to this paragraph shall be irrevocable.
(e) The Administrative Agent shall promptly notify each bidding
Lender by telecopy whether or not its Competitive Loan Bid has been accepted
(and, if so, the amount and Competitive Loan Bid Rate so accepted), and each
successful bidder will thereupon become bound, subject to the terms and
conditions hereof, to make the Competitive Loan in respect of which its
Competitive Loan Bid has been accepted.
(f) If the Administrative Agent shall elect to submit a Competitive
Loan Bid in its capacity as a Lender, it shall submit such Competitive Loan Bid
directly to the relevant Borrower at least one quarter of an hour earlier than
the time by which the other Lenders are required to
<PAGE>
29
submit their Competitive Loan Bids to the Administrative Agent pursuant to
paragraph (b) of this Section.
SECTION 2.05. Letters of Credit. (a) General. Subject to the terms
------------------ --------
and conditions set forth herein, any Borrower may request the issuance of
Committed Letters of Credit for its own account in a form reasonably acceptable
to the Administrative Agent and the Issuing Banks, and any Borrower may request
the submission of Competitive Letter of Credit Bids pursuant to a Competitive
Letter of Credit Bid Request, at any time and from time to time during the
Availability Period. In the event of any inconsistency between the terms and
conditions of this Agreement and the terms and conditions of any form of letter
of credit application or other agreement submitted by a Borrower to, or entered
into by a Borrower with, any Issuing Bank relating to any Letter of Credit, the
terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
----------------------------------------------------------
Conditions. (i) To request the issuance of a Committed Letter of Credit by any
- -----------
Issuing Bank (or the amendment, renewal or extension of an outstanding Committed
Letter of Credit), a Borrower shall hand deliver or telecopy (or transmit by
electronic communication, if arrangements for doing so have been approved by
such Issuing Bank) to such Issuing Bank and the Administrative Agent (reasonably
in advance of the requested date of issuance, amendment, renewal or extension) a
notice requesting the issuance of a Committed Letter of Credit, or identifying
the Committed Letter of Credit to be amended, renewed or extended, the date of
issuance, amendment, renewal or extension, the date on which such Committed
Letter of Credit is to expire (which shall comply with paragraph (c) of this
Section), the amount of such Committed Letter of Credit, the name and address of
the beneficiary thereof, whether such Committed Letter of Credit is to be a
Performance Letter of Credit or a Standby Letter of Credit and such other
information as shall be necessary to prepare, amend, renew or extend such
Committed Letter of Credit. The Issuing Bank will issue any Committed Letter of
Credit so requested at the time specified in such notice, subject to the other
terms and conditions set forth herein.
(ii)(1) Subject to the terms and conditions set forth herein, from
time to time during the Availability Period any Borrower may request Competitive
Letter of Credit Bids and may (but shall not have any obligation to) accept
Competitive Letter of Credit Bids and obtain the issuance of Competitive Letters
of Credit. To request Competitive Letter of Credit Bids, a Borrower shall
notify the Administrative Agent of such request by telephone not later than
11:00 a.m., New York City time, six Business Days
<PAGE>
30
before the date of the proposed issuance of the Competitive Letter of Credit.
The Borrowers may submit multiple Competitive Letter of Credit Bid Requests on
the same day. Each such telephonic Competitive Letter of Credit Bid Request
shall be confirmed promptly by hand delivery or telecopy to the Administrative
Agent of a written Competitive Letter of Credit Bid Request in a form approved
by the Administrative Agent and signed by the applicable Borrower. Each such
telephonic and written Competitive Letter of Credit Bid Request shall specify
the Competitive Letter of Credit to be issued, amended, renewed or extended, the
date of issuance, amendment, renewal or extension, the date on which such
Competitive Letter of Credit is to expire (which shall comply with paragraph (c)
of this Section), the amount of such Competitive Letter of Credit, the name and
address of the beneficiary thereof, whether such Competitive Letter of Credit is
to be a Performance Letter of Credit or a Standby Letter of Credit and such
other information as shall be necessary to prepare, amend, renew or extend such
Committed Letter of Credit. Promptly following receipt of a Competitive Letter
of Credit Bid Request in accordance with this Section, the Administrative Agent
shall notify the Issuing Banks of the details thereof by telecopy, inviting the
Issuing Banks to submit Competitive Letter of Credit Bids.
(2) Issuing Banks may (but shall not have any obligation to) make one
or more Competitive Letter of Credit Bids in response to a Competitive Letter of
Credit Bid Request. Each Competitive Letter of Credit Bid must be in a form
approved by the Administrative Agent and must be re ceived by the Administrative
Agent by telecopy not later than 9:30 a.m., New York City time, four Business
Days before the proposed issue date of such Competitive Letter of Credit.
Competitive Letter of Credit Bids that do not conform substantially to the form
approved by the Administrative Agent may be rejected by the Administrative
Agent, and the Administrative Agent shall notify the applicable Issuing Banks as
promptly as practicable. Each Competitive Letter of Credit Bid shall specify
the Competi tive Letter of Credit Bid Rate at which the Issuing Bank is prepared
to issue the requested Competitive Letter of Credit (expressed as a percentage
rate per annum in the form of a decimal to no more than four decimal places).
(3) The Administrative Agent shall promptly notify the applicable
Borrower by telecopy of the Competitive Letter of Credit Bid Rate specified in
each Competitive Letter of Credit Bid and the identity of the Issuing Bank that
shall have made such Competitive Letter of Credit Bid.
(4) Subject only to the provisions of this paragraph, the applicable
Borrower may accept or reject any
<PAGE>
31
Competitive Letter of Credit Bid. Such Borrower shall notify the Administrative
Agent by telephone, confirmed by telecopy in a form approved by the
Administrative Agent, whether and to what extent it has decided to accept or
reject each Competitive Letter of Credit Bid not later than 10:30 a.m., New York
City time, three Business Days before the date of the proposed issuance of the
Competitive Letter of Credit; provided that (i) the failure of such Borrower to
--------
give such notice shall be deemed to be a rejection of each Competitive Letter of
Credit Bid, (ii) such Borrower shall not accept a Competitive Letter of Credit
Bid made at a particular Competitive Letter of Credit Bid Rate if such Borrower
rejects a Competitive Letter of Credit Bid at a lower Competitive Letter of
Credit Bid Rate, and (iii) such Borrower shall accept only a single Competitive
Letter of Credit Bid for each Competitive Letter of Credit specified in the
Competitive Letter of Credit Request. A notice given by any Borrower pursuant
to this paragraph shall be irrevocable.
(5) The Administrative Agent shall promptly notify each bidding
Issuing Bank by telecopy whether or not its Competitive Letter of Credit Bid has
been accepted (and, if so, the Competitive Letter of Credit Bid Rate so
accepted), and the successful bidder will thereupon become bound, subject to the
terms and conditions hereof, to issue the Competitive Letter of Credit in
respect of which its Competitive Letter of Credit Bid has been accepted.
(6) If the Administrative Agent shall elect to submit a Competitive
Letter of Credit Bid in its capacity as an Issuing Bank, it shall submit such
Competitive Letter of Credit Bid directly to the applicable Borrower at least
one quarter of an hour earlier than the time by which the other Issuing Banks
are required to submit their Competitive Letter of Credit Bids to the
Administrative Agent pursuant to paragraph (b) of this Section.
(iii) A Letter of Credit shall be issued, amended, renewed or extended
only if (and upon issuance, amendment, renewal or extension of each Letter of
Credit the applicable Borrower shall be deemed to represent and warrant that),
after giving effect to such issuance, amendment, renewal or extension (i) the LC
Exposure shall not exceed $35,000,000 and (ii) the sum of the total Revolving
Credit Exposures plus the aggregate principal amount of outstanding Competitive
Loans plus the Competitive L/C Exposure shall not exceed the total Commitments.
(c) Expiration Date. Each Letter of Credit shall expire at or prior
----------------
to the close of business on the earlier of (i) the date one year after the date
of the issuance of such Letter of Credit or, in the case of any renewal or
extension thereof, one year after such renewal or extension
<PAGE>
32
(it being understood that a Letter of Credit may provide for automatic year-to-
year renewals in the absence of a notice to the contrary from the applicable
Issuing Bank given not fewer than 30 days prior to the expiration date at any
time in effect) and (ii) the date that is five Business Days prior to the
Maturity Date.
(d) Participations. By the issuance of a Committed Letter of Credit
---------------
(or an amendment to a Committed Letter of Credit increasing the amount thereof)
and without any further action on the part of the applicable Issuing Bank or the
Lenders, such Issuing Bank hereby grants to each Lender, and each Lender hereby
acquires from such Issuing Bank, a participation in such Committed Letter of
Credit equal to such Lender's Applicable Percentage of the aggregate amount
available to be drawn under such Committed Letter of Credit. In consideration
and in furtherance of the foregoing, each Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of
such Issuing Bank, such Lender's Applicable Percentage of each LC Disbursement
made by such Issuing Bank under such Letter of Credit and not reimbursed by the
applicable Borrower on the date due as provided in paragraph (e) of this Section
2.05, or of any reimbursement payment required to be refunded to such Borrower
for any reason. Each Lender acknowledges and agrees that its obligation to
acquire participations pursuant to this paragraph in respect of Committed
Letters of Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any
Committed Letter of Credit or the occurrence and continuance of a Default or
reduction or termination of the Commitments, and that each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever.
Notwithstanding anything contained in this paragraph, the Issuing Bank in
respect of any Competitive Letter of Credit shall bear the entire credit
exposure associated therewith.
(e) Reimbursement. If any Issuing Bank shall make any LC
--------------
Disbursement in respect of a Letter of Credit, the applicable Borrower shall
reimburse such LC Disbursement by paying to the Administrative Agent, in the
case of a Committed Letter of Credit, or to the applicable Issuing Bank, in the
case of a Competitive Letter of Credit, an amount equal to such LC Disbursement
not later than 12:00 noon, New York City time, on the date that such LC
Disbursement is made, if such Borrower shall have received notice of such LC
Disbursement prior to 10:00 a.m., New York City time, on such date, or, if such
notice has not been received by such Borrower prior to such time on such date,
then not later than 12:00 noon, New York City time, on (i) the Business Day that
such Borrower receives such notice, if such notice is received prior to 10:00
a.m., New York City
<PAGE>
33
time, on the day of receipt, or (ii) the Business Day immediately following the
day that such Borrower receives such notice, if such notice is not received
prior to such time on the day of receipt; provided that, if such LC Disbursement
--------
is not less than $500,000, such Borrower may, subject to the conditions to
borrowing set forth herein, request in accordance with Section 2.03 that such
payment be financed with an ABR Revolving Borrowing in an equivalent amount and,
to the extent so financed, the Borrower's obligation to make such payment shall
be discharged and replaced by the resulting ABR Revolving Borrowing. If such
Borrower fails to make such payment when due in respect of any Committed Letter
of Credit, the Administrative Agent shall notify each Lender of the applicable
LC Disbursement, the payment then due from such Borrower in respect thereof and
such Lender's Applicable Percentage thereof. Promptly following receipt of such
notice, each Lender shall pay to the Administrative Agent its Applicable
Percentage of the payment then due from the Borrower, in the same manner as
provided in Section 2.06 with respect to Loans made by such Lender (and Section
2.06 shall apply, mutatis mutandis, to the payment obligations of the Lenders),
------- --------
and the Administrative Agent shall promptly pay to the applicable Issuing Bank
the amounts so received by it from the Lenders. Promptly following receipt by
the Administrative Agent of any payment from such Borrower pursuant to this
paragraph in respect of any Committed Letter of Credit, the Administrative Agent
shall distribute such payment to the applicable Issuing Bank or, to the extent
that Lenders have made payments pursuant to this paragraph to reimburse such
Issuing Bank, then to such Lenders and such Issuing Bank as their interests may
appear. Any payment made by a Lender pursuant to this paragraph to reimburse
any Issuing Bank for any LC Disbursement (other than the funding of ABR
Revolving Loans as contemplated above) shall not constitute a Loan and shall not
relieve such Borrower of its obligation to reimburse such LC Disbursement.
(f) Obligations Absolute. Each Borrower's obligation to reimburse LC
---------------------
Disbursements as provided in paragraph (e) of this Section 2.05 shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of any
Letter of Credit or this Agreement, or any term or provision therein, (ii) any
draft or other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by any Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing,
<PAGE>
34
that might, but for the provisions of this Section, constitute a legal or
equitable discharge of, or provide a right of setoff against, such Borrower's
obligations hereunder. None of the Administrative Agent, the Lenders or any
Issuing Bank, or any of their Related Parties, shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication under or relating to any
Letter of Credit (including any document required to make a drawing thereunder),
any error in interpretation of technical terms or any consequence arising from
causes beyond the control of such Issuing Bank; provided that the foregoing
--------
shall not be construed to excuse such Issuing Bank from liability to such
Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by each Borrower to the
extent permitted by applicable law) suffered by such Borrower that are caused by
such Issuing Bank's failure to exercise care when determining whether drafts and
other documents presented under a Letter of Credit comply with the terms
thereof. The parties hereto expressly agree that, in the absence of gross
negligence or willful misconduct on the part of an Issuing Bank (as finally
determined by a court of competent jurisdiction), such Issuing Bank shall be
deemed to have exercised care in each such determination. In furtherance of the
foregoing and without limiting the generality thereof, the parties agree that,
with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, an Issuing Bank
may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.
(g) Disbursement Procedures. Each Issuing Bank shall, promptly
------------------------
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. Each Issuing Bank shall promptly
notify the Administrative Agent and the applicable Borrower by telephone
(confirmed by telecopy) of such demand for payment and whether such Issuing Bank
has made or will make an LC Disbursement thereunder; provided that any failure
--------
to give or delay in giving such notice shall not relieve such Borrower of its
obligation to reimburse such Issuing Bank and the Lenders with respect to any
such LC Disbursement.
<PAGE>
35
(h) Interim Interest. If any Issuing Bank shall make any LC
-----------------
Disbursement, then, unless the applicable Borrower shall reimburse such LC
Disbursement in full on the date such LC Disbursement is made, the unpaid amount
thereof shall bear interest, for each day from and including the date such LC
Disbursement is made to but excluding the date that such Borrower reimburses
such LC Disbursement, at the rate per annum then applicable to ABR Revolving
Loans; provided that, if such Borrower fails to reimburse such LC Disbursement
--------
when due pursuant to paragraph (e) of this Section, then Section 2.12(d) shall
apply. Interest accrued pursuant to this paragraph shall be for the account of
the applicable Issuing Bank, except that interest accrued on and after the date
of payment by any Lender pursuant to paragraph (e)(i) of this Section to
reimburse such Issuing Bank shall be for the account of such Lender to the
extent of such payment.
(i) Cash Collateralization. If any Event of Default shall occur and
-----------------------
be continuing, on the Business Day that the Company receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Lenders with LC Exposure representing greater than 50% of
the total LC Exposure) demanding the deposit of cash collateral pursuant to this
paragraph, the Company and the Borrowers for whose account Letters of Credit
have been issued shall deposit in an account with the Administrative Agent, in
the name of the Administrative Agent and for the benefit of the Lenders, ratably
in accordance with their LC Exposures, an amount in cash equal to the LC
Exposure as of such date plus any accrued and unpaid interest thereon; provided
--------
that the obligation to deposit such cash collateral shall become effective
immediately, and such deposit shall become immediately due and payable, without
demand or other notice of any kind, upon the occurrence of any Event of Default
with respect to any Borrower described in clause (h) or (i) of Article VII.
Such deposit shall be held by the Administrative Agent as collateral for the
payment and performance of the obligations of the Borrowers under this
Agreement. The Administrative Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account. Other than any
interest earned on the investment of such deposits, which investments shall be
made at the option and sole discretion of the Administrative Agent and at the
Borrowers' risk and expense, such deposits shall not bear interest. Interest or
profits, if any, on such investments shall accumulate in such account. Moneys
in such account shall be applied by the Administrative Agent to reimburse the
Issuing Banks on a pro rata basis for LC Disbursements for Letters of Credit for
which they have not been reimbursed and, to the extent not so applied, shall be
held for the satisfaction of the reimbursement obligations of the applicable
Borrower for the
<PAGE>
36
LC Exposure at such time or, if the maturity of the Loans has been accelerated
(but subject to the consent of Lenders with LC Exposures representing greater
than 50% of the total LC Exposure), be applied to satisfy other obligations of
the Borrowers under this Agreement. If the Company and the Borrowers are
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Company or such Borrowers within three
Business Days after all Events of Default have been cured or waived.
SECTION 2.06. Funding of Borrowings. (a) Each Lender shall make
----------------------
each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 12:00 noon, New York City time, to
the account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders. The Administrative Agent will make such Loans
available to the applicable Borrower by promptly crediting the amounts so
received, in like funds, to an account of such Borrower (or of the Company)
maintained with the Administrative Agent in New York City and designated by such
Borrower in the applicable Borrowing Request or Competitive Loan Bid Request;
provided that ABR Revolving Loans made to finance the reimbursement of an LC
- --------
Disbursement as provided in Section 2.05(e) shall be remitted by the
Administrative Agent to the applicable Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the relevant
Borrower a corresponding amount. In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and the applicable Borrower severally agree to
pay to the Administrative Agent forthwith on demand such corresponding amount
with interest thereon, for each day from and including the date such amount is
made available to the applicable Borrower to but excluding the date of payment
to the Administrative Agent, at (i) in the case of such Lender, the greater of
the Federal Funds Effective Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation or
(ii) in the case of such Borrower, the interest rate applicable to ABR Loans.
If such Lender pays such amount to the Administrative Agent, then such amount
shall constitute such Lender's Loan included in such Borrowing. If such
Borrower pays such amount to the
<PAGE>
37
Administrative Agent, then such payment shall fully discharge such Borrower's
obligations hereunder with respect to the amount of principal or interest so
paid.
SECTION 2.07. Interest Elections. (a) Each Revolving Borrowing
-------------------
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurodollar Revolving Borrowing, shall have an initial
Interest Period as specified in such Borrowing Request. Thereafter, the relevant
Borrower may elect to convert such Borrowing to a different Type or to continue
such Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect
Interest Periods therefor, all as provided in this Section. A Borrower may
elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the
Lenders holding the Loans comprising such Borrowing, and the Loans comprising
each such portion shall be considered a separate Borrowing. This Section shall
not apply to Competitive Borrowings, which may not be converted or continued.
(b) To make an election pursuant to this Section, a Borrower shall
notify the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if such Borrower were
requesting a Revolving Borrowing of the Type resulting from such election to be
made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
relevant Borrower.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies and,
if different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Borrowing (in
which case the information to be specified pursuant to clauses (iii) and (iv)
below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
<PAGE>
38
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the term
"Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then such Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.
(e) If the relevant Borrower fails to deliver a timely Interest
Election Request with respect to a Eurodollar Revolving Borrowing prior to the
end of the Interest Period applicable thereto, then, unless such Borrowing is
repaid as provided herein, at the end of such Interest Period such Borrowing
shall be converted to an ABR Borrowing. Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing and the
Administrative Agent, at the request of the Required Lenders, so notifies the
Company, then, so long as an Event of Default is continuing (i) no outstanding
Revolving Borrowing may be converted to or continued as a Eurodollar Borrowing
and (ii) unless repaid, each Eurodollar Revolving Borrowing shall be converted
to an ABR Borrowing at the end of the Interest Period applicable thereto.
SECTION 2.08. Termination and Reduction of Commitments. (a) Unless
-----------------------------------------
previously terminated, the Commitments shall terminate on the Maturity Date.
(b) In the event that on the third anniversary of the date hereof the
aggregate Commitments shall exceed $50,000,000, the Commitments shall be
automatically reduced on such date, pro rata in accordance with the respective
amounts thereof, to $50,000,000.
(c) The Company may at any time terminate, or from time to time
reduce, the Commitments; provided that (i) each reduction of the Commitments
--------
shall be in an amount that is an integral multiple of $1,000,000 and (ii) the
Company shall not terminate or reduce the Commitments if, after giving effect to
any concurrent prepayment of the Loans in accordance with Section 2.10, the sum
of the Revolving Credit Exposures plus the aggregate principal amount of
outstanding Competitive Loans plus the aggregate Competitive LC Exposure would
exceed the total Commitments.
<PAGE>
39
(d) The Company shall notify the Administrative Agent of any election
to terminate or reduce the Commitments under paragraph (c) of this Section at
least three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Company pursuant
to this Section shall be irrevocable; provided that a notice of termination of
--------
the Commitments delivered by the Company may state that such notice is
conditioned upon the effectiveness of other credit facilities, in which case
such notice may be revoked by the Company (by notice to the Administrative Agent
on or prior to the specified effective date) if such condition is not satisfied.
Any termination or reduction of the Commitments shall be permanent. Each
reduction of the Commitments shall be made ratably among the Lenders in
accordance with their respective Commitments.
SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) Each
-------------------------------------
Borrower hereby unconditionally promises to pay (i) to the Administrative Agent
for the account of each Lender the then unpaid principal amount of each
Revolving Loan of such Borrower on the Maturity Date and (ii) to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Competitive Loan of such Lender made to such Borrower on the last
day of the Interest Period applicable to such Loan.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of each Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from each
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
----- -----
amounts of the obligations recorded therein; provided that the failure of any
--------
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of any Borrower to repay
the Loans in accordance with the terms of this Agreement.
<PAGE>
40
(e) Any Lender may request that Loans made by it be evidenced by a
promissory note. In such event, each Borrower shall prepare, execute and
deliver to such Lender a promissory note payable to the order of such Lender
(or, if requested by such Lender, to such Lender and its registered assigns) and
in a form approved by the Administrative Agent. Thereafter, the Loans evidenced
by each such promissory note and interest thereon shall at all times (including
after assignment pursuant to Section 10.04) be represented by one or more
promissory notes in such form payable to the order of the payee named therein
(or, if such promissory note is a registered note, to such payee and its
registered assigns).
SECTION 2.10. Prepayment of Loans. (a) Any Borrower shall have the
--------------------
right at any time and from time to time to prepay any Borrowing of such Borrower
in whole or in part, subject to prior notice in accordance with paragraph (b) of
this Section; provided that no Borrower shall have the right to prepay any
--------
Competitive Loan without the prior consent of the Lender thereof.
(b) The relevant Borrower shall notify the Administrative Agent by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Revolving Borrowing, not later than 11:00 a.m., New
York City time, three Business Days before the date of prepayment or (ii) in the
case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New
York City time, one Business Day before the date of prepayment. Each such notice
shall be irrevocable and shall specify the prepayment date and the principal
amount of each Borrowing or portion thereof to be prepaid; provided that, if a
--------
notice of prepayment is given in connection with a conditional notice of
termination of the Commitments as contemplated by Section 2.08, then such notice
of prepayment may be revoked if such notice of termination is revoked in
accordance with Section 2.08. Promptly following receipt of any such notice
relating to a Revolving Borrowing, the Administrative Agent shall advise the
Lenders of the contents thereof. Each partial prepayment of any Revolving
Borrowing shall be in an amount that would be permitted in the case of an
advance of a Revolving Borrowing of the same Type as provided in Section 2.02.
Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans
included in the prepaid Borrowing. Prepayments shall be accompanied by accrued
interest to the extent required by Section 2.12.
(c) If after giving effect to any prepayment of Loans either (i) the
sum of the aggregate Revolving Credit Exposures plus the aggregate principal
amount of outstanding Competitive Loans plus the aggregate Competitive L/C
Exposures exceeds the aggregate Commitments or (ii) the Revolving Credit
Exposure of any Lender exceeds the Commitment of such Lender, the Borrowers
shall forthwith
<PAGE>
41
prepay Loans (and, if necessary, provide cash collateral to secure reimbursement
obligations in respect of Letters of Credit) to the extent necessary to
eliminate such excess.
SECTION 2.11. Fees. (a) The Borrowers agree to pay to the
-----
Administrative Agent for the account of each Lender a facility fee, which shall
accrue at the Applicable Rate on the daily amount of the Commitment of such
Lender (whether used or unused) during the period from and including the date
hereof to but excluding the date on which such Commitment terminates; provided
--------
that, if such Lender continues to have any Revolving Credit Exposure after its
Commitment terminates, then such facility fee shall continue to accrue on the
daily amount of such Lender's Revolving Credit Exposure from and including the
date on which its Commitment terminates to but excluding the date on which such
Lender ceases to have any Revolving Credit Exposure. Accrued facility fees shall
be payable in arrears on the last day of March, June, September and December of
each year and on the date on which the Commitments terminate, commencing on the
first such date to occur after the date hereof; provided that any facility fees
--------
accruing after the date on which the Commitments terminate shall be payable on
demand. All facility fees shall be computed on the basis of a year of 360 days
and shall be payable for the actual number of days elapsed (including the first
day but excluding the last day).
(b) The Borrowers agree to pay (i) to the Administrative Agent for
the account of each Lender a participation fee with respect to its
participations in Committed Letters of Credit, which shall accrue at the
Applicable Rate on the average daily amount of such Lender's Committed LC
Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the date hereof to but
excluding the later of the date on which such Lender's Commitment terminates and
the date on which such Lender ceases to have any such Committed LC Exposure, and
(ii) to each Issuing Bank a fronting fee, which shall accrue on the undrawn
amount of each Letter of Credit issued by such Issuing Bank during the period
from and including the date hereof to but excluding the later of the date of
termination of the Commitments and the date on which such Issuing Bank ceases to
have any Letters of Credit outstanding, at a rate equal to (x) in the case of
each Committed Letter of Credit, the rate separately agreed upon by such Issuing
Bank and the Company and (y) in the case of each Competitive Letter of Credit,
the Competitive Letter of Credit Bid Rate bid by such Issuing Bank and accepted
by the applicable Borrower pursuant to Section 2.05(b)(ii), as well as each
Issuing Bank's standard fees with respect to the issuance, amendment, renewal or
extension of any Committed or Competitive Letter of Credit or the processing of
drawings
<PAGE>
42
thereunder. Participation fees and fronting fees accrued through and including
the last day of March, June, September and December of each year shall be
payable on the third Business Day following such last day, commencing on the
first such date to occur after the date hereof; provided that all such fees
--------
shall be payable on the date on which the Commitments terminate and any such
fees accruing after the date on which the Commitments terminate shall be payable
on demand. Any other fees payable to the Issuing Banks pursuant to this
paragraph shall be payable within 10 days after demand. All participation fees
and fronting fees shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day).
(c) The Borrowers agree to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed upon
between the Company and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to each Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
facility fees and participation fees, to the Lenders. Fees paid shall not be
refundable under any circumstances.
SECTION 2.12. Interest. (a) The Loans comprising each ABR
---------
Borrowing shall bear interest at the Alternate Base Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest (i) in the case of a Eurodollar Revolving Loan, at the Adjusted LIBO
Rate for the Interest Period in effect for such Borrowing plus the Applicable
Rate, or (ii) in the case of a Eurodollar Competitive Loan, at the LIBO Rate for
the Interest Period in effect for such Borrowing plus (or minus, as applicable)
the Margin applicable to such Loan.
(c) Each Fixed Rate Loan shall bear interest at the Fixed Rate
applicable to such Loan.
(d) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by any Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount, 2% plus the rate
applicable to ABR Loans as provided in paragraph (a) of this Section.
<PAGE>
43
(e) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and, in the case of Revolving Loans, upon
termination of the Commitments; provided that (i) interest accrued pursuant to
--------
paragraph (d) of this Section shall be payable on demand, (ii) in the event of
any repayment or prepayment of any Loan (other than a prepayment of an ABR
Revolving Loan prior to the end of the Availability Period), accrued interest on
the principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment and (iii) in the event of any conversion of any
Eurodollar Revolving Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date
of such conversion.
(f) All interest hereunder shall be computed on the basis of a year
of 360 days, except that interest computed by reference to the Alternate Base
Rate at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate,
Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent,
and such determination shall be conclusive absent manifest error.
SECTION 2.13. Alternate Rate of Interest. If prior to the
---------------------------
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders (or,
in the case of a Eurodollar Competitive Loan, the Lender that is required to
make such Loan) that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for
such Interest Period will not adequately and fairly reflect the cost to such
Lenders (or Lender) of making or maintaining their Loans (or its Loan) included
in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Company and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Company and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Revolving Borrowing to, or
continuation of
<PAGE>
44
any Revolving Borrowing as, a Eurodollar Borrowing shall be ineffective, (ii) if
any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing
shall be made as an ABR Borrowing and (iii) any request by any Borrower for a
Eurodollar Competitive Borrowing shall be ineffective; provided that (A) if the
--------
circumstances giving rise to such notice do not affect all the Lenders, then
requests by the Borrowers for Eurodollar Competitive Borrowings may be made to
Lenders that are not affected thereby and (B) if the circumstances giving rise
to such notice affect only one Type of Borrowings, then the other Type of
Borrowings shall be permitted.
SECTION 2.14. Increased Costs. (a) If any Change in Law shall:
----------------
(i) impose, modify or deem applicable any reserve, special deposit
or similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Lender (except any such reserve requirement reflected
in the Adjusted LIBO Rate) or any Issuing Bank; or
(ii) impose on any Lender or any Issuing Bank or the London interbank
market any other condition affecting this Agreement or Eurodollar Loans or Fixed
Rate Loans made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan or Fixed Rate Loan (or of
maintaining its obligation to make any such Loan) or to increase the cost to
such Lender or such Issuing Bank of participating in, issuing or maintaining any
Letter of Credit or to reduce the amount of any sum received or receivable by
such Lender or such Issuing Bank hereunder (whether of principal, interest or
otherwise), in each case by an amount deemed by such Lender or Issuing Bank to
be material, then the Company will pay or cause the applicable Borrower to pay
to such Lender or such Issuing Bank, as the case may be, such additional amount
or amounts as will compensate such Lender or such Issuing Bank, as the case may
be, for such additional costs incurred or reduction suffered.
(b) If any Lender or any Issuing Bank determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's or such Issuing Bank's capital or on the capital
of such Lender's or such Issuing Bank's holding company, if any, by an amount
deemed by such Lender or Issuing Bank to be material, as a consequence of this
Agreement or the Loans made by, or participations in Letters of Credit held by,
such Lender, or the Letters of Credit issued by such Issuing
<PAGE>
45
Bank, to a level below that which such Lender or such Issuing Bank or such
Lender's or such Issuing Bank's holding company could have achieved but for such
Change in Law (taking into consideration such Lender's or such Issuing Bank's
policies and the policies of such Lender's or such Issuing Bank's holding
company with respect to capital adequacy), then from time to time the Company
will pay or cause the applicable Borrower to pay to such Lender or such Issuing
Bank, as the case may be, such additional amount or amounts as will compensate
such Lender or such Issuing Bank or such Lender's or such Issuing Bank's holding
company for any such reduction suffered.
(c) A certificate of a Lender or an Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or such Issuing Bank or
its holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section, and explaining in reasonable detail the manner in which such
amount or amounts shall have been determined, shall be delivered to the Company
and shall be conclusive absent manifest error. The Company will pay or will
cause the applicable Borrower to pay such Lender or such Issuing Bank, as the
case may be, the amount shown as due on any such certificate within 10 days
after receipt thereof.
(d) Failure or delay on the part of any Lender or any Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or such Issuing Bank's right to demand such compensation; provided
--------
that the Company and the Borrowers shall not be required to compensate a Lender
or any Issuing Bank pursuant to this Section for any increased costs or
reductions incurred more than 270 days prior to the date that such Lender or
such Issuing Bank, as the case may be, notifies the Company of the Change in Law
giving rise to such increased costs or reductions and of such Lender's or such
Issuing Bank's intention to claim compensation therefor; provided further that,
-------- -------
if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 270-day period referred to above shall be extended to
include the period of retroactive effect thereof.
(e) Notwithstanding the foregoing provisions of this Section, a
Lender shall not be entitled to compensation pursuant to this Section (i) in
respect of any demand for compensation if it shall not be the general practice
of such Lender to demand such compensation in similar circumstances under
comparable provisions of other comparable credit agreements with Borrowers
similarly situated or (ii) in respect of any Competitive Loan or Competitive
Letter of Credit if the Change in Law that would otherwise entitle it to such
compensation shall have been publicly announced prior to submission of the
Competitive Loan Bid pursuant to which such Loan was made or the Competitive
Letter of Credit
<PAGE>
46
Bid pursuant to which such Competitive Letter of Credit was made.
SECTION 2.15. Break Funding Payments. In the event of (a) the
-----------------------
payment of any principal of any Eurodollar Loan or Fixed Rate Loan other than on
the last day of an Interest Period applicable thereto (including as a result of
an Event of Default), (b) the conversion of any Eurodollar Loan other than on
the last day of the Interest Period applicable thereto, (c) the failure to
borrow, convert, continue or prepay any Revolving Loan on the date specified in
any notice delivered pursuant hereto (regardless of whether such notice may be
revoked under Section 2.10(b) and is revoked in accordance therewith), (d) the
failure to borrow any Competitive Loan after accepting the Competitive Loan Bid
to make such Loan, or (e) the assignment of any Eurodollar Loan or Fixed Rate
Loan other than on the last day of the Interest Period applicable thereto as a
result of a request by the Company pursuant to Section 2.18, then, in any such
event, the Company shall compensate each Lender or Issuing Bank for the loss,
cost and expense attributable to such event. In the case of a Eurodollar Loan,
such loss, cost or expense to any Lender shall be deemed to include an amount
determined by such Lender to be the excess, if any, of (i) the amount of
interest which would have accrued on the principal amount of such Loan had such
event not occurred, at the Adjusted LIBO Rate that would have been applicable to
such Loan, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would
bid were it to bid, at the commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the eurodollar market. A
certificate of any Lender or Issuing Bank setting forth any amount or amounts
that such Lender or Issuing Bank is entitled to receive pursuant to this
Section, and explaining in reasonable detail the manner in which such amount or
amounts shall have been determined, shall be delivered to the Company and shall
be conclusive absent manifest error. The Company shall pay such Lender or
Issuing Bank the amount shown as due on any such certificate within 10 days
after receipt thereof.
SECTION 2.16. Taxes. (a) Any and all payments by or on account of
------
any obligation of any Borrower hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if any
--------
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
<PAGE>
47
additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Bank (as the case may be) receive an amount equal to the sum they would
have received had no such deductions been made, (ii) such Borrower shall make
such deductions and (iii) such Borrower shall pay the full amount deducted to
the relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Borrowers shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) Each Borrower shall indemnify the Administrative Agent, each
Lender and each Issuing Bank, within 10 days after written demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or such Issuing Bank, as the case may be, on
or with respect to any payment by or on account of any obligation of such
Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section) and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability delivered to the
Company by a Lender or an Issuing Bank, or by the Administrative Agent on its
own behalf or on behalf of a Lender or an Issuing Bank, shall be conclusive
absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by any Borrower to a Governmental Authority, such Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which a
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Company (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by applicable
law or reasonably requested by the Company as will permit such payments to be
made without withholding or at a reduced rate.
SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-
------------------------------------------------------
offs. (a) Each Borrower shall
- -----
<PAGE>
48
make each payment required to be made by it hereunder (whether of principal,
interest, fees or reimbursement of LC Disbursements, or of amounts payable under
Section 2.14, 2.15 or 2.16, or otherwise) prior to 12:00 noon, New York City
time, on the date when due, in immediately available funds, without set-off or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at its offices at 270
Park Avenue, New York, New York, except payments to be made directly to the
Issuing Bank as expressly provided herein and except that payments pursuant to
Sections 2.14, 2.15, 2.16 and 10.03 shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All
payments hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and available
to the Administrative Agent to pay fully all amounts of principal, unreimbursed
LC Disbursements, interest and fees then due hereunder, such funds shall be
applied (i) first, towards payment of interest and fees then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, (ii) second, towards payment of
principal and unreimbursed LC Disbursements then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal and
unreimbursed LC Disbursements then due to such parties, and (iii) third, towards
payment of other amounts due hereunder, ratably among the parties entitled
thereto in accordance with the amounts then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans or participations in such LC
Disbursements in respect of Committed Letters of Credit resulting in such Lender
receiving payment of a greater proportion of the aggregate amount of its
Revolving Loans and participations in such LC Disbursements and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Revolving Loans and participations in LC Disbursements in
respect of Committed Letters of Credit of other Lenders to the extent necessary
<PAGE>
49
so that the benefit of all such payments shall be shared by the Lenders ratably
in accordance with the aggregate amount of principal of and accrued interest on
their respective Revolving Loans and participations in LC Disbursements in
respect of Committed Letters of Credit; provided that (i) if any such
--------
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by any Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in LC Disbursements to any assignee or participant, other than to any Borrower
or any Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph shall apply). Each Borrower consents to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against such Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of such Borrower
in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from a
Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Banks hereunder that such
Borrower will not make such payment, the Administrative Agent may assume that
such Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing
Banks, as the case may be, the amount due. In such event, if such Borrower has
not in fact made such payment, then each of the Lenders or the Issuing Banks, as
the case may be, severally agrees to repay to the Administrative Agent forthwith
on demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.
(e) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.05(d) or (e), 2.06(b) or 2.17(d), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender's obligations under
such Sections until all such unsatisfied obligations are fully paid.
<PAGE>
50
SECTION 2.18. Mitigation Obligations; Replacement of Lenders. (a)
-----------------------------------------------
If any Lender requests compensation under Section 2.14, or if any Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.16, then such
Lender shall use reasonable efforts to file any certificate or document
requested by a Borrower or designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if such filing, designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Section
2.14 or 2.16, as the case may be, in the future and (ii) in the judgment of such
Lender, would not subject such Lender to any unreimbursed cost or expense and
would not otherwise be disadvantageous to such Lender or contrary to such
Lender's policies. The Company hereby agrees to pay all reasonable costs and
expenses incurred by any Lender in connection with any such designation or
assignment.
(b) If any Lender requests compensation under Section 2.14, or if any
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Company may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 10.04), all its interests, rights and obligations under this Agreement
(other than in respect of outstanding Competitive Loans and Letters of Credit
issued by it) to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment); provided that (i)
--------
the Company shall have received the prior written consent of the Administrative
Agent (and, if a Commitment is being assigned, the Issuing Banks), which consent
shall not unreasonably be withheld, (ii) such Lender shall have received payment
of an amount equal to the outstanding principal of its Loans (other than
Competitive Loans) and participations in LC Disbursements, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the applicable Borrower (in the case of all other amounts) and (iii) in
the case of any such assignment resulting from a claim for compensation under
Section 2.14 or payments required to be made pursuant to Section 2.16, such
assignment will result in a reduction in such compensation or payments. A
Lender shall not be required to make any such assignment and delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
<PAGE>
51
circumstances entitling such Borrower to require such assignment and delegation
cease to apply.
SECTION 2.19. Borrowing Subsidiaries. On or after the Effective
-----------------------
Date, the Company may designate any Wholly Owned Subsidiary of the Company as a
Borrowing Subsidiary by delivery to the Administrative Agent of a Borrowing
Subsidiary Agreement executed by such Subsidiary and the Company, and upon such
delivery such Subsidiary shall for all purposes of this Agreement be a Borrowing
Subsidiary and a party to this Agreement until the Company shall have executed
and delivered to the Administrative Agent a Borrowing Subsidiary Termination
with respect to such Subsidiary, whereupon such Subsidiary shall cease to be a
Borrowing Subsidiary and a party to this Agreement. Notwithstanding the
preceding sentence, no Borrowing Subsidiary Termination will become effective as
to any Borrowing Subsidiary at a time when any principal of or interest on any
Loan to such Borrowing Subsidiary, or any Letter of Credit issued for the
account of such Borrowing Subsidiary or reimbursement obligation related
thereto, shall be outstanding. As soon as practicable upon receipt of a
Borrowing Subsidiary Agreement, the Administrative Agent shall send a copy
thereof to each Lender.
ARTICLE III
Representations and Warranties
------------------------------
The Company represents and warrants to the Lenders that:
SECTION 3.01. Organization; Powers. Each of the Company and its
---------------------
Subsidiaries is duly organized and validly existing under the laws of the
jurisdiction of its organization, has all requisite power and authority to carry
on its business as now conducted and, except where the failure to be so
qualified, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect, is qualified to do business in, and is in
good standing in, the jurisdiction of its organization and every other
jurisdiction where such qualification is required.
SECTION 3.02. Authorization; Enforceability. The Transactions are
------------------------------
within the Company's (and, as applicable, Old CBIC's and each Subsidiary's),
corporate powers and have been duly authorized by all necessary corporate and,
if required, stockholder action. This Agreement and each Guarantor Agreement
has been duly executed and delivered by the Company and each Subsidiary party
hereto and thereto and constitutes a legal, valid and binding obligation of the
Company and each such Subsidiary, and each Borrowing
<PAGE>
52
Subsidiary Agreement (as to which a Borrowing Subsidiary Termination has not
become effective) has been duly executed and delivered by the Company and the
applicable Borrowing Subsidiary and constitutes a legal, valid and binding
obligation of such Borrowing Subsidiary, in each case enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other laws affecting creditors' rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions
-------------------------------------
(a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority with jurisdiction over the
Company or any Subsidiary, except such as have been obtained or made and are in
full force and effect, (b) will not violate any applicable law or regulation or
the charter, by-laws or other organizational documents of the Company or any of
its Subsidiaries or any order of any Governmental Authority with jurisdiction
over the Company, (c) will not violate or result in a default under any
indenture or any material agreement or other instrument binding upon the Company
or any of its Subsidiaries or its assets, or give rise to a right thereunder to
require any payment to be made by the Company or any of its Subsidiaries, and
(d) will not result in the creation or imposition of any Lien (other than
Permitted Liens) on any asset of the Company or any of its Subsidiaries, except,
in the case of clauses (a) through (d) above, for any of the foregoing that
could not reasonably be expected to result in a Material Adverse Effect or
materially and adversely to affect the rights or interests of the Lenders.
SECTION 3.04. Financial Condition; No Material Adverse Change. (a)
------------------------------------------------
The Company has heretofore furnished to the Lenders its consolidated balance
sheets and statements of income, stockholders equity and cash flows as of and
for the fiscal years ended December 31, 1996, and December 31, 1995, reported on
by Arthur Andersen LLP, independent public accountants. Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Company and its consolidated
Subsidiaries as of such dates and for such periods in accordance with GAAP.
(b) The Company has heretofore furnished to the Lenders (i) its
unaudited pro forma combined statements of financial position and combined
statements of operations as of and for the fiscal years 1993-1995 on a stand-
alone basis, and (ii) projections including income statement, balance sheet and
cash flow projections of the Company and the Subsidiaries for the fiscal years
1996 to 2001. Such
<PAGE>
53
pro forma financial statements have been prepared in good faith by the Company
and present fairly in all material respects on a pro forma basis the combined
financial position and results of operations of the Company and the Subsidiaries
as of the dates and for the periods indicated. Such projections have been
prepared in good faith by the Company based on assumptions believed by the
management of the Company to be reasonable at the time such projections were
prepared (it being understood that no representation is made by the Company that
such projections will be achieved).
(c) Since December 31, 1996, there has been no material adverse
change in the business, assets, operations, prospects or condition, financial or
otherwise, of the Company and its Subsidiaries, taken as a whole.
SECTION 3.05. Properties. (a) Each of the Company and its
-----------
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to the business of the Company and its
Subsidiaries, taken as a whole, except for Permitted Encumbrances and minor
defects in title that do not interfere with its ability to conduct its business
as currently conducted or to utilize such properties for their intended
purposes.
(b) Each of the Company and its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
property material to the business of the Company and its Subsidiaries, taken as
a whole, and the use thereof by the Company and its Subsidiaries does not
infringe upon the rights of any other Person, except for any such infringements
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 3.06. Litigation and Environmental Matters. (a) There are no
-------------------------------------
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries (i) that could
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect (other than as disclosed in Schedule 3.06 or matters
disclosed in the Registration Statement) or (ii) that involve this Agreement,
any Borrowing Subsidiary Agreement or the Transactions.
(b) Except as disclosed in Schedule 3.06 and matters disclosed in the
Registration Statement, and except with respect to any other matters that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, neither the Company nor any of its Subsidiaries (i)
has failed in the last five years to
<PAGE>
54
comply with any Environmental Law or to obtain, maintain or comply with any
permit, license or other approval required under any Environmental Law, (ii) is
currently subject to any Environmental Liability, (iii) has received written
notice of any pending or threatened claim with respect to any Environmental
Liability or (iv) has received notice of any future claim with respect to any
Environmental Liability.
(c) Since the date of this Agreement, there has been no change in the
status of the matters disclosed in Schedules 3.06 and 3.07 that, individually or
in the aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect.
SECTION 3.07. Compliance with Laws and Agreements. Except as
------------------------------------
disclosed in Schedule 3.07 and matters disclosed in the Registration Statement,
each of the Company and its Subsidiaries is in compliance with all laws,
regulations and orders of any Governmental Authority applicable to it or its
property and all indentures and material agreements and other instruments
binding upon it or its property, except where the failure to do so, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect. No Default has occurred and is continuing.
SECTION 3.08. Investment and Holding Company Status. Neither the
--------------------------------------
Company nor any of its Subsidiaries is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regula tion under, the Public
Utility Holding Company Act of 1935.
SECTION 3.09. Taxes. Each of the Company and each of its
------
Subsidiaries has timely filed or caused to be filed all Tax returns and reports
required to have been filed and has paid or caused to be paid all Taxes required
to have been paid by it, except (a) Taxes that are being contested in good faith
by appropriate proceedings and for which the Company or such Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
------
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such
<PAGE>
55
amounts, exceed by more than $100,000 the fair market value of the assets of
such Plan, and the present value of all accumulated benefit obligations of all
underfunded Plans (based on the assumptions used for purposes of Statement of
Financial Accounting Standards No. 87) did not, as of the date of the most
recent financial statements reflecting such amounts, exceed by more than
$1,000,000 the fair market value of the assets of all such underfunded Plans.
SECTION 3.11. Disclosure. Except as heretofore disclosed to the
-----------
Lenders, the Company is not aware of any circumstance or event that exists or
has occurred that it believes is materially likely to result in a Material
Adverse Effect. None of the reports, financial statements, certificates or
other information furnished by or on behalf of any Borrower to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or any Borrowing Subsidiary Agreement or delivered hereunder or
thereunder (as modified or supplemented by other information so furnished),
taken as a whole, contains any material misstatement of fact or omits to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that, with
--------
respect to projected financial information, the Company represents only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time such projections were prepared.
SECTION 3.12. Subsidiaries; Guarantors. Schedule 3.12 sets forth as
-------------------------
of the date hereof a list of all Subsidiaries of the Company and the percentage
ownership interest of the Company therein. The Subsidiaries that have executed
and delivered Guarantor Agreements constitute all the Subsidiaries (other than
the Designated Subsidiaries) that are required to become Guarantors under
Section 5.09.
SECTION 3.13. Use of Proceeds. The Borrowers will use the proceeds
----------------
of the Loans and will request Letters of Credit only for the purposes specified
in Section 5.08.
SECTION 3.14. Solvency. After the consummation of the Reorganization
---------
and the other Transactions to occur on or prior to the Effective Date, (a) the
fair value of the assets of the Company and the Subsidiaries will exceed their
debts and liabilities, subordinated, contingent or otherwise; (b) the present
fair saleable value of the property of the Company and the Subsidiaries will be
greater than the amount that will be required to pay the probable liability of
their debts and other liabilities, subordinated, contingent or otherwise, as
such debts and other liabilities become absolute and matured; (c) the Company
and the Subsidiaries will be able to pay their debts and liabilities,
subordinated, contingent or otherwise, as
<PAGE>
56
such debts and liabilities become absolute and matured; and (d) the Company and
the Subsidiaries will not have unreasonably small capital with which to conduct
the businesses in which they are engaged as such businesses are now conducted
and are proposed to be conducted following the Effective Date.
SECTION 3.15. Federal Reserve Regulations. (a) Neither the Company
----------------------------
nor any of the Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit will
be used, whether directly or indirectly, and whether immediately, incidentally
or ultimately, (i) to purchase or carry Margin Stock or to extend credit to
others for the purpose of purchasing or carrying Margin Stock or to refund
Indebtedness originally incurred for such purpose, or (ii) for any purpose which
entails a violation of, or which is inconsistent with, the provisions of the
Regulations of the Board, including Regulation G, U or X.
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date. The obligations of the Lenders to make
---------------
Loans and of the Issuing Banks to issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 10.02):
(a) The Administrative Agent (or its counsel) shall have received
from each party hereto either (i) a counterpart of this Agreement signed on
behalf of such party or (ii) written evidence satisfactory to the Administrative
Agent (which may include telecopy transmission of a signed signature page of
this Agreement) that such party has signed a counterpart of this Agreement. The
Administrative Agent shall have received from each Guarantor to the extent
required under Section 5.09 either (i) a counterpart of an executed Guarantor
Agreement signed on behalf of such Guarantor or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page of the Guarantor Agreement) that such
Guarantor has signed a counterpart of a Guarantor Agreement.
(b) The Administrative Agent shall have received a favorable written
opinion (addressed to the
<PAGE>
57
Administrative Agent and the Lenders and dated the Effective Date) of Cahill
Gordon & Reindel, U.S. counsel for the Company and its Subsidiaries, and Loeff
Claeys Verbeke, Dutch counsel for the Company and its Subsidiaries,
substantially in the forms of Exhibits B and C, respectively, and covering such
other matters relating to the Company and its Subsidiaries, this Agreement or
the Transactions as the Administrative Agent shall reasonably request. The
Company and its Subsidiaries hereby request such counsel to deliver such
opinion.
(c) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably request
relating to the organization, existence and good standing of the Company and its
Subsidiaries, the authorization of the Transactions and any other legal matters
relating to the Company and its Subsidiaries, this Agreement or the
Transactions, all in form and substance reasonably satisfactory to the
Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a certificate, dated
the Effective Date and signed by the President, a Vice President or a Financial
Officer of the Company, confirming compliance with the conditions set forth in
paragraphs (a) and (b) of Section 4.02 (at the time of and after giving effect
to the Transactions occurring on or prior to the Effective Date) and paragraph
(g) and (h) of this Section 4.01.
(e) The Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the Effective Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses required
to be reimbursed or paid by the Company hereunder.
(f) The Lenders shall be satisfied with any changes to the material
terms of the Reorganization or of the agreements to be entered into between the
Company and its Subsidiaries on the one hand and Praxair and its subsidiaries on
the other hand in connection therewith from those set forth in the Registration
Statement.
(g) The Reorganization and the Offering shall have been completed in
accordance with applicable law and on terms consistent in all material respects
with the pro forma financial statements and projections furnished to the
Administrative Agent prior to the date hereof.
<PAGE>
58
(h) The Praxair Indebtedness and any other Indebtedness owed by the
Company or its Subsidiaries to Praxair shall have been or shall
simultaneously be repaid in full and cancelled, and no Indebtedness of the
Company or its Subsidiaries (other than the Borrowings hereunder, the
Existing Indebtedness and performance bonds and letters of credit to secure
ordinary course performance obligations of the Company or a Subsidiary in
connection with active construction projects (including projects about to be
commenced) or bids for prospective construction projects) shall be
outstanding on the Effective Date.
The Administrative Agent shall notify the Borrowers and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Banks to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 10.02) at or prior to 3:00 p.m., New York City time, on
April 15, 1997 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).
SECTION 4.02. Each Credit Event. The obligation of each Lender to
------------------
make a Loan on the occasion of any Borrowing, and of each Issuing Bank to issue,
amend, renew or extend any Letter of Credit, is subject to the satisfaction of
the following conditions:
(a) The representations and warranties of the Company set forth in
this Agreement and, in the case of a Borrowing by a Borrowing Subsidiary, the
representations and warranties of such Borrowing Subsidiary in its Borrowing
Subsidiary Agreement shall be true and correct in all material respects on and
as of the date of such Borrowing (other than the continuation or conversion of
any loan) or the date of issuance of such Letter of Credit, as applicable (it
being understood and agreed that any representation or warranty which by its
terms is made as of a specified date shall be required to be true and correct in
all material respects only as of such specified date).
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no Default shall have occurred and be continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Company and, if applicable, the relevant Borrowing Subsidiary on the date
<PAGE>
59
thereof as to the matters specified in paragraphs (a) and (b) of this Section.
SECTION 4.03. Initial Borrowing by Each Borrowing Subsidiary. The
-----------------------------------------------
obligation of each Lender to make the initial Loan to, and the obligation of any
Issuing Bank to issue the initial Letter of Credit for the account of, any
Borrowing Subsidiary is subject to the satisfaction of the following conditions:
(a) receipt by the Administrative Agent of a Borrowing Subsidiary
Agreement executed by such Borrowing Subsidiary and the Company;
(b) receipt by the Administrative Agent of all documents it may
reasonably request relating to the existence of such Borrowing Subsidiary, the
corporate power and authority of such Borrowing Subsidiary to enter into and the
validity with respect to such Borrowing Subsidiary of this Agreement and any
other matters relevant hereto, all in form and substance satisfactory to the
Administrative Agent; and
(c) with respect to any Foreign Subsidiary, receipt by the
Administrative Agent of any governmental and third party approvals necessary in
connection with the execution, delivery and performance by such Borrowing
Subsidiary of this Agreement.
ARTICLE V
Affirmative Covenants
---------------------
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements shall have been reimbursed, the Company covenants and
agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. The
-------------------------------------------
Company will furnish to the Administrative Agent and each Lender:
(a) within 120 days after the end of each fiscal year of the Company,
its audited consolidated balance sheet and related statements of operations,
stockholders' equity and cash flows as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all reported on by Arthur Andersen LLP or other independent public accountants
of recognized national standing (without a "going concern" or like
<PAGE>
60
qualification or exception and without any material qualification or exception
as to the scope of such audit) to the effect that such consolidated financial
statements present fairly in all material respects the financial condition and
results of operations of the Company and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
(b) within 60 days after the end of each of the first three fiscal
quarters of each fiscal year of the Company, its consolidated balance sheet and
related statements of operations, stockholders' equity and cash flows as of the
end of and for such fiscal quarter and the then elapsed portion of the fiscal
year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition
and results of operations of the Company and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes;
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of the Company (i)
certifying as to whether a Default has occurred and, if a Default has occurred,
specifying the details thereof and any action taken or proposed to be taken with
respect thereto; (ii) setting forth reasonably detailed calculations
demonstrating compliance with Sections 6.10, 6.11, 6.12 and 6.13; (iii) stating
whether, to such officer's knowledge, any change in GAAP or in the application
thereof has occurred since the date of the audited financial statements referred
to in Section 3.04 and, if any such change has occurred, specifying the effect
of such change on the financial statements accompanying such certificate; and
(iv) in the case of a delivery of financial statements under clause (a) above,
attaching a revised Schedule 1.01 identifying the Material Subsidiaries as of
the date of the balance sheet included in such financial statements;
(d) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on such
financial statements stating whether they obtained knowledge during the course
of their examination of such financial statements of any Default (which
certificate may be limited to the extent required by accounting rules or
guidelines);
<PAGE>
61
(e) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
Company or any Subsidiary with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed by the
Company to its shareholders generally, as the case may be; and
(f) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Borrowers or any Subsidiary, or compliance with the terms of this Agreement, as
the Administrative Agent or any Lender may reasonably request.
SECTION 5.02. Notices of Material Events. Promptly upon obtaining
---------------------------
knowledge thereof, the Company will furnish to the Administrative Agent and each
Lender written notice of the following:
(a) the occurrence of any Default that is continuing;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting the Company
or any Affiliate thereof that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Company and its Subsidiaries in an aggregate amount exceeding
$1,000,000; and
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Company setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business. The Company will, and
-------------------------------
will cause each of its Material Subsidiaries to, do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of the
<PAGE>
62
business of the Company and its Subsidiaries, taken as a whole; provided that
--------
the foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 6.04 or the liquidation, dissolution or
disposition (including by means of a merger or consolidation) of any Subsidiary
that in the good faith judgment of the Board of Directors of the Company is no
longer necessary or useful to the conduct of the business of the Company and the
Subsidiaries.
SECTION 5.04. Payment of Obligations. The Company will, and will
-----------------------
cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities that, if not paid, could result in a Material Adverse Effect before
the same shall become delinquent or in default, except where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings, (b)
the Company or such Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 5.05. Maintenance of Properties; Insurance. The Company
-------------------------------------
will, and will cause each of its Material Subsidiaries to, (a) keep and maintain
all property material to the conduct of the business of the Company and its
Subsidiaries, taken as a whole, in good working order and condition, ordinary
wear and tear excepted, and (b) maintain, with financially sound and reputable
insurance companies, insurance in such amounts and against such risks as are
customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations and of the same or similar overall
size.
SECTION 5.06. Books and Records; Inspection Rights. The Company
-------------------------------------
will, and will cause each of its Material Subsidiaries to, keep proper books of
record and account in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities. The
Company will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender, upon
reasonable prior notice, to visit and inspect its properties, to examine and
make extracts from its books and records, and to discuss its affairs, finances
and condition with its officers and independent accountants, all at such
reasonable times and as often as reasonably requested.
SECTION 5.07. Compliance with Laws. The Company will, and will cause
---------------------
each of its Subsidiaries to, comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to it or its property (including
ERISA), except where the failure to do so,
<PAGE>
63
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
SECTION 5.08. Use of Proceeds and Letters of Credit. The proceeds of
--------------------------------------
the Loans will be used to repay the Praxair Indebtedness and for general
corporate purposes. No part of the proceeds of any Loan will be used, whether
directly or indirectly, for any purpose that entails a violation of any of the
Regulations of the Board, including Regulations G, U and X. The Letters of
Credit will be used for general corporate purposes.
SECTION 5.09. Further Assurances. (a) The Company will cause each
-------------------
Subsidiary that on the date of the initial Borrowing or issuance of a Letter of
Credit is a Material Subsidiary (other than any Excluded Foreign Subsidiary) to
execute and deliver to the Administrative Agent, prior to such Borrowing or
issuance, a Guarantor Agreement under which it shall become and assume the
obligations of a Guarantor hereunder. Promptly upon (i) the acquisition or
formation of any Material Subsidiary (other than an Excluded Foreign
Subsidiary), or (ii) any transfer of assets by the Company or one or more
Subsidiaries to any existing Subsidiary (other than an Excluded Foreign
Subsidiary) that results in such Subsidiary becoming a Material Subsidiary, and
not later than the next date on which financial statements are delivered
pursuant to Section 5.01(a) after (x) any existing Subsidiary (other than an
Excluded Foreign Subsidiary) becomes a Material Subsidiary other than as
provided in clause (ii) above or (y) any Material Subsidiary that has been an
Excluded Foreign Subsidiary ceases to be an Excluded Foreign Subsidiary, the
Company will cause such Subsidiary to execute and deliver to the Administrative
Agent a Guarantor Agreement under which such Subsidiary shall become and assume
the obligations of a Guarantor hereunder.
(b) In the event any Subsidiary otherwise required to become a
Guarantor under paragraph (a) above shall be an Excluded Foreign Subsidiary,
promptly furnish to the Administrative Agent a notice identifying such
Subsidiary and explaining in reasonable detail the factors that prevent it from
becoming a Guarantor, and, if the Administrative Agent shall so request, cause
such Subsidiary to execute and deliver any modified or partial guarantee of the
Obligations that can be executed and delivered by such Subsidiary without any of
the adverse consequences set forth in the definition of "Excluded Foreign
Subsidiary".
(c) Notwithstanding any other provision of this Agreement, for
purposes of paragraphs (a) and (b) above, until the 30th day following the date
of this Agreement, no Subsidiary shall be required to become a Guarantor
hereunder that would not have been so required in the absence of the
<PAGE>
64
proviso to the definition of "Material Subsidiary" in Article I hereto (each
such Subsidiary being called a "Designated Subsidiary"), and the failure of any
Designated Subsidiary to be a Guarantor during such 30 day period shall not
result in a Default or Event of Default under any provision contained herein.
The Company agrees, by the 30th day following the date of this Agreement, to
cause each Designated Subsidiary to execute and deliver a Guarantor Agreement
and to become a Guarantor hereunder.
ARTICLE VI
Negative Covenants
------------------
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder have been
paid in full and all Letters of Credit have expired or terminated and all LC
Disbursements shall have been reimbursed, the Company covenants and agrees with
the Lenders that:
SECTION 6.01. Indebtedness. The Company will not permit any
-------------
Subsidiary to create, incur or assume, and will not permit to exist, any
Indebtedness of any Subsidiary, except:
(a) Indebtedness created hereunder;
(b) Indebtedness existing on the date hereof and set forth in
Schedule 6.01 ("Existing Indebtedness");
(c) Unsecured Indebtedness of any Subsidiary to the Company or any
other Subsidiary (including any Indebtedness of or to Lealand Finance
Company, B.V., to or from any other Subsidiary but excluding any other
Indebtedness of a Subsidiary Guarantor to a Subsidiary that is not a
Guarantor);
(d) Performance bonds and letters of credit to secure ordinary
course performance obligations of the Company or a Subsidiary in
connection with active construction projects (including projects about
to be commenced) or bids for prospective construction projects;
(e) Letters of credit in an aggregate face amount at any time not
to exceed $28,000,000, issued in the ordinary course of business to
secure obligations of the Company and the Subsidiaries under workers'
compensation and other social security programs, and Guarantees of any
such permitted letters of credit;
<PAGE>
65
(f) Indebtedness of any Person that becomes a Subsidiary after the
date hereof; provided that (i) such Indebtedness exists at the time such
--------
Person becomes a Subsidiary and is not created in contemplation of or in
connection with such Person becoming a Subsidiary and (ii) the aggregate
principal amount of Indebtedness permitted by this clause (d) shall not
exceed $5,000,000 at any time outstanding;
(g) Indebtedness of the Subsidiaries in an aggregate amount not to
exceed $15,000,000 secured by Liens referred to in Section 6.02(d); and
(h) other unsecured Indebtedness in an aggregate principal amount for
all Subsidiaries not exceeding $5,000,000 at any time outstanding.
For the avoidance of doubt, the parties agree that nothing in this Agreement
shall restrict the ability of the Company or any of its Subsidiaries (i) to
obtain, enter into or guarantee performance bonds and letters of credit to
secure ordinary course performance obligations of the Company or a Subsidiary in
connection with active construction projects (including projects about to be
commenced) or bids for prospective construction projects or (ii) to guarantee
the obligations of the Company or any Subsidiary under any Hedging Agreement not
prohibited by this Agreement.
SECTION 6.02. Liens. The Company will not, and will not permit any
------
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of the Company or any Subsidiary
existing on the date hereof and set forth in Schedule 6.02; provided that
--------
(i) such Lien shall not apply to any other property or asset of the Company
or any Subsidiary and (ii) such Lien shall secure only those obligations
which it secures on the date hereof and extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Company or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the date
hereof prior to the time such Person becomes a Subsidiary; provided that
--------
(i) such Lien is not created in contemplation of or in connection with such
acquisition
<PAGE>
66
or such Person becoming a Subsidiary, as the case may be, (ii) such Lien
shall not apply to any other property or assets of the Company or any
Subsidiary and (iii) such Lien shall secure only those obligations which
it secures on the date of such acquisition or the date such Person
becomes a Subsidiary, as the case may be and extensions, renewals and
replacements thereof that do not increase the outstanding principal
amount thereof;
(d) Liens on fixed or capital assets acquired, constructed or
improved by the Company or any Subsidiary; provided that (i) such
security interests secure only Indebtedness permitted under the terms of
this Agreement, (ii) such security interests and the Indebtedness
secured thereby are incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement, (iii)
the Indebtedness secured thereby does not exceed 80% of the cost of
acquiring, constructing or improving such fixed or capital assets and
(iv) such security interests shall not apply to any other property or
assets of the Company or any Subsidiary; and
(e) Liens arising or deemed to arise in connection with sale and
lease-back transactions permitted under Section 6.03.
SECTION 6.03. Sale and Lease-Back Transactions. The Company will not,
---------------------------------
and will not permit any of its Subsidiaries to, directly or indirectly, enter
into any arrangement with any Person whereby it shall sell or transfer any
property used or useful in its business, whether now owned or hereafter
acquired, and thereafter rent or lease such property or other property which it
intends to use for substantially the same purpose or purposes as the property
being sold or transferred; provided; that the Company and the Subsidiaries may
--------
enter into such transactions with respect to property with an aggregate book
value at the time of transfer not in excess of $1,000,000.
SECTION 6.04. Fundamental Changes. (a) The Company will not, and
--------------------
will not permit any of its Subsidiaries to, merge into or consolidate with any
other Person, or permit any other Person to merge into or consolidate with it,
or sell, transfer, lease or otherwise dispose of (in one transaction or in a
series of transactions) any assets (other than (i) assets with a book value of
approximately $19,000,000 identified in the Registration Statement, as being
held for sale and (ii) other assets with a book value not in excess of
$5,000,000 during any fiscal year of the Company or $15,000,000 during the term
of this Agreement), or any capital stock of any of its Subsidiaries, in each
case whether now owned or here
<PAGE>
67
after acquired, or liquidate or dissolve, except that, if at the time thereof
and immediately after giving effect thereto no Default shall have occurred and
be continuing (i) any Person may merge into the Company in a transaction in
which the Company is the surviving corporation, (ii) any Person may merge into
any Wholly Owned Subsidiary in a transaction in which the surviving entity is a
Wholly Owned Subsidiary, (iii) any Subsidiary may sell, transfer, lease or
otherwise dispose of its assets to the Company or to a Wholly Owned Subsidiary,
(iv) any Subsidiary may liquidate or dissolve if the Company determines in good
faith that such liquidation or dissolution is in the best interests of the
Company, (v) the Company and each Subsidiary may sell inventory and sell or
dispose of used or surplus equipment in the ordinary course of business and (vi)
the Company and any Subsidiary may dispose of assets owned or formerly owned by
Cooperheat, Inc. with a book value not in excess of approximately $2,400,000 in
the aggregate; provided that any such merger involving a Person that is
--------
not a Wholly Owned Subsidiary immediately prior to such merger shall not be
permitted unless also permitted by Section 6.05.
(b) The Company will not, and will not permit any of its Subsidiaries
to, engage to any material extent in any business other than businesses of the
type conducted by the Company and its Subsidiaries on the date of execution of
this Agreement and businesses reasonably related or incidental thereto.
SECTION 6.05. Investments, Loans, Advances, Guarantees and
--------------------------------------------
Acquisitions. The Company will not, and will not permit any of its Subsidiaries
- -------------
to, purchase, hold or acquire (including pursuant to any merger with any Person
that was not a Wholly Owned Subsidiary prior to such merger) any capital stock,
evidences of indebtedness or other securities (including any option, warrant or
other right to acquire any of the foregoing) of, make or permit to exist any
loans or advances to, Guarantee any obligations of, or make or permit to exist
any investment or any other interest in, any other Person, or purchase or
otherwise acquire (in one transaction or a series of transactions) any assets of
any other Person constituting a business unit, except:
(a) Permitted Investments;
(b) investments by the Company existing on the date hereof in the
capital stock of its Subsidiaries or existing immediately following the
Reorganization in the capital stock of corporations that will become
Subsidiaries pursuant to the Reorganization;
(c) loans or advances made by the Company to any Subsidiary and made
by any Subsidiary to the Company or any other Subsidiary;
<PAGE>
68
(d) Guarantees constituting Indebtedness permitted by Section 6.0 1;
(e) Permitted Acquisitions; and
(f) Purchases of capital stock of the Company and the Subsidiaries
permitted under Section 6.07.
SECTION 6.06. Hedging Agreements. The Company will not, and will not
-------------------
permit any of its Subsidiaries to, enter into any Hedging Agreement, other than
Hedging Agreements entered into in the ordinary course of business to hedge or
mitigate risks to which the Company or any Subsidiary is exposed in the conduct
of its business or the management of its liabilities.
SECTION 6.07. Restricted Payments; Issuances of Capital Stock by
--------------------------------------------------
Subsidiaries. The Company will not, and will not permit any of its Subsidiaries
- -------------
to, declare or make, or agree to pay or make, directly or indirectly, any
Restricted Payment, except that (a) any Subsidiary may make Restricted Payments
to the Company or any other Subsidiary, (b) the Company may declare and pay
dividends with respect to its capital stock payable (i) in additional shares of
its common stock or (ii) so long as no Default shall be continuing at the time
thereof or after giving effect thereto, in cash in an aggregate amount not to
exceed (A) prior to December 31, 1997, $5,000,000 and (B) during any fiscal year
of the Company thereafter, $5,000,000 plus 10% of Consolidated Net Income for
the immediately preceding fiscal year, (c) the Company and its Subsidiaries may
make Restricted Payments pursuant to and in accordance with stock option plans
or other benefit plans for management or employees of the Company and its
Subsidiaries, (d) the Company or any Subsidiary may purchase capital stock
representing any minority interest held by one or more third parties in any
Subsidiary; provided that the aggregate amount of all such Restricted Payments
--------
permitted under this clause (d) shall not exceed $2,000,000 and (e) after the
aggregate amount of the Commitments shall have been reduced to $50,000,000 or
less, so long as no Default shall be continuing at the time thereof or after
giving effect thereto, the Company may make additional repurchases of shares of
its capital stock during any fiscal year in an aggregate amount not to exceed
10% of Consolidated Net Income for the immediately preceding fiscal year. The
Company will not permit any Subsidiary to issue shares of its capital stock
other than to the Company or another Subsidiary (except to the extent such
issuance is required in order to comply with applicable foreign law).
SECTION 6.08. Transactions with Affiliates. The Company will not,
-----------------------------
and will not permit any of its Subsidiaries to, sell, lease or otherwise
transfer any
<PAGE>
69
property or assets to, or purchase, lease or otherwise acquire any property or
assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) at prices and on terms and conditions not less favorable
to the Company or such Subsidiary than could be obtained on an arm's-length
basis from unrelated third parties, (b) transactions between or among the
Company and its Subsidiaries not involving any other Affiliate, (c) the
Reorganization and the Offering, (d) any Restricted Payment permitted by Section
6.07, (e) customary fees paid to members of the Supervisory or Management Board
of the Company or the Board of Directors of any Subsidiary and (f) customary
compensation including salaries and bonuses paid to officers and employees of
the Company and its Subsidiaries.
SECTION 6.09. Restrictive Agreements. The Company will not, and will
-----------------------
not permit any of its Subsidiaries to, directly or indirectly, enter into, incur
or permit to exist any agreement or other arrangement that prohibits, restricts
or imposes any condition upon the ability of any Subsidiary to pay dividends or
other distributions with respect to any shares of its capital stock or to make
or repay loans or advances to the Company or any other Subsidiary or to
Guarantee Indebtedness of the Company or any other Subsidiary; provided that (i)
--------
the foregoing shall not apply to restrictions and conditions imposed by law or
by this Agreement, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof and identified on Schedule 6.09 (but
shall apply to any extension or renewal of, or any amendment or modification
expanding the scope of, any such restriction or condition), (iii) the foregoing
shall not apply to customary restrictions and conditions contained in agreements
relating to the sale of a Subsidiary pending such sale, provided such
restrictions and conditions apply only to the Subsidiary that is to be sold and
such sale is permitted hereunder, (iv) the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (v) the
foregoing shall not apply to customary provisions in leases and other contracts
restricting the assignment thereof.
SECTION 6.10. Capital Expenditures. The Company will not permit
---------------------
Consolidated Capital Expenditures to exceed (a) $22,500,000 during the fiscal
year ending December 31, 1997, or (b) $20,000,000 during any fiscal year
thereafter; provided, that the amount of Consolidated Capital Expenditures
--------
permitted in any fiscal year shall be increased by the lesser of (i) any amount
by which permitted Consolidated Capital Expenditures during the immediately
preceding fiscal year exceeded actual Consolidated Capital
<PAGE>
70
Expenditures during such preceding fiscal year and (ii) $5,000,000.
SECTION 6.11. Consolidated Interest Coverage Ratio. The ratio of
-------------------------------------
Consolidated EBITDA to Consolidated Interest Expense for any period of four
consecutive fiscal quarters shall not be less than 5.00 to 1.00.
SECTION 6.12. Consolidated Leverage Ratio. The Company will not
----------------------------
permit the Consolidated Leverage Ratio as of the end of and for (a) any period
of four consecutive fiscal quarters ending on or prior to March 31, 1998 to be
greater than 2.75 to 1.00 or (b) any period of four consecutive fiscal quarters
ending thereafter to be greater than 2.50 to 1.00.
SECTION 6.13. Consolidated Tangible Net Worth. The Company will not
--------------------------------
permit Consolidated Tangible Net Worth at any time to be less than (a)
Consolidated Net Worth as of December 31, 1996 minus (b) $10,000,000 plus (c)
50% of Consolidated Net Income for each fiscal year, commencing with the fiscal
year ending December 31, 1997, during which Consolidated Net Income is positive.
ARTICLE VII
Events of Default
-----------------
If any of the following events ("Events of Default") shall occur:
-----------------
(a) any Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or otherwise;
(b) any Borrower shall fail to pay any interest on any Loan or any fee
or other amount (other than an amount referred to in clause (a) of this Article)
payable by such Borrower under this Agreement, when and as the same shall become
due and payable, and such failure shall continue unremedied for a period of five
days;
(c) any representation or warranty made or deemed made by or on behalf
of the Company or any Subsidiary in or in connection with this Agreement, any
Borrowing Subsidiary Agreement or any amendment or modification hereof or
thereof, or in any report, certificate, financial statement or other document
furnished
<PAGE>
71
pursuant to or in connection with this Agreement, any Borrowing Subsidiary
Agreement or any amendment or modification hereof or thereof, shall prove to
have been incorrect in any material respect when made or deemed made;
(d) the Company shall fail to observe or perform any covenant,
condition or agreement contained in Section 5.02, 5.03 (with respect to the
Company's existence) or 5.08 or in Article VI;
(e) the Company shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement or any Borrowing Subsidiary
Agreement (other than those specified in clause (a), (b) or (d) of this
Article), and such failure shall continue unremedied for a period of 30 days
after notice thereof from the Administrative Agent to the Company (which notice
will be given at the request of any Lender);
(f) the Company or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable (after
giving effect to any grace period);
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (after giving effect to any grace period) the holder or holders of any
Material Indebtedness or any trustee or agent on its or their behalf to cause
any Material Indebtedness to become due, or to require the prepayment,
repurchase, redemption or defeasance thereof, prior to its scheduled maturity;
provided that this clause (g) shall not apply to secured Indebtedness that
- --------
becomes due solely as a result of the voluntary sale or transfer of the property
or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Company or any Subsidiary (other than a Foreign Subsidiary
that is not a Material Subsidiary) or its debts, or of a substantial part of its
assets, under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect or (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Company or any such Subsidiary or for a substantial part of its assets, and, in
any such case, such proceeding or petition shall continue undismissed for 60
days or an order or
<PAGE>
72
decree approving or ordering any of the foregoing shall be entered;
(i) the Company or any Subsidiary (other than a Foreign Subsidiary
that is not a Material Subsidiary) shall (i) voluntarily commence any proceeding
or file any petition seeking liquidation, reorganization or other relief under
any Federal, state or foreign bankruptcy, insolvency, receivership or similar
law now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described
in clause (h) of this Article, (iii) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Company or such Subsidiary or for a substantial part of its assets, (iv)
file an answer admitting the material allegations of a petition filed against it
in any such proceeding, (v) make a general assignment for the benefit of
creditors or (vi) take any action for the purpose of effecting any of the
foregoing;
(j) the Company or any Subsidiary (other than a Foreign Subsidiary
that is not a Material Subsidiary) shall fail generally to pay its debts as they
become due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 shall be rendered against the Company, any
Subsidiary or any combination thereof and the same shall remain undischarged for
a period of 30 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of the Company or any Subsidiary to enforce any such
judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of the Company and
its Subsidiaries in an aggregate amount exceeding (i) $1,000,000 in any year or
(ii) $5,000,000 for all periods;
(m) a Change in Control shall occur; or
(n) the guarantee by any Guarantor of the Obligations shall not be (or
shall be claimed by such Guarantor not to be) valid and in full force and
effect;
then, and in every such event (other than an event with respect to any Borrower
described in clause (h) or (i) of
<PAGE>
73
this Article), and at any time thereafter during the continuance of such event,
the Administrative Agent, at the request of the Required Lenders, shall, by
notice to the Company, take either or both of the following actions, at the same
or different times: (i) terminate the Commitments, and thereupon the
Commitments shall terminate immediately, and (ii) declare the Loans then
outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrowers accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by each Borrower; and in case of any event with
respect to the Company described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other
obligations of the Borrowers accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by each Borrower; and in the case of any event
with respect to any Borrowing Subsidiary described in clause (h) or (i) of this
Article, (i) the eligibility of such Borrowing Subsidiary to borrow shall
thereupon terminate and (ii) the Loans of such Borrowing Subsidiary shall become
immediately due and payable, together with accrued interest thereon and all fees
and other obligations of such Borrowing Subsidiary accrued hereunder, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by each Borrowing Subsidiary.
ARTICLE VIII
The Administrative Agent
------------------------
Each of the Lenders and the Issuing Banks hereby irrevocably appoints
the Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with
<PAGE>
74
the Company or any Subsidiary or other Affiliate thereof as if it were not the
Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations
except those expressly set forth herein. Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent is
required to exercise in writing by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 10.02), and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Company or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 10.02) or in the absence of its own gross negligence or
willful misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by a Borrower or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with this
Agreement or any Borrowing Subsidiary Agreement, (ii) the contents of any
certificate, report or other document delivered hereunder or thereunder or in
connection herewith or therewith, (iii) the performance or observance of any of
the covenants, agreements or other terms or conditions set forth herein, (iv)
the validity, enforceability, effectiveness or genuineness of this Agreement or
any Borrowing Subsidiary Agreement or any other agreement, instrument or
document, or (v) the satisfaction of any condition set forth in Article IV or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by
<PAGE>
75
it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders, the Issuing Banks and the Company.
Upon any such resignation, the Required Lenders shall have the right, in
consultation with the Company, to appoint a successor. If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and the Issuing Banks, appoint a successor Administrative Agent which
shall be a bank with an office in New York, New York, or an Affiliate of any
such bank. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder. The fees payable by the Company to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Company and such successor. After the
Administrative Agent's resignation hereunder, the provisions of this Article and
Section 10.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and
<PAGE>
76
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any related agreement or any
document furnished hereunder or thereunder.
ARTICLE IX
Guarantee
---------
In order to induce the Lenders to extend credit hereunder, each
Guarantor hereby irrevocably and unconditionally guarantees, severally and
jointly with the other Guarantors, as primary obligor and not merely as a
surety, the Obligations (to the extent such Obligations are not obligations of
such Guarantor in its capacity as a Borrower). Each Guarantor further agrees
that the due and punctual payment of the Obligations may be extended or renewed,
in whole or in part, without notice to or further assent from it, and that it
will remain bound upon its Guarantee hereunder notwithstanding any such
extension or renewal of any Obligation.
Each Guarantor waives presentment to, demand of payment from and
protest to any Borrower of any of the Obligations, and also waives notice of
acceptance of its obligations and notice of protest for nonpayment. The
obligations of a Guarantor hereunder shall not be affected by (a) the failure of
any Lender or the Administrative Agent to assert any claim or demand or to
enforce any right or remedy against any Borrower or any other Guarantor under
the provisions of this Agreement or otherwise; (b) change or increase in the
amount of any of the Obligations, whether or not consented to by such Guarantor,
or (c) any rescission, waiver, amendment or modification of any of the terms or
provisions of this Agreement, any Borrowing Subsidiary Agreement or any other
agreement.
Each Guarantor further agrees that its agreement hereunder constitutes
a promise of payment when due (whether or not any bankruptcy or similar
proceeding shall have stayed the accrual or collection of any of the Obligations
or operated as a discharge thereof) and not merely of collection, and waives any
right to require that any resort be had by any Lender to any balance of any
deposit account or credit on the books of any Lender in favor of any Borrower or
any other person.
<PAGE>
77
The obligations of the Guarantors hereunder shall not be subject to
any reduction, limitation, impairment or termination for any reason, and shall
not be subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever, by reason of the invalidity, illegality or unenforceability of the
Obligations, any impossibility in the performance of the Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of
the Guarantors hereunder shall not be discharged or impaired or otherwise
affected by the failure of the Administrative Agent or any Lender to assert any
claim or demand or to enforce any remedy under this Agreement or any other
agreement, by any waiver or modification in respect of any thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or omission which may or might in any manner or
to any extent vary the risk of the Guarantors or otherwise operate as a
discharge of the Guarantors or any other Borrower as a matter of law or equity.
Each Guarantor further agrees that its obligations hereunder shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any Obligation is rescinded or must otherwise
be restored by the Administrative Agent or any Lender upon the bankruptcy or
reorganization of any Borrower or other Guarantor or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which the Administrative Agent or any Lender may have at law or in equity
against any Guarantor by virtue hereof, upon the failure of any Borrower to pay
any Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, each Guarantor hereby
promises to and will, upon receipt of written demand by the Administrative
Agent, forthwith pay, or cause to be paid, in cash the amount of such unpaid
Obligation. Each Guarantor further agrees that if payment in respect of any
Obligation shall be due in a currency other than dollars and/or at a place of
payment other than New York and if, by reason of any Change in Law, disruption
of currency or foreign exchange markets, war or civil disturbance or similar
event, payment of such Obligation in such currency or at such place of payment
shall be impossible or, in the judgment of any applicable Lender, not consistent
with the protection of its rights or interests, then, at the election of any
applicable Lender, such Guarantor shall make payment of such Obligation in
dollars (based upon the currency exchange rate in effect for the applicable
currency on the date on which such Lender receives payment in immediately
available funds) and/or in New York, and shall indemnify such Lender against any
losses or expenses that it shall sustain as a result of such alternative
payment.
<PAGE>
78
Upon payment by a Guarantor of any Obligation, each Lender shall, in a
reasonable manner, assign the amount of such Obligation owed to it and so paid
to the Guarantor, such assignment to be pro tanto to the extent to which the
--- -----
Obligation in question was discharged by the Guarantor, or make such disposition
thereof as the Guarantor shall direct (all without recourse to any Lender and
without any representation or warranty by any Lender).
Upon payment by a Guarantor of any sums as provided above, all rights
of such Guarantor against any Borrower arising as a result thereof by way of
right of subrogation or otherwise shall in all respects be subordinate and
junior in right of payment to the prior indefeasible payment in full of all the
Obligations owed by such Borrower, whether in its capacity as a Borrower or as a
Guarantor, to the Lenders.
In the event that all the capital stock directly or indirectly owned
by the Company of any Guarantor shall be sold or otherwise transferred in a
transaction permitted hereunder with the result that such Guarantor shall no
longer be a Subsidiary, such Guarantor shall without further action on the part
of the Administrative Agent or the Lenders cease to be a party hereto and a
Guarantor hereunder, and the Administrative Agent is authorized to execute and
deliver all such instruments as shall be reasonably requested by the Company to
evidence the release of such Guarantor.
ARTICLE X
Miscellaneous
-------------
SECTION 10.01. Notices. Except in the case of notices and other
--------
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to any Borrower, to it in care of the Company at 1501 North
Division Street, Plainfield, Illinois 60544, Attention of the Treasurer, with
a copy to the General Counsel (Telecopy No. (815) 439-6600);
(b) if to the Administrative Agent, to The Chase Manhattan Bank, Loan
and Agency Services Group, One Chase Manhattan Plaza, 8th floor, New York,
New York 10081, Attention of Janet Belden (Telecopy No. (212) (552-5658),
with a copy to Chase Securities Inc., 10 South LaSalle Street, 23rd floor,
Chicago, Illinois
<PAGE>
79
60603-1097, Attention of Jon Hinard (Telecopy No. (312) 807-4077);
(c) if to any other Lender or to an Issuing Bank, to it at its address
(or telecopy number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 10.02. Waivers; Amendments. (a) No failure or delay by the
--------------------
Administrative Agent, the Issuing Banks or any Lender in exercising any right or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Administrative Agent, the Issuing Bank and the
Lenders hereunder are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of this Agree ment
or consent to any departure by any Borrower therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent, any Lender or the Issuing Banks may have had notice or knowledge of such
Default at the time.
(b) Neither this Agreement nor any Borrowing Subsidiary Agreement nor
any provision hereof or thereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Company
and the Required Lenders or by the Company and the Administrative Agent with the
consent of the Required Lenders (and, in the case of a Borrowing Subsidiary
Agreement, the applicable Borrowing Subsidiary); provided that no such agreement
--------
shall (i) increase the Commitment of any Lender without the written consent of
such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or
reduce the rate of interest thereon, or reduce any fees payable hereunder,
without the written consent of each Lender affected thereby, (iii) postpone the
scheduled date of payment of the principal amount of any Loan or LC
Disbursement, or any interest thereon, or any fees payable
<PAGE>
80
hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Commitment, without the written
consent of each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a
manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender, or (v) change any of the provisions
of this Section or the definition of "Required Lenders" or any other provision
hereof specifying the number or percentage of Lenders required to waive, amend
or modify any rights hereunder, make any determination or grant any consent
hereunder without the prior consent of each Lender or (vi) release the Company
or Guarantors representing a substantial part of the consolidated assets of the
Company from their obligations under Article IX, without the written consent of
each Lender; provided further that no such agreement shall amend, modify or
----------------
otherwise affect the rights or duties of the Administrative Agent or any Issuing
Bank hereunder without the prior written consent of the Administrative Agent or
such Issuing Bank, as the case may be.
SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) The Company
-----------------------------------
shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent, in connection with
the syndication of the credit facilities provided for herein, the preparation
and administration of this Agreement or any Borrowing Subsidiary Agreement or
any amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions contemplated hereby or thereby shall be
consummated), (ii) all reasonable out-of-pocket expenses incurred by any Issuing
Bank in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder and (iii) all out-of-
pocket expenses incurred by the Administrative Agent, any Issuing Bank or any
Lender, including the fees, charges and disbursements of any counsel for the
Administrative Agent, any Issuing Bank or any Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement or any
Borrowing Subsidiary Agreement, including its rights under this Section, or in
connection with the Loans made or Letters of Credit issued hereunder, including
all such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit, except to the extent
such expenses are incurred as a result of the gross negligence or willful
misconduct of the Administrative Agent, Lender or Issuing Bank.
(b) The Company shall indemnify the Adminis trative Agent, each
Issuing Bank and each Lender, and each Related Party of any of the foregoing
Persons (each such
<PAGE>
81
Person being called an "Indemnitee") against, and hold each Indemnitee harmless
----------
from, any and all losses, claims, damages, liabilities and related expenses,
including the reasonable fees, charges and disbursements of any counsel for any
Indemnitee, incurred by or asserted against any Indemnitee arising out of, in
connection with or as a result of (i) the execution or delivery of this
Agreement or any Borrowing Subsidiary Agreement or any agreement or instrument
contemplated hereby or thereby, the performance by the parties hereto or thereto
of their respective obligations hereunder or thereunder or the consummation of
the Transactions or any other transactions contemplated hereby, (ii) any Loan or
Letter of Credit or the use of the proceeds therefrom (including any refusal by
any Issuing Bank to honor a demand for payment under a Letter of Credit if the
documents presented in connection with such demand do not strictly comply with
the terms of such Letter of Credit), (iii) any actual or alleged presence or
release of Hazardous Materials on or from any property owned or operated by the
Company or any of its Subsidiaries, or any Environmental Liability related in
any way to the Company or any of its Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such
--------
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses resulted from the gross
negligence or willful misconduct of any Indemnitee or any representative
thereof.
(c) To the extent that the Company fails to pay any amount required
to be paid by it to the Administrative Agent or any Issuing Bank under paragraph
(a) or (b) of this Section, each Lender severally agrees to pay to the
Administrative Agent or such Issuing Bank, as the case may be, such Lender's
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
- --------
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent or such Issuing Bank in its capacity as such.
(d) To the extent permitted by applicable law, no Borrower shall
assert, and each Borrower hereby waives, any claim against any Indemnitee, on
any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement or any Borrowing Subsidiary Agreement or
any agreement or instrument contemplated hereby or thereby, the Transactions,
any Loan or Letter of Credit or the use of the proceeds thereof.
<PAGE>
82
(e) All amounts due under this Section shall be payable promptly
after written demand therefor.
SECTION 10.04. Successors and Assigns. (a) The provisions of this
-----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
(including any Borrowing Subsidiaries) and their respective successors and
assigns permitted hereby (including any Affiliate of any Issuing Bank that
issues any Letter of Credit), except that no Borrower may assign or otherwise
transfer any of its rights or obligations hereunder or under any Borrowing
Subsidiary Agreement without the prior written consent of each Lender (and any
attempted assignment or transfer by any Borrower without such consent shall be
null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent,
any Issuing Banks and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion
of its rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans at the time owing to it); provided that (i)
--------
except in the case of an assignment to a Federal Reserve Bank, a Lender or an
Affiliate of a Lender, each of the Company and the Administrative Agent (and, in
the case of an assignment of all or a portion of a Commitment or any Lender's
obligations in respect of its LC Exposure, the Issuing Banks) must give their
prior written consent to such assignment (which consent shall not be
unreasonably withheld), (ii) except in the case of an assignment to a Lender or
an Affiliate of a Lender or an assignment of the entire remaining amount of the
assigning Lender's Commitment, the amount of the Commitment of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Company and the Administrative Agent otherwise consent, (iii) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender's rights and obligations under this Agreement, except that this
clause (iii) shall not apply to rights in respect of outstanding Competitive
Loans, (iv) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance, together with a processing
and recordation fee of $3,500, and (v) the assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; and provided further that
----------------
<PAGE>
83
any consent of the Company otherwise required under this paragraph shall not be
required if an Event of Default under clause (h) or (i) of Article VII has
occurred and is continuing. Subject to acceptance and recording thereof
pursuant to paragraph (d) of this Section, from and after the effective date
specified in each Assignment and Acceptance the assignee thereunder shall be a
party hereto and, to the extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Acceptance, be released from its obliga tions
under this Agreement (and, in the case of an Assignment and Acceptance covering
all of the assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.14, 2.15, 2.16 and 9.03). Any assignment or transfer by
a Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrowers, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
--------
the Register shall be conclusive, and the Borrowers, the Administrative Agent,
the Issuing Banks and the Lenders may treat each Person whose name is recorded
in the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Company, the Issuing Banks and
any Lender, at any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
<PAGE>
84
(e) Any Lender may, without the consent of any Borrower, the
Administrative Agent or the Issuing Banks sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such Lender's
-----------
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (i) such Lender's
--------
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrowers, the Administrative Agent, the Issuing
Banks and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
--------
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in the first proviso to
Section 10.02(b) that affects such Participant. Subject to paragraph (f) of
this Section, each Borrower agrees that each Participant shall be entitled to
the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 10.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.17(c) as though it were a
Lender.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.14 or 2.16 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Company's prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.16 unless
the Company is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrowers, to comply with Section
2.16(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
--------
a security interest shall release a Lender from any of its obligations
<PAGE>
85
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.
SECTION 10.05. Survival. All covenants, agreements, representations
---------
and warranties made by the Borrowers herein and in the Borrowing Subsidiary
Agreements and the certificates or other instruments delivered in connection
with or pursuant to this Agreement shall be considered to have been relied upon
by the other parties hereto and shall survive the execution and delivery of this
Agreement and the making of any Loans and issuance of any Letters of Credit,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that the Administrative Agent, the Issuing Banks or any
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Commitments have not expired or terminated. The provisions of
Sections 2.14, 2.15, 2.16 and 9.03 and Article VIII shall survive and remain in
full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination
of the Letters of Credit and the Commitments or the termination of this
Agreement or any provision hereof.
SECTION 10.06. Counterparts; Integration; Effectiveness. This
-----------------------------------------
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement
and any separate letter agreements with respect to fees payable to the
Administrative Agent constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Administrative Agent and when the Administrative Agent
shall have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto (excluding any Borrowing
Subsidiaries), and thereafter shall be binding upon and inure to the benefit of
the parties hereto (including any Borrowing Subsidiaries) and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
<PAGE>
86
SECTION 10.07. Severability. Any provision of this Agreement held to
-------------
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 10.08. Right of Setoff. If an Event of Default shall have
----------------
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of any
Borrower or Guarantor against any of and all the obligations of such Borrower or
Guarantor now or hereafter existing under this Agreement held by such Lender,
irrespective of whether or not such Lender shall have made any demand under this
Agreement and although such obligations may be unmatured. The rights of each
Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of
--------------------------------------------------
Process. (a) This Agreement shall be construed in accordance with and governed
- --------
by the law of the State of New York.
(b) Each Borrower and Guarantor hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Administrative Agent, any Issuing Bank or any Lender may otherwise have to bring
any action or proceeding relating to this Agreement against any Borrower or
Guarantor or its properties in the courts of any jurisdiction.
<PAGE>
87
(c) Each Borrower and Guarantor hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement in
any court referred to in paragraph (b) of this Section. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
(d) Each party to this Agreement (including any Borrowing
Subsidiaries) irrevocably consents to service of process in the manner provided
for notices in Section 10.01, and the Company and each Borrower or Guarantor
located or organized outside of the State of New York hereby irrevocably
appoints CT Corporation System at 1633 Broadway, New York, NY 10019, as its
agent for service of process out of any of the courts referred to in paragraph
(b) above. Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
---------------------
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREE MENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 10.11. Headings. Article and Section headings and the Table
---------
of Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 10.12. Confidentiality. Each of the Administrative Agent,
----------------
the Issuing Banks and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent
<PAGE>
88
requested by any regulatory authority, (c) to the extent required by applicable
laws or regulations or by any subpoena or similar legal process, (d) to any
other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to any assignee of
or Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement, (g) with the consent of the Company
or (h) to the extent such Information (i) becomes publicly available other than
as a result of a breach of this Section or (ii) becomes available to the
Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis
from a source other than the Company. For the purposes of this Section,
"Information" means all information received from the Company relating to the
- ------------
Company or its business, other than any such information that is available to
the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential
basis prior to disclosure by the Company; provided that, in the case of
--------
information received from the Company after the date hereof, such information is
clearly identified at the time of delivery as confidential. Any Person required
to maintain the confidentiality of Information as provided in this Section shall
be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
SECTION 10.13. Interest Rate Limitation. Notwithstanding anything
-------------------------
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
-------
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
------------
taken, received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
SECTION 10.14. Conversion of Currencies. (a) If, for the purpose of
-------------------------
obtaining judgment in any court,
<PAGE>
89
it is necessary to convert a sum owing hereunder in one currency into another
currency, each party hereto (including any Borrowing Subsidiary) agrees, to the
fullest extent that it may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures in the
relevant jurisdiction the first currency could be purchased with such other
currency on the Business Day immediately preceding the day on which final
judgment is given.
(b) The obligations of each Borrower in respect of any sum due to any
party hereto or any holder of the obligations owing hereunder (the "Applicable
Creditor") shall, notwithstanding any judgment in a currency (the "Judgment
Currency") other than the currency in which such sum is stated to be due
hereunder (the "Agreement Currency"), be discharged only to the extent that, on
the Business Day following receipt by the Applicable Creditor of any sum
adjudged to be so due in the Judgment Currency, the Applicable Creditor may in
accordance with normal banking procedures in the relevant jurisdiction purchase
the Agreement Currency with the Judgment Currency; if the amount of the
Agreement Currency so purchased is less than the sum originally due to the
Applicable Creditor in the Agreement Currency, such Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Applicable Creditor against such loss. The obligations of the Borrowers
contained in this Section 10.14 shall survive the termination of this Agreement
and the payment of all other amounts owing hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
CHICAGO BRIDGE & IRON COMPANY
N.V.,
by
/s/ James S. Sawyer
-------------------------
Name: James S. Sawyer
Title: Managing Director
<PAGE>
90
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent,
by
/s/ Deborah Davey
-------------------------
Name: Deborah Davey
Title: Vice President
BANK OF MONTREAL,
by
/s/ Leon H. Sinclair
-------------------------
Name: Leon H. Sinclair
Title: Director
THE FIRST NATIONAL BANK OF
CHICAGO,
by
/s/ Deborah E. Stevens
-------------------------
Name: Deborah E. Stevens
Title: Authorized Agent
CREDIT SUISSE FIRST BOSTON,
by
/s/ Lynn Allegaert
-------------------------
Name: Lynn Allegaert
Title: Vice President
by
/s/ David W. Kratovil
-------------------------
Name: David W. Kratovil
Title: Director
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH,
by
/s/ Samuel Azzo
-------------------------
Name: Samuel Azzo
Title: Vice President
by
/s/ Jan Buettgen
-------------------------
Name: Jan Buettgen
Title: Corporate Banking
<PAGE>
EXHIBIT 23.1.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports dated February 7, 1997 and December 16, 1996 (and to all references to
our Firm) included in or made part of this Registration Statement on Form S-1.
/s/ Arthur Andersen LLP
Chicago, Illinois
March 19, 1997
<PAGE>
EXHIBIT 23.1.2
AEX-Effectenbeurs nv
P.O. Box 19163
1000 GD Amsterdam
The Netherlands
Dear Sirs:
As independent public accountants with respect to Chicago Bridge & Iron
Company N.V., we hereby consent to the use of our audit report, addressed to
the shareholder of Chicago Bridge & Iron Company N.V. in respect of the
December 31, 1996 balance sheet and to all references to our Firm in the form
and context in which they are included in the Prospectus on pages F-43 through
F-45 dated March 20, 1997.
It should be noted that we have not made an examination of any financial
statements of Chicago Bridge & Iron Company N.V. as of any date or for any
period subsequent to December 31, 1996, the date of the latest financial
statements covered by our report.
Very truly yours,
/s/ Arthur Andersen & Co.
Amsterdam,
March 19, 1997
<PAGE>
EXHIBIT 23.13
CONSENT OF DIRECTOR NOMINEE
I hereby consent to being named as a nominee to the Supervisory Board of
Chicago Bridge & Iron Company, N.V., a Netherlands corporation, in its
Registration Statement on Form S-1 (Registration No.333-18065) and related
prospectus, and any amendments thereto, filed with the Securities Exchange
Commission.
Signed: /s/ Jerry H. Ballengee
Dated: March 10, 1997
