<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CHICAGO BRIDGE & IRON COMPANY N.V.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
CHICAGO BRIDGE & IRON COMPANY N.V.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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<PAGE> 2
PRELIMINARY COPY
CHICAGO BRIDGE & IRON COMPANY N. V.
POLARISAVENUE 31
2132 JH HOOFDDORP, THE NETHERLANDS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 12, 1999
To the Shareholders of:
CHICAGO BRIDGE & IRON COMPANY N.V.
You are hereby notified that the Annual Meeting of Shareholders of Chicago
Bridge & Iron Company N.V. will be held at Amstel Inter-Continental Amsterdam,
Prof. Tulpplein 1, 1018 GX, Amsterdam, The Netherlands, at 2:00 P.M., local
time, on Wednesday, May 12, 1999, for the following purposes:
1. To reelect J. Charles Jennett, Gary L. Neale and Marsha C.
Williams as members of the Board of Supervisory Directors to serve
until the Annual Meeting of Shareholders in 2002, and until their
successors shall have been duly elected and qualified;
2. To authorize the preparation of the annual accounts and the report
in the English language and to adopt the Dutch Statutory Annual
Accounts of the Company for the fiscal year ended December 31,
1998;
3. To approve the distribution of profits for the fiscal year ended
December 31, 1998 in the amount of US$0.24 per share of common
stock previously paid as interim dividends;
4. To cancel shares held by the Company in its own share capital;
5. To approve the extension of the authority of the Management Board
to repurchase up to 30% of the outstanding share capital of the
Company until November 12, 2000;
6. To cancel shares to be acquired by the Company in its own share
capital;
7. To amend the Articles of Association to decrease the authorized
capital of the Company;
8. To approve the extension of the authority of the Supervisory Board
to issue and/or grant rights on (including options to purchase)
common stock of the Company until May 12, 2004;
9. To approve the extension of the authority of the Supervisory Board
to limit or exclude the preemptive rights of the holders of the
common stock of the Company until May 12, 2004;
10. To adopt the Chicago Bridge & Iron 1999 Long Term-Incentive Plan;
11. To adopt the Incentive Compensation Program; and
12. To approve the appointment of Arthur Andersen as the Company's
independent public accountants for the fiscal year ending December
31, 1999.
Copies of the Dutch StatutoryAnnual Accounts, the report of the Management
Board and the list of nominees for the Supervisory Board can be obtained free of
charge by shareholders and other persons entitled to attend meetings of
shareholders of the Company at the offices of the Company at Polarisavenue 31,
2132 JH Hoofddorp, The Netherlands; at Kas Associatie N.V., Spuistraat 172, 1012
VT Amsterdam, The Netherlands; and at the Bank of New York, 101 Barclay Street,
22nd Floor West, New York, New York 10286 from the date hereof until the close
of the Annual Meeting.
Holders of registered shares of record at the close of business on April 1,
1999, and holders of the share-certificates to bearer shares are entitled to
receive notice of and to vote at the Annual Meeting and any adjournment thereof.
The stock transfer books will not be closed.
REGISTERED SHAREHOLDERS ARE REQUESTED TO COMPLETE, SIGN, DATE AND PROMPTLY
MAIL THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR
MAILING IN THE UNITED STATES.
Robert H. Wolfe
Secretary
April , 1999
<PAGE> 3
CHICAGO BRIDGE & IRON COMPANY N. V.
PROXY STATEMENT
MAY 12, 1999
This proxy statement, which is first being mailed to holders of registered
shares on or about April 12, 1999, is furnished in connection with the
solicitation of proxies on behalf of the Supervisory Board of Chicago Bridge &
Iron Company N.V. ("CB&I" or the "Company"), who ask you to complete, sign, date
and mail the enclosed proxy for use at the Annual Meeting of Shareholders to be
held May 12, 1999, 2:00 p.m. local time (the "Annual Meeting"), for the purposes
set forth in the foregoing notice. Cost of solicitation of proxies will be borne
by the Company. Proxies may be solicited personally or by telephone or telefax
by certain members of the Supervisory Board and the directors, officers and a
few regular employees of the Company and its subsidiaries, without extra
compensation.
Each share of common stock entitles the record holder thereof to one vote
on each matter submitted to a vote at the meeting. All shares represented by
proxies duly executed and received by the Company within the time indicated on
the enclosed proxy (the "Voter Deadline"), will be voted at the meeting or any
adjourned session of the meeting in accordance with the terms of the proxies. If
no choice is indicated on the proxy, the proxyholders will vote for Messrs.
Jennett and Neale and Ms. Williams for Supervisory Directors and for all
proposals described in this Proxy Statement.
A shareholder may revoke a proxy by submitting a document revoking it or by
submitting a duly executed proxy bearing a later date prior to the Voter
Deadline, or by attending the meeting and voting in person.
Only shareholders of record of the registered shares of the
Company's common stock, par value NLG 0.01 (the "Registered Shares") outstanding
at the close of business on April 1, 1999, and the holders of the 14,011
share-certificates to bearer shares (the "Bearer Shares") (the Registered Shares
and the Bearer Shares together, the "Common Stock" or "Shares") are entitled to
notice of and to vote at the meeting.
Abstentions, directions to withhold authority to vote for a
director-nominee or to withhold authority to vote for all director-nominees and
"broker non-votes" (where a named entity holding shares for a beneficial owner
has not received voting instructions from the beneficial owner with respect to a
particular matter and such named entity does not possess or choose to exercise
its discretionary authority with respect thereto) will be considered present at
the meeting but will not be counted to determine the total number of votes cast.
A copy of the Company's Annual Report on Form 10-K, including the financial
statements, schedules and exhibits thereto, may be obtained without charge by
written request to Robert H. Wolfe, Secretary, Chicago Bridge & Iron Company
N.V., Polarisavenue 31, 2132 JH Hoofddorp, The Netherlands or Investor Relations
Department c/o Chicago Bridge & Iron Company, 1501 N. Division Street,
Plainfield, IL 60544-8984 USA.
ITEM 1
ELECTION OF DIRECTORS
The general affairs and business of the Company and the board which manages
the Company (the "Management Board") are supervised by the Board of Supervisory
Directors (the "Supervisory Board") which is appointed by the general meeting of
shareholders. The Company's Articles of Association (the "Articles of
Association") provide for at least six and no more than 12 Supervisory Directors
to serve on the Supervisory Board. Effective March 26, 1997, the size of the
Board is eight. Under the law of The Netherlands, a Supervisory Director cannot
be a member of the Management Board ("Managing Directors") of the Company. The
shareholders have appointed Chicago Bridge & Iron Company B.V. as the Management
Board. Executive officers are not Managing Directors of the Company for purposes
of Dutch law.
Members of the Supervisory Board are elected to serve three-year terms,
with approximately one-third of such members' terms expiring each year. Members
of the Supervisory Board must retire no later than at the
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general meeting of shareholders held after a period of three years following
their appointment, but may be re-elected. 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 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, the general meeting of shareholders 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 Company
(a "Two-thirds Majority of Quorum") 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.
As permitted under Dutch law and the Articles of Association, the
Supervisory Board is authorized to make binding nominations of two candidates
for each open position on the Supervisory Board, with the candidate receiving
the greater number of votes being elected. This means that a nomination by the
Supervisory Board is binding on the shareholders unless overridden by a
Two-thirds Majority of Quorum.
Three Supervisory Directors are to be elected to serve until the Annual
Meeting of Shareholders in 2002. For one position, the Supervisory Board has
proposed the election of J. Charles Jennett or Stephen M. Duffy. For the second
position, the Supervisory Board has proposed the election of Gary L. Neale or
Kevin C. Yessian. For the third position, the Supervisory Board has proposed the
election of Marsha C. Williams or Samuel C. Leventry. Messrs. Jennett and Neale
and Ms. Williams are presently members of the Supervisory Board. Mr. Duffy is
Vice President-Human Resources and Administration of Chicago Bridge & Iron
Company, Mr. Yessian is Vice President-Procurement and Manufacturing of Chicago
Bridge & Iron Company and Mr. Leventry is Vice President-Engineering of Chicago
Bridge & Iron Company.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR MESSRS. JENNETT
AND NEALE AND MS. WILLIAMS.
Certain information with respect to the nominees for Supervisory Director
and the five Supervisory Directors whose terms do not expire this year is as
follows:
NOMINEES FOR ELECTION FOR TERM OF THREE YEARS EXPIRING IN 2002:
FIRST POSITION
FIRST NOMINEE
J. CHARLES JENNETT, 58, has served as a Supervisory Director of the Company
since April, 1997. 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 is a member of the
Supervisory Board's Nominating Committee and Corporate Governance Committee.
SECOND NOMINEE
Stephen M. Duffy, 49, has served as Vice President-Human Resources and
Administration of Chicago Bridge & Iron Company since June, 1996. Mr. Duffy was
Vice President-Human Resources and Administration of CBI Industries, Inc. from
November, 1991, through May, 1996.
SECOND POSITION
FIRST NOMINEE
GARY L. NEALE, 59, has served as a Supervisory Director of the Company
since April, 1997. He is currently President, CEO and Chairman of the Board of
NIPSCO Industries, Inc., whose primary business is the distribution of
electricity, gas and water through utility companies. 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
(heat transfer products) since 1977. Mr. Neale is Chairman of
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<PAGE> 5
the Supervisory Board's Corporate Governance Committee and a member of the
Organization and Compensation Committee.
SECOND NOMINEE
Kevin C. Yessian, 44, has served as Vice President-Procurement and
Manufacturing of Chicago Bridge & Iron Company since July, 1997. Prior to
joining the Company, he was President of Indeck Energy Services from May, 1994
to July, 1997. Prior to that, Mr. Yessian was Executive Vice President of
Coastal Remediation Company and Vice President of Coastal Chem (both units of
The Coastal Company), and was employed for over 20 years by that company and its
predecessor company, American Natural Resources Corporation.
THIRD POSITION
FIRST NOMINEE
MARSHA C. WILLIAMS, 48, has served as a Supervisory Director of the Company
since April, 1997. Since May 26, 1998, she has served as Chief Administrative
Officer of Crate & Barrel, a specialty retail company. Prior to that, she served
as Vice President and Treasurer of Amoco Corporation from December, 1997 to May,
1998 and Treasurer from 1993 to 1997. Ms. Williams is a director of Selected
Funds, Davis Funds and Modine Manufacturing Company (heat transfer products).
Ms. Williams is a member of the Supervisory Board's Audit Committee and
Corporate Governance Committee.
SECOND NOMINEE
Samuel C. Leventry, 49, has served as Vice President-Engineering of Chicago
Bridge & Iron Company since April, 1997. Prior to that, he was Product
Manager-Pressure Vessels and Spheres from April, 1995 to April, 1997 and Product
Engineering Manager-Special Plate Structures for Chicago Bridge & Iron Company.
Mr. Leventry has been employed by Chicago Bridge & Iron Company for over 28
years in various engineering positions.
DIRECTORS TO CONTINUE IN OFFICE WITH TERMS EXPIRING IN 2000:
J. DENNIS BONNEY, 68, has served as a Supervisory Director of the Company
since April, 1997. 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 Aeromovel Global Corporation. From 1996 to 1998 he was a
director of Alumax Inc. and United Meridian Corporation. Mr. Bonney is Chairman
of the Supervisory Board's Audit Committee, and is a member of the Organization
and Compensation Committee and the Corporate Governance Committee.
GERALD M. GLENN, 56, has served as Chairman of the Supervisory Board of the
Company since April, 1997. He has been President and Chief Executive Officer of
Chicago Bridge & Iron Company since May, 1996 and has been a Managing Director
of Chicago Bridge & Iron Company B.V. since March, 1997. Since April, 1994, Mr.
Glenn has been a principal in the Glenn Group LLC. From November, 1986 to April,
1994, he served as Group President-Fluor Daniel, Inc. Mr. Glenn is a member of
the Supervisory Board's Nominating Committee.
VINCENT L. KONTNY, 61, has served as a Supervisory Director of the Company
since April, 1997. Mr. Kontny was President and Chief Operating Officer of Fluor
Corporation from 1990 until September, 1994. He 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 is Chairman of the Supervisory Board's
Organization and Compensation Committee and is a member of the Audit Committee
and the Corporate Governance Committee.
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DIRECTORS TO CONTINUE IN OFFICE WITH TERMS EXPIRING IN 2001:
JERRY H. BALLENGEE, 61, has served as a Supervisory Director of the Company
since April, 1997. 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 Chairman of the Supervisory Board's Nominating
Committee and a member of the Corporate Governance Committee.
L. DONALD SIMPSON, 63, has served as a Supervisory Director of the Company
since April, 1997. Since December, 1996, Mr. Simpson has served as Executive
Vice President of Great Lakes Chemical Corporation. Prior thereto, beginning in
1992, he served in various executive capacities at Great Lakes Chemical
Corporation. He is a member of the Supervisory Board's Audit Committee and
Corporate Governance Committee.
COMMITTEES OF THE BOARD
The Audit Committee, which held four meetings in 1998, is charged with
reviewing the adequacy and effectiveness of the internal auditing, accounting
and financial controls of the Company, and coordinating the annual internal
audit plan with the auditing plan of the independent public accountants. The
Committee receives reports from the Company's Internal Audit Department, reviews
the annual report to shareholders and the financial statements contained
therein, reviews the results of the audit performed by the Company's independent
public accountants and acts as liaison between the independent public
accountants and the Supervisory Board. The Committee makes recommendations
concerning the appointment of the independent public accountants of the Company,
the scope of the audit to be performed and the fees to be paid. The Committee is
also authorized to audit and monitor the compliance by the Company and its
subsidiaries with the laws of the various jurisdictions in which the Company and
its subsidiaries conduct business and to report to the Supervisory Board and
make recommendations with respect to any problems.
The Organization and Compensation Committee, which held five meetings in
1998, reviews and makes recommendations concerning compensation philosophy and
guidelines for the executive and managerial group of the Company, reviews
compensation and benefit programs for employees of the Company and its
subsidiaries, compares such programs and compensation against market data and
makes recommendations as to modifications, reviews recommendations or actions of
management concerning benefit plans, incentive plans, stock option or other
stock awards and oversees the administration of such plans, reviews
compensation, awards and grants under corporate benefit plans for the Chief
Executive Officer, reviews management recommendations concerning compensation
for certain other officers, administers the Company's long-term incentive plan
and advises as to which key officers of the Company or its subsidiaries should
be offered employment and/or termination agreements.
The Nominating Committee, which held three meetings in 1998, establishes
criteria regarding the size and composition of the Supervisory Board and its
Committees, recommends criteria relating to tenure and eligibility, identifies,
reviews and recommends prospective Supervisory Directors, recommends candidates
for the position of Chief Executive Officer, approves the nominees for new
positions on the Supervisory Board and vacancies on the Supervisory Board, and
advises regarding Supervisory Board compensation. It will consider nominees for
Supervisory Director recommended by shareholders. Recommendations must be
submitted in writing and addressed to the Chairman of the Nominating Committee,
c/o Secretary of the Company, Robert H. Wolfe, Chicago Bridge & Iron Company
N.V., Polarisavenue 31, JH 2132 Hoofddorp, The Netherlands, and set forth the
name, age, business and residential address, principal occupation, number of
shares of Common Stock owned and such other information concerning the nominee
as may be requested by the Nominating Committee.
The Corporate Governance Committee, which held one meeting in 1998, reviews
and makes recommendations concerning policies and practices of management
relating to corporate governance and responsibilities and is responsible for the
internal operations of the Supervisory Board.
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INFORMATION REGARDING MEETINGS
The Supervisory Board held four meetings and acted by consent twice in
1998. Each of the Supervisory Directors attended at least 75% of the meetings of
the Supervisory Board and of the committees, if any, of which he or she was a
member.
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<PAGE> 8
COMMON STOCK OWNERSHIP BY CERTAIN PERSONS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to each
person (other than management of the Company) known to the Company to be the
beneficial owner of more than 5% of any class of the Company's outstanding
stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- -------------- ------------------- -------------------- --------
<S> <C> <C> <C> <C>
Common Stock............ Neuberger & Berman, LLC 1,256,941(1) 10.23%
605 Third Ave.
New York, NY 10158
Common Stock............ Wellington Management 1,170,000(2) 10.03%
Company, LLP
75 State Street
Boston, MA 02109
Common Stock............ Hartford Capital 1,170,000(3) 10.03%
Appreciation HLS Fund,
Inc.
200 Hopmeadow Street
Simsbury, CT 06070
Common Stock............ Skyline Asset Management 1,041,800(4) 8.50%
L.P.
311 South Wacker Drive,
Suite 4500
Chicago, IL 60606
Common Stock............ Mellon Bank Corporation 917,000(5) 7.86%
One Mellon Bank Center
Pittsburgh, PA 15258
Common Stock............ David L. Babson and 887,200(6) 7.61%
Company Incorporated
One Memorial Drive
Cambridge, MA 02142-
1300
</TABLE>
- ---------------
(1) According to an amended Schedule 13G dated February 10, 1999, filed by
Neuberger & Berman LLC and Neuberger & Berman Management Incorporation and
it had sole power to vote 954,141 shares of Common Stock and shared power to
dispose of 1,256,941 shares of Common Stock.
(2) According to an amended Schedule 13G dated December 31, 1998, filed by
Wellington Management Company, LLP and it had shared power to vote and to
dispose of 1,170,000 shares of Common Stock.
(3) According to an amended Schedule 13G dated February 9, 1999 filed by
Hartford Capital Appreciation HLS Fund, Inc., and it had shared power to
vote and to dispose of 1,170,000 shares of Common Stock.
(4) According to a Schedule 13G dated February 12, 1999, filed by Skyline Asset
Management L.P. for itself and certain client accounts over which it
exercises discretion and it had shared power to vote 1,041,800 shares and
shared power to dispose of 1,041,800 shares of Common Stock.
(5) According to a Schedule 13G dated January 26, 1999, by Mellon Bank
Corporation for itself and Boston Group Holdings, Inc. and Boston Company
Asset Management, Inc. and it had sole power to vote 809,800 shares, sole
power to dispose of 813,300 shares and shared power to dispose of 100,200
shares of Common Stock..
(6) According to a Schedule 13G dated January 15, 1999 filed by David L. Babson
and Company Incorporated and it had sole power to vote and dispose of
887,200 shares of Common Stock.
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<PAGE> 9
SECURITY OWNERSHIP OF MANAGEMENT OF THE COMPANY
The following table sets forth certain information regarding the Company's
Common Stock beneficially owned on March 1, 1999, by each Supervisory Director
and each nominee to be a Supervisory Director, each named executive officer and
by all directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENT OF
SHARES OF COMMON STOCK OUTSTANDING
NAME OF BENEFICIALLY OWNED COMMON
BENEFICIAL OWNER AS OF MARCH 1, 1999 (1) STOCK
---------------- ----------------------- -----------
<S> <C> <C>
Gerald M. Glenn.............................. 577,453 5.0%
Stephen P. Crain............................. 10,235 *
Stephen M. Duffy............................. 23,292 *
Robert B. Jordan............................. 31,950 *
Samuel C. Leventry........................... 4,372 *
Timothy J. Wiggins........................... 137,024 1.2%
Robert H. Wolfe.............................. 46,300 *
Kevin C. Yessian............................. 2,670 *
Jerry H. Ballengee........................... 689 *
J. Dennis Bonney............................. 4,000 *
J. Charles Jennett........................... 1,000 *
Vincent L. Kontny............................ 1,000 *
Gary L. Neale................................ 1,000 *
L. Donald Simpson............................ 1,000 *
Marsha C. Williams........................... 2,000 *
All directors, nominees for directors and
executive officers as a group (18 in
number).................................... 875,789 7.7%
</TABLE>
- -------------------------
* Beneficially owns less than one percent of the Company's Common Stock.
(1) Share amounts for individual Supervisory Directors and named executive
officers and all directors and officers as a group include shares held
pursuant to the CB&I Management Defined Contribution Plan and shares held by
immediate family members.
(2) Excludes shares which are subject to presently exercisable stock options
under the Company's Stock Purchase Plan which will be exercised pursuant to
that plan on April 1, 1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 (a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Supervisory Directors, Executive Officers and
persons who own more than 10% of the Common Stock to file initial reports of
ownership and reports of changes in ownership of Common Stock (Forms 3, 4 and 5)
with the Securities and Exchange Commission (the "SEC") and the New York Stock
Exchange. Supervisory Directors, Executive Officers and greater than 10%
shareholders are required by SEC regulation to furnish the Company with copies
of all such forms that they file.
To the Company's knowledge based solely on its review of the copies of such
reports received by it and on written representations by certain reporting
persons that no reports on Form 5 were required, the Company believes that
during the fiscal year ended December 31, 1998, its Supervisory Directors,
executive officers and 10% shareholders complied with all Section 16(a) filing
requirements applicable to them.
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<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL -----------------------------------
COMPENSATION AWARDS PAYOUTS
------------------ ------------------------ -------
(A) (B) (C) (D) (G) (H) (I)
(F) SECURITIES
RESTRICTED UNDERLYING
STOCK OPTIONS/ LTIP ALL OTHER
SALARY BONUS AWARD(S) SARS (# PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) SHARES) ($) ($)(4)
- --------------------------- ---- ------ ------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gerald. M Glenn,................. 1998 420,000 330,000 0 51,200 73,935 1,268,993
Chairman of the Supervisory 1997 400,000 155,000 0 92,094 -- 8,640,347
Board; President, Chief 1996 230,770 469,500 0 0 -- 26,094
Executive Officer and Chairman
of Chicago Bridge & Iron
Company; and Managing Director
of Chicago Bridge & Iron
Company B.V.
Robert B. Jordan,................ 1998 250,082 140,000 275,000 70,500 29,745 121,448
Vice President -- Operations of 1997 -- -- -- -- -- --
Chicago Bridge & Iron Company; 1996 -- -- -- -- -- --
and Managing Director of
Chicago Bridge & Iron Company
B.V.
Stephen M. Duffy,................ 1998 171,210 59,924 0 5,800 8,314 66,416
Vice President -- Human 1997 160,000 30,000 0 11,160 -- 366,246
Resources and Administration of 1996 89,230 219,129 0 0 -- 10,362
Chicago Bridge & Iron Company
Timothy J. Wiggins,.............. 1998 242,008 125,000 0 12,300 17,932 318,578
Vice President and Chief 1997 220,012 75,000 0 21,489 -- 2,057,273
Financial Officer of Chicago 1996 59,230 50,000 0 0 -- 55,026
Bridge & Iron Company; and
Managing Director of Chicago
Bridge & Iron Company B.V.
Robert H. Wolfe,................. 1998 187,252 65,538 0 8,600 12,251 116,668
Secretary of the Company; Vice 1997 175,000 35,000 0 17,094 -- 721,090
President, General Counsel and 1996 16,827 25,000 0 0 -- 0
Secretary of Chicago Bridge &
Iron Company; and Secretary of
Chicago Bridge & Iron Company
B.V.
</TABLE>
- -------------------------
(1) Salary paid in 1996 for actual period of employment by the Company: Mr.
Glenn -- May 27, 1996; Mr. Duffy -- June 1, 1996; Mr. Wiggins -- September
16, 1996; and Mr. Wolfe -- November 18, 1996. Salary paid in 1998 for
actual period of employment by the Company: Mr. Jordan -- February 9, 1998.
(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 in 1997 by the
Incentive Compensation Plan (as described under the caption "Organization
and Compensation Committee Report on Executive Compensation").
(3) Restricted stock awards are valued at the closing price on the date of
grant. Participants receive dividends on the Restricted Stock reported in
this column. Restricted stock awards vest in four equal annual installments
starting in September, 1999. The number and value of the aggregate
restricted stock holdings at the end of the last completed fiscal year,
based on the NYSE composite closing price of $12.1875/share on December 31,
1998, for each named executive officer who held such shares is: Mr. Jordan,
25,000, $304,687.
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<PAGE> 11
(4) The compensation reported for 1996 includes payments under various
compensation plans and other employment arrangements in effect at the time
CBI Industries was acquired by Praxair, Inc. ("Praxair") which became
payable because of such acquisition totaling $7,568 for Mr. Duffy.
The compensation reported for 1998 represents (a) the value of shares of
Common Stock reallocated to each named executive officer resulting from
forfeitures of other Participants pursuant to the Management Plan (as
described below), (b) contributions pursuant to the Chicago Bridge & Iron
Savings Plan (the "401(k) Plan") allocated to the executive officer's
account, (c) the cost of allocations to each executive officer's account in
a benefit restoration plan (described under the caption "Pension and other
retirement benefits") for allocations pursuant to the 401(k) Plan which
otherwise exceed the maximum limit imposed upon such plan by the Internal
Revenue Code of 1986, as amended (the "Code"), and (d), reimbursement for
moving and relocation expenses. For 1998, those four amounts, expressed in
the same order identified above, for each named executive officer are as
follows: Gerald M. Glenn, $1,217,312, $14,400, $37,281, $0; Robert B.
Jordan $0, $14,400, $7,408, $99,640; Stephen M. Duffy $48,348, $14,400,
$3,670, $0; Timothy J. Wiggins $290,123, $14,400, $14,055, $0; Robert H.
Wolfe $96,708, $14,400, $5,560, $0.
MANAGEMENT PLAN
The Company has established the Chicago Bridge & Iron Management Defined
Contribution Plan (the "Management Plan").The Management Plan is not qualified
under Section 401(a) of the Code and each participant's account is treated as a
separate account under Section 404(a)(5) of the Code. The designation of
participants, the amount of Company contributions, and the amount allocated to
individual participants was determined by the Management Board. Restrictions on
the Management Plan shares lapse on March 27, 2000, for all participants (except
with respect to one participant whose restrictions lapsed January, 1999).
Dividends are payable to the participants during that period.
As an incentive to increasing the long-term value of the Company, Mr. Glenn
had an agreement with Praxair, and Messrs. Duffy, Wiggins, and Wolfe have
agreements with CB&I, whereby each received special compensation related to the
initial public offer of the Company by Praxair, in March, 1997 (the "IPO"), in
the amounts of 462,835, 18,383, 110,298, and 36,766 shares of Common Stock,
respectively. Each of such officers, along with a group of approximately 48
other key management employees, are participants in the Management Plan. In
fulfillment of Praxair's commitment, upon consummation of the IPO, the Company
made a contribution to the Management Plan in the form of 925,670 shares of
Common Stock.
EMPLOYEE STOCK PURCHASE PLAN
The Company has adopted a broad-based employee stock purchase plan (the
"Stock Purchase Plan") intended to qualify under Section 423 of the Code.
Pursuant to the Stock Purchase Plan, each employee, including executive
officers, electing to participate is granted an option to purchase shares of
Common Stock on 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 participating employees' after-tax pay is withheld and
used to purchase as many shares of Common Stock as such funds allow at the
discounted purchase price.
LONG-TERM COMPENSATION
The Company has adopted the Chicago Bridge & Iron Long-Term Incentive Plan
(the "Incentive Plan") for its executive officers, other management employees
and Supervisory Directors, which is a so-called "omnibus" plan. The Incentive
Plan allows the Company to provide long-term compensation in the following
forms: non-qualified options to purchase shares of Common Stock; qualified
"incentive" options to purchase shares of Common Stock; restricted shares of
Common Stock; "performance shares," paying out a variable number of shares of
Common Stock depending on goal achievement; and "performance units," which would
be cash payments based on either the value of the Common Stock or appreciation
in the price of the Common Stock upon achievement of specific financial goals.
Selection of participating employees and the number of
9
<PAGE> 12
options to be granted are subject to the approval of the Organization and
Compensation Committee of the Supervisory Board.
The exercise price of all options granted under the Incentive Plan may not
be less than the fair market value of the stock subject to the option on the
date the option is granted. Options are exercisable in accordance with the terms
set forth in individual award agreements. The expiration date of each option
shall not exceed 10 years from the date of grant.
Awards of restricted stock shall be subject to a period of restriction
during which the transfer 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 Organization and Compensation Committee.
Each performance unit shall have an initial value that is established by
the Organization and Compensation Committee at the time of grant. 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 shares shall be deemed to have
been fully earned for the entire performance period.
OPTIONS AND STOCK APPRECIATION RIGHTS
The following tables summarize option grants and exercises pursuant to the
Incentive Plan during the fiscal year 1998 to and by the executive officers
named in the Summary Compensation Table above, and the value of the options held
by such persons at the end of fiscal 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
- ------------------------------------------------------------------------------------------ -------------
(A) (B) (C) (D) (E) (F)
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE
OPTIONS/SARS GRANTED TO OR BASE GRANT DATE
GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT VALUE
NAME (# SHARES)(1) FISCAL YEAR ($/SHARE) DATE ($)(2)
---- ------------- ------------ --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Gerald M. Glenn.................... 51,200 21.2% $13.125 7/30/08 $233,984
Robert B. Jordan................... 50,000 20.7% 15.00 2/9/08 260,000
20,500 8.5% 13.125 7/30/08 93,685
Stephen M. Duffy................... 5,800 2.4% 13.125 7/30/08 26,506
Timothy J. Wiggins................. 12,300 5.1% 13.125 7/30/08 56,211
Robert H. Wolfe.................... 8,600 3.6% 13.125 7/30/08 39,302
</TABLE>
- -------------------------
(1) All options were granted at market value. The 50,000 options granted to Mr.
Jordan are exercisable after February 9, 2001, at the earliest, subject to
achievement of a cumulative earnings per share for the three-year period
from 1997 to 1999 of at least $6.25 per share of Common Stock (excluding the
pretax charge of $16.7 million relating to the implementation of the
Management Plan). If the performance criterion is not met, then the option
will become exercisable on the February 9 after which such goal, compounded
an additional 15% per year, is achieved as of the end of a subsequent fiscal
year. If the performance criterion is not met, then the options become
exercisable on February 9, 2003. All other options granted, including
options granted to Mr. Jordan, vest 25% per year starting July 30, 1999.
Each option will terminate and cease to be exercisable if the Participant's
employment with the Company terminates for
10
<PAGE> 13
any reason other than death, retirement, disability or dismissal for the
convenience of the Company (other than involuntary termination of employment
for willful misconduct or gross negligence).
(2) The estimated grant date present value reflected in the above table for all
options, other than the grant of 50,000 options to Mr. Jordan, is
determined using the following Black-Scholes model. The material
assumptions and adjustments incorporated in the Black-Scholes model in
estimating the value of the options reflected in the above table include
the following: (a) an exercise price of the option of $13.125 equal to the
fair market value of the underlying stock on the date of grant; (b) an
interest rate of 5.46% that represents the interest rate on a U.S. treasury
security with a maturity date corresponding to that of the option term; (c)
volatility of 37.70% calculated using daily stock prices for the twelve
months prior to the date of grant; (d) dividends at the rate of $0.24 per
share, representing the annualized dividends paid with respect to a share
of Common Stock at the date of grant; (e) an approximately 11.10% reduction
to reflect the probability of forfeiture due to termination prior to
vesting and approximately 12.58% reduction to reflect the probability of a
shortened option term due to termination of employment prior to the option
expiration date; and (f) an option term of ten years. The ultimate values
of options will depend on the future market price of Common Stock, which
cannot be forecast with reasonable accuracy. The actual value, if any, an
optionee will realize upon exercise of an option will depend on the excess
of the market value of the Common Stock over the exercise price on the date
the option is exercised.
The estimated grant date present value reflected in the above table for the
grant of 50,000 options to Mr. Jordan is determined using the following
Black-Scholes model. The material assumptions and adjustments incorporated
in the Black-Scholes model in estimating the value of the options reflected
in the above table include the following: (a) an exercise price of the
option of $15.00 equal to the fair market value of the underlying stock on
the date of grant; (b) an interest rate of 5.29% that represents the
interest rate on a U.S. treasury security with a maturity date
corresponding to that of the option term; (c) volatility of 35.42%
calculated using daily stock prices for the twelve months prior to the date
of grant; (d) dividends at the rate of $0.24 per share, representing the
annualized dividends paid with respect to a share of Common Stock at the
date of grant; (e) an approximately 11.10% reduction to reflect the
probability of forfeiture due to termination prior to vesting and
approximately 13.32% reduction to reflect the probability of a shortened
option term due to termination of employment prior to the option expiration
date; and (f) an option term of ten years. The ultimate values of options
will depend on the future market price of Common Stock, which cannot be
forecast with reasonable accuracy. The actual value, if any, an optionee
will realize upon exercise of an option will depend on the excess of the
market value of the Common Stock over the exercise price on the date the
option is exercised.
11
<PAGE> 14
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D)
NUMBER OF (E)
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
FY-END (#) AT FY-END ($)
--------------- ----------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
---- --------------- ----------- ------------- ----------------
<S> <C> <C> <C> <C>
Gerald M. Glenn.................... 0 NA 0/ 0/0
143,294
Robert B. Jordan................... 0 NA 0/ 0/0
70,500
Stephen M. Duffy................... 0 NA 0/ 0/0
16,960
Timothy J. Wiggins................. 0 NA 0/ 0/0
33,789
Robert H. Wolfe.................... 0 NA 0/ 0/0
25,694
</TABLE>
- -------------------------
(1) Value is based on the NYSE composite closing price of $12.1875/share on
December 31, 1998.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
In 1998, under the Chicago Bridge & Iron Long-Term Incentive Plan, target
awards were allocated one third for each year beginning in the fiscal year 1998.
Target awards are subject to adjustment based upon measurement of earnings per
share for each fiscal year in which the measurement of performance is made.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
---------------------------------
(A) (C) (D) (E) (F)
(B) PERFORMANCE
NUMBER OF OR OTHER
SHARES, UNITS PERIOD UNTIL
OR OTHER MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#) OR PAYOUT ($ OR #) ($ OR #) ($ OR #)
---- ------------- ------------ --------- -------- --------
<S> <C> <C> <C> <C> <C>
Gerald M. Glenn.................... 16,900 1998 2,816.5 5,633 8,449.5
1999 2,816.5 5,633 8,449.5
2000 2,816.5 5,633 8,449.5
Robert B. Jordan................... 6,800 1998 1,133 2,266 3,399
1999 1,133 2,266 3,399
2000 1,133 2,266 3,399
Stephen M. Duffy................... 1,900 1998 316.5 633 949.5
1999 316.5 633 949.5
2000 316.5 633 949.5
Timothy J. Wiggins................. 4,100 1998 683 1,366 2,049
1999 683 1,366 2,049
2000 683 1,366 2,049
Robert H. Wolfe.................... 2,800 1998 466.5 933 1,399.5
1999 466.5 933 1,399.5
2000 466.5 933 1,399.5
</TABLE>
12
<PAGE> 15
Actual performance against the performance goal for the fiscal year period
ended December 31, 1998 has been determined and the stock earned has been
allocated. (See Summary Compensation Table -- LTIP -- Payouts).
PENSION AND OTHER RETIREMENT BENEFITS
Effective January 1, 1997, the Company adopted the Chicago Bridge & Iron
Savings Plan (the "401(k) Plan"), a tax qualified defined contribution pension
plan for eligible employees, 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 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 shares of Common Stock.
The 401(k) Plan substantially replaced the CBI 401(k) Pay Deferral Plan and
the CBI Pension Plan, each adopted by the Company's former parent, CBI
Industries, Inc. The CBI Pension Plan (the "Pension Plan") was non-contributory
and covered substantially all salaried employees and certain hourly employees of
the Company and its participating subsidiaries. Since December 31, 1996, no
employees of the Company participated in the Pension Plan who were not already
participants as of December 31, 1996. No further benefits will accrue under the
provisions of the 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 December 31, 1996, accrued pension benefit was based on credited service and
average earnings over the high three consecutive year period and is subject to
an offset adjustment for each individual for primary social security benefits
and a portion of the value of benefits under the terminated CBI Salaried
Employee Stock Ownership Plan (1987) previously sponsored by CBI Industries,
Inc. The estimated annual benefit payable upon retirement at normal retirement
age for each of the named executive officers who participate in the plan is:
Stephen M. Duffy, $9,156.
The Code limited the compensation used to determine benefits under the
401(k) Plan to $160,000 for 1998. Chicago Bridge & Iron Company adopted the
Chicago Bridge & Iron Company Excess Benefit Plan through which it contributes
benefits which would be paid under the 401(k) Plan in the absence of the IRS
limit. Such contributions are paid into a trust, with an independent trustee,
established for this purpose.
COMPENSATION OF DIRECTORS
Supervisory Directors who were not employees of the Company received an
annual retainer of $20,000, paid in quarterly installments, and $1,500 for
attendance at each Supervisory Board meeting, as well as an annual grant of
options to purchase 500 shares of Common Stock at an exercise price equal to the
fair market value of the Common Stock at the time of the grant. Supervisory
Directors who were chairpersons of committees receive an additional annual
retainer of $3,000. Those who serve on Supervisory Board Committees receive
$1,000 for each Committee meeting attended. Supervisory Directors may elect to
receive their compensation in Common Stock and may elect to defer their
compensation. In addition, a Supervisory Director may direct that up to 8% of
his or her director's fees be applied to purchase shares of Common Stock at 85%
of the closing price per share of Common Stock on the New York Stock Exchange on
the first trading day following the end of each calendar quarter. Such stock is
delivered either at the time of purchase or at a specified future date.
Supervisory Directors who are full-time employees of the Company receive no
compensation for serving as Supervisory Directors.
TERMINATION AND EMPLOYMENT AGREEMENTS
The Company and Messrs. Duffy, Wiggins and Wolfe entered into change of
control severance agreements each providing that, in the event of a termination
of their respective employment with the
13
<PAGE> 16
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 $240,000, $1,000,000 and $750,000, respectively. In addition, upon
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 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 IPO, (i) any person or group of persons other than Praxair 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 subsidiary with or into another person pursuant to which the shareholders of
the Company or any 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 Company's Supervisory Board changes and new
members were not nominated by at least 75% of the Supervisory Directors then
still in office who were Supervisory Directors at the beginning of such period.
In addition, the Company has entered into employment arrangements with
Messrs. Glenn, Jordan, Wiggins and Wolfe to serve the Company as President and
Chief Executive Officer, Vice President -- Operations, 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. Jordan's base
salary is $265,000 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 amounts specified above, and in the case of Mr.
Jordan, $1,000,000, in the event of termination (or a significant reduction in
levels of responsibility) within two years of a sale of the Company and, except
for Mr. Jordan, for a special stock-based compensation award relating to the IPO
(as described under the caption "Management Plan"). Each 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.
14
<PAGE> 17
ORGANIZATION AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
TO OUR SHAREHOLDERS
COMMITTEE ROLE IN OVERSEEING EXECUTIVE COMPENSATION POLICY
The Company's Organization & Compensation Committee (the "Committee")
consists of three members of the Supervisory Board of the Company (the directors
of the Company elected by its public shareholders) who are not current or former
employees of the Company and who have no "interlocking" relationships, as
defined by the United States Securities and Exchange Commission (SEC).
A primary role of the Committee is to determine and oversee the
administration of compensation for the Company's executive officers. The
Committee approves the design of, assesses the effectiveness of, and
administers, reviews and approves all salary arrangements and other remuneration
for executives and evaluates executive performance.
During the 1998 fiscal year the Committee restated its policy for executive
compensation, as described below. The Committee also made certain compensation
decisions for the Company's 1998 fiscal year as likewise described below.
COMPENSATION PHILOSOPHY
The Company is committed to increasing shareholder value by growing its
business in the global marketplace. The Company seeks to ensure that the
Company's compensation policies and practices are used effectively to support
the achievement of the Company's short- and long-term business objectives.
The Company's overall compensation philosophy is to remain competitive with
comparable companies while focusing on performance-based compensation. This
philosophy is premised on the fact that the Company must compete with a wide
variety of construction, engineering and related firms in order to attract and
develop a pool of talented employees. The philosophy also acknowledges the need
to focus employees on the Company's financial performance. The Company's
compensation philosophy includes the following factors:
- Programs that will attract new talent and retain key people;
- Competitive pay with significant focus on incentive compensation;
- Equity compensation for top managers to motivate value creation for all
shareholders; and
- Plans with a higher percentage of pay "at-risk" (based on performance)
than typical marketplace practices.
In evaluating competitive practices, the Company considers competitive
market data provided by an independent compensation consultant, Hewitt
Associates LLC of Lincolnshire, Illinois. The data provided compare the
Company's compensation practices to a group of "comparator" companies. These are
companies that tend to have national and international business operations and
similar employment levels and lines of business, and also include companies
operating in the same geographic areas and competing for management employees in
the same areas of expertise as the Company. The Committee reviews and approves
the selection of comparator companies based on its assessment of the
comparability of the above factors.
The companies chosen for the comparator group used for compensation
purposes generally are not the same companies which comprise the peer group
index in the Performance Graph included in this Proxy Statement. Considering the
factors described above, the Committee believes that the Company's most direct
competitors for executive talent are not necessarily all of the companies that
would be included in a peer group established for comparing shareholder returns.
The four key elements of the Company's executive compensation are base
salary, annual incentives, long-term compensation, and benefits. These key
elements are addressed separately below. In determining compensation, the
Committee considers all elements of an executive officer's total compensation
package.
15
<PAGE> 18
BASE SALARIES
The Committee regularly reviews each executive officer's base salary. Base
salaries are targeted at approximately the 50th percentile of the compensation
data supplied by Hewitt on the comparator companies. Base salaries for executive
officers are initially determined by evaluating executives' levels of
responsibility, prior experience, breadth of knowledge, internal equity within
the Company, and external pay practices.
Base salaries provide the underlying level of compensation security to
executives and allow the Company to attract competent executive talent and
maintain a stable management team. Base salaries also allow executives to be
rewarded for individual performance based on the Company's evaluation process.
Base salary increases for individual performance reward executives for achieving
goals that may not be immediately evident in common financial measurements.
Individual performance is evaluated based on sustained levels of individual
contribution to the Company. When evaluating individual performance, the
Committee considers the executive's efforts in promoting Company values; safety;
continuing educational and management training; improving quality; developing
relationships with clients, suppliers, and employees; demonstrating leadership
abilities among coworkers; and other goals. Overall, executive salaries were
increased in 1998 at a rate comparable to the increases provided at other
companies and are near median market levels.
In 1998, Mr. Glenn received an increase in his rate of base salary of
$20,000 per year, or an increase of 5% to his base rate of $400,000 per year.
This increase was based on an evaluation of Mr. Glenn's performance, considered
in light of the above described factors, and individual performance goals set
for him by the Committee. He actually received total base salary payments of
$420,000 as reflected in the Summary Compensation Table on page 8.
ANNUAL INCENTIVES
The Company adopted an Incentive Compensation Plan (the "Bonus Plan") which
took 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 other factors described below, and is
payable following the end of the fiscal year. The operating income goal and
other goals will 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 Company's Supervisory Board.
For 1998, under the Bonus Plan, a target bonus was established for each
participating employee at the beginning of the year based on position,
responsibilities and grade level. The bonus could be earned from three
sources -- achievement of the corporate operating income goal, achievement of a
cash management goal, and achievement of individual performance goals. A
percentage of target bonus opportunity was allocated to each bonus source. The
individual performance bonus was determined by the management's evaluation, or
in the case of the CEO, the Committee.
For fiscal 1998, Mr. Glenn and the Company's other executive officers
received bonus payments pursuant to the Bonus Plan. Mr. Glenn received a bonus
payment of $330,000. Mr. Glenn's bonus payment was slightly above his target
bonus and reflects the achievement of the corporate operating objectives for
1998. In 1998, Mr. Glenn's annual bonus payment represented 79% of his base
salary as is reflected in the Summary Table on page 8, and depending on
achievement of the respective goals under the Plan, could have ranged from 0% to
114% of his base pay. Mr. Glenn's bonus is somewhat above the median of annual
incentive compensation paid other executives at comparator companies for 1998.
LONG-TERM INCENTIVES
In keeping with the Company's commitment to provide a total compensation
package that favors at-risk components of pay, long-term incentives comprise a
significant portion of an executive's total compensation
16
<PAGE> 19
package. The Committee's objective is to provide executives with long-term
incentive award opportunities that are at or above the median of comparator
companies, with the actual realization of the opportunity dependent on the
degree of achieving the performance or other conditions of the award.
Long-term incentives are provided pursuant to the Company's Long-Term
Incentive Plan ("Incentive Plan"). When awarding long-term incentives, the
Committee considers executives' levels of responsibility, prior experience,
historical award data, various performance criteria, and compensation practices
at comparator companies. The three long-term incentives awarded in 1998 were
stock options, Performance Shares, and Restricted Stock Units.
Stock options are granted under the Incentive Plan at an option price not
less than the fair market value of the Common Stock on the date of grant.
Accordingly, stock options generally have value only if the stock price
appreciates from the date the options are granted. This design focuses
executives on the creation of shareholder value over the long term,
identification with shareholders' interests, and encourages equity ownership in
the Company. Stock options granted in 1998 under the Incentive Plan become
exercisable beginning July 30, 1999, at a rate of 25% of such options on such
date, and an additional 25% on July 30 of each of the following three years.
Performance Shares are granted under the Incentive Plan subject to specific
Company performance goals set by the Committee and made a part of each
participant's grant, to be achieved over a defined Performance Period, and which
determine the number of Performance Shares actually to be earned and issued to a
participant. Accordingly, Performance Shares are issued and the award has value
only to the extent the performance goals are achieved. Performance goals are
generally set to achieve the same objectives of creation of long-term
shareholder value as in the case of stock options, with an additional focus on
the specific performance goal utilized.
Participants were granted a "target" number of Performance Shares to be
earned based on the compound growth of Company earnings per share (EPS) as
compared to fiscal year 1997 results, at a rate of one-third (1/3) of the total
target for each of fiscal years 1998, 1999 and 2000. Such target Performance
Shares, or a portion thereof ranging from a minimum of 0% to a maximum of 150%
of such target, will be earned for each of such fiscal years if the compound
growth in EPS over the 1997 fiscal year falls in a specified range.
Restricted Stock Shares or Restricted Stock Units may be awarded under the
Incentive Plan under conditions of vesting and/or performance set by the
Committee. Units are carried as a bookkeeping unit of the Company until the
achievement of the required vesting or performance conditions, after which
actual shares of the Common Stock are issued to the respective participant.
Restricted Stock Units awarded during 1998 under the Incentive Plan become
vested beginning on the first anniversary of the award at a rate of 25% of such
units on such date and an additional 25% on each of the next three successive
anniversary dates of the award.
In 1998, Mr. Glenn received options to purchase 51,200 shares with an
exercise price of $13.125, and an award of 16,900 Performance Shares, both of
which were granted in accordance with the conditions described above, and as
detailed in the table on pages 10 and 12. The size and estimated value of such
grant and award is above the median of comparator companies. Mr. Glenn currently
owns or has beneficial ownership of 577,453 shares of the Common Stock, as shown
on page 7. This equity interest provides an appropriate link to the interests of
shareholders.
In addition, after extensive study and discussion by the Committee,
including consideration of a presentation of survey data by Hewitt Associates,
the Committee determined in July, 1998 that stock options initially granted in
1997 under the Plan, in the form granted, were no longer providing a
sufficiently fair and competitive level of incentive for performance by, and
retention of, key management employees. The Committee reached this determination
in light of the current competitive environment in which the Company is
operating, and the Company's stock price and earnings levels relative to the
option exercise price and performance vesting conditions set in the options.
Accordingly, under the power afforded the Committee under the Plan, all
outstanding options granted in 1997 and held by active employees as of July,
1998 were amended so that, instead of such options vesting on the ninth (9(th))
anniversary of the date of grant in the
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absence of achieving the performance vesting conditions, such options would vest
on the fifth (5(th)) anniversary of the date of grant. The 92,094 options
granted to Mr. Glenn in 1997 were amended accordingly, along with those granted
to all other employees.
BENEFITS
In general, benefits provide a safety net of protection against financial
catastrophes that can result from illness, disability, or death. The benefits
offered by the Company to key executives are generally those offered to the
general employee population with some variation to promote replacement of
benefit opportunities lost to regulatory limits, as discussed on page 13.
INTERNAL REVENUE CODE 162(M) CONSIDERATIONS
Section 162(m) of the U.S. Internal Revenue Code of 1986 ("code") provides
that compensation in excess of $1,000,000 annually for any of the five most
highly-paid executive officers will not be deductible for purposes of U.S.
corporate income taxes unless it is "performance-based" compensation and is paid
pursuant to a plan meeting certain requirements of the Code. The Committee's
primary obligation is to promote, recognize and reward performance which
increases shareholder value, and accordingly will continue to rely on
performance-based compensation programs which are designed to achieve that goal.
The Committee believes that all compensation paid in respect of 1998 and earlier
years was deductible, primarily because the aggregate amount of such
compensation for each executive officer was below the $1 million threshold under
Section 162(m). The Supervisory Board has recommended that the Company's
shareholders approve a new Incentive Compensation Program and a new 1999
Long-Term Incentive Plan that will permit the Company to provide annual bonuses,
stock options and other awards to its executive officers in a form that should
qualify as deductible performance-based compensation. See "Item 10 -- Adoption
of the Chicago Bridge & Iron 1999 Long-Term Incentive Plan" and "Item 11 --
Adoption of Incentive Compensation Program." Certain compensation paid in 1999
and in future years pursuant to the Company's existing Bonus Plan and Long-Term
Incentive Plan may not be deductible to the extent such compensation causes the
$1,000,000 threshold to be exceeded for any of Company's five highest paid
executive officers. The Committee intends to give appropriate consideration to
the requirements of Section 162(m) in the operation of the Plan and Program, but
will also exercise its discretion to determine, according to the best overall
interests of the Company, whether to satisfy such requirements.
CONCLUSION
The Committee believes these executive compensation policies and programs
serve the interests of shareholders and the Company effectively. The various pay
vehicles offered are appropriately balanced to provide increased motivation for
executives to contribute to the Company's overall future success, thereby
enhancing the value of the Company for the shareholders' benefit.
We will continue to monitor the effectiveness of the Company's total
compensation program to meet the current needs of the Company.
Vincent L. Kontny (Chairman)
J. Dennis Bonney
Gary L. Neale
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<PAGE> 21
STOCK PERFORMANCE CHART
The Stock Performance Chart below shall not be deemed incorporated by
reference by a general statement incorporating by reference this proxy statement
into any filing under the Securities Act of 1933 or under the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts. There can be no assurance that the Common Stock performance will
continue into the future with the same or similar trends depicted in the graph
below. The Company will not make or endorse any predictions as to future
performance of the Common Stock.
The chart below compares the cumulative total shareholder return on the
Common Stock from the date of the IPO to the end of the last fiscal year with
the cumulative total return on the Russell 2000 Index and the Dow Jones Heavy
Construction Industry Index ("Peer Group Index") for the same period. The
comparison assumes $100 was invested in the Common Stock, the Peer Group Index
and the Russell 2000 Index on March 27, 1997, and reinvestment of all dividends.
COMPARISON OF TOTAL RETURNS
VALUE FOR EACH ONE HUNDRED DOLLARS INVESTED ON MARCH 27, 1997
(GAINS IN STOCK PRICE, DIVIDENDS AND REINVESTED DIVIDENDS)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
03/27/97 12/31/97 12/31/98
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Chicago Bridge & Iron Company N.V. $100.00 $ 91.14 $ 69.59
-------------------------------------------------------------------------------
Peer Group Index $100.00 $ 83.28 $ 86.74
-------------------------------------------------------------------------------
Russell 2000 Index $100.00 $129.01 $125.40
-------------------------------------------------------------------------------
</TABLE>
ITEM 2
APPROVAL OF ANNUAL ACCOUNTS
At the Annual Meeting, the shareholders will be asked to authorize the
preparation of the annual accounts and annual report in the English language and
to adopt the Dutch Statutory Annual Accounts of the Company for the fiscal year
ended December 31, 1998 (the "Annual Accounts"), as required under Dutch law and
the Articles of Association. Copies of the Annual Accounts, the report of the
Management Board and the list of nominees for the Supervisory Board can be
obtained free of charge by shareholders and other persons entitled to attend
meetings of shareholders of the Company at the offices of the Company at
Polarisavenue 31, 2132 JH Hoofddorp, The Netherlands; at Kas Associatie N.V.
Spuistraat 172,
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<PAGE> 22
1012 VT Amsterdam, The Netherlands; and at the Bank of New York, 101 Barclay
Street, 22nd Floor West, New York, New York 10286 USA from the date hereof until
the close of the Annual Meeting.
The Annual Accounts are prepared in accordance with Dutch law and
International Accounting Standards ("IAS"). However, the Annual Accounts are
substantially similar to the Financial Statements contained in the Company's
1998 Annual Report to Shareholders (the "Annual Report") accompanying this Proxy
Statement, which were prepared in accordance with generally accepted accounting
principals in the United States ("U.S. GAAP"). The Annual Accounts contain
certain disclosures not required under U.S. GAAP. In addition, the Management
Report required by Dutch law, although substantially similar to the Management's
Discussion and Analysis of Financial Conditions and Results of Operations
included in the Annual Report, also contains information included in the
Company's Annual Report on Form 10-K and other information required by Dutch
law.
Under Dutch law and the Articles of Association, adoption of the Annual
Accounts by the 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 Annual Meeting and without prejudice to the provisions of the law of The
Netherlands relating to liability upon bankruptcy. Under the law of The
Netherlands, this discharge from liability does not extend to matters not
disclosed to shareholders.
The affirmative vote of a majority of the votes cast at the meeting is
required to adopt the Annual Accounts.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ADOPTION
OF THE ANNUAL ACCOUNTS, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED
UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
ITEM 3
DISTRIBUTION OF PROFITS
(in thousands, except share data)
The Company's Articles of Association provide that "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 after
(such) reservation ... are at the disposal of the general meeting for
distribution on the shares equally and proportionally and/or reservation." As
permitted under the Company's Articles of Association, interim dividends were
paid in 1998 on June 30, September 30 and December 30 and in 1999 on March 30
("interim dividends").
It is proposed that the shareholders approve the distribution of 1998
profits in the amount of $0.24 per share of Common Stock ($????) paid as interim
dividends, and a transfer of the balance of the profits to retained earnings.
The Company's financial statements reflect $2162 in interim dividends paid to
shareholders as of December 31, 1998. The balance of 1998 profits was
transferred to retained earnings, including $??? which was paid to shareholders
as an interim dividend subsequent to year end.
The affirmative vote of a majority of the votes cast at the meeting is
required to approve the distribution of profits.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF
THE DISTRIBUTION OF PROFITS IN THE FORM OF INTERIM DIVIDENDS, AND PROXIES
EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE
INDICATED THEREON.
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<PAGE> 23
ITEM 4
CANCELLATION OF SHARES HELD BY THE COMPANY IN ITS OWN SHARE CAPITAL
Under Dutch law and the Articles of Association, the Company may hold no
more than 10% of its issued share capital. At March -, 1999, the Company held
********* shares (or ****%) of its issued share capital. Upon the resolution of
the general meeting of shareholders, the Company will cancel those shares, or
such smaller number of shares as will be held by the Company in its own share
capital on the date such resolution will become effective.
The Management Board believes it is in the best interests of the
shareholders that it have the authorization to acquire additional issued shares
on behalf of the Company. Therefore, the Management Board with the approval of
the Supervisory Board proposes to cancel the shares the Company currently holds,
or such smaller number as the Management Board shall determine, to permit it to
purchase additional shares pursuant to the current authorization and the
extended authority sought under Item 5 below.
With regard to the requirements of sec.2.99, subsection 7, Dutch Civil
Code, the resolution to cancel shares currently held by the Company of its share
capital will become effective after filing thereof with the Commercial Register
and after expiry of a two-month period after publication of such filing in a
daily newspaper distributed nationally in The Netherlands, provided no
opposition is instituted by creditors against such resolution. If opposition is
instituted, this resolution shall become effective as soon as possible, with due
observance of the law. Upon effectiveness of such resolution, the capital
decrease will be filed with the Commercial Register, the shareholder register of
the Company will reflect the cancellation of registered shares, and bearer share
certificates and registered share certificates, if any, will be destroyed. Such
filing with the Commercial Register will show whether ********* shares have been
canceled or a smaller number held on the effective date of such resolution.
The affirmative vote of a majority of the votes cast, or the affirmative
vote of 2/3 of the votes cast if less than 50% of the issued capital is
represented at the meeting, is required to adopt the proposal to cancel the
shares currently held by the Company of its share capital or such smaller number
as determined by the Management Board.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL
TO CANCEL SHARES HELD BY THE COMPANY OF ITS ISSUED SHARE CAPITAL, AND PROXIES
EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE
INDICATED THEREON.
ITEM 5
EXTENSION OF AUTHORITY OF MANAGEMENT BOARD TO REPURCHASE UP TO 30% OF THE ISSUED
SHARE CAPITAL OF THE COMPANY UNTIL NOVEMBER 12, 2000
Under Dutch law and the Articles of Association, the Management Board may,
with the prior approval of the Supervisory Board, and subject to certain Dutch
statutory provisions, be authorized to repurchase issued shares on behalf of the
Company in amounts, at prices and in the manner authorized by the general
meeting of shareholders. Adoption of this proposal will allow the Company to
have the flexibility to repurchase its shares without the expense of calling
special shareholder meetings. Such authorization may not continue for more than
18 months, but may be given on an annual rolling basis. At the 1998 Annual
Meeting, the general meeting of shareholders authorized the Management Board to
repurchase up to 10% of the Company's issued share capital on behalf of the
Company in open market purchases at a price not to exceed 110% of the then
market price. Such authority expires on November 12, 1999.
The Management Board believes that the Company would benefit by extending
and expanding the authority of the Management Board to repurchase its share
capital. For example, to the extent the Management Board believes that the
Company's stock may be undervalued at the market levels at which it is then
trading, repurchases of its own share capital may represent an attractive
investment for the Company.
21
<PAGE> 24
Such shares, to the extent they are not canceled pursuant to the authority
requested in Item 6 below, could be used for any valid corporate purpose,
including use under the Company's compensation plans, sale in connection with
the exercise of outstanding options, or for acquisitions, mergers or similar
transactions. The reduction in the Company's issued capital resulting from any
such purchases (assuming such repurchased shares are subsequently canceled) will
increase the proportionate interest of the remaining shareholders in the
Company's net worth and whatever further profits the Company may earn. However,
the number of shares repurchased, if any, and the timing and manner of any
repurchases would be determined by the Management Board in light of prevailing
market conditions, the Company's available resources and other factors that
cannot now be predicted.
In order to provide the Company with sufficient flexibility, the Management
Board proposes that the general meeting of shareholders grant extended authority
for the repurchase of up to 30% of the current issued share capital (over three
million shares) in the open market, through privately negotiated transactions or
by means of a self-tender offer or offers and at prices ranging up to 150% of
the market price at the time of the transaction. Such authority would extend for
eighteen months from the date of the 1999 Annual Meeting until November 12,
2000.
The affirmative vote of a majority of the votes cast at the meeting is
required to adopt the proposal to grant extended authority to the Management
Board until November 12, 2000 to repurchase up to 30% of the Company's issued
share capital on behalf of the Company in the open market, through privately
negotiated transactions or by means of a self-tender offer or offers at prices
ranging up to 150% of the market price at the time of the transaction.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL
TO GRANT EXTENDED AUTHORITY TO THE MANAGEMENT BOARD TO REPURCHASE SHARES OF THE
COMPANY'S SHARE CAPITAL, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED
UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
ITEM 6
CANCELLATION OF SHARES TO BE ACQUIRED BY THE COMPANY IN ITS OWN SHARE CAPITAL
As indicated in Item 4, under Dutch law and the Articles of Association,
the Company may hold no more than 10% of its issued share capital at any time.
In order to allow implementation of proposed repurchases contemplated by the
authorization requested in Item 5 above which are in excess of 10% (and up to
30%) of the then issued share capital, the Company must cancel shares which have
been repurchased. The Management Board, with the prior approval of the
Supervisory Board and subject to certain Dutch statutory conditions, is
requesting a resolution on the prospective cancellation of shares so that the
Management Board will have the ability to implement any proposed repurchases in
excess of 10% (and up to 30%) of current issued share capital in an efficient
manner without the delay and expense of calling special shareholders meetings.
Subsequent to the cancellation contemplated pursuant to Item 4 above,
prospective cancellation of shares shall occur if and when the Company holds in
excess of 9% of its issued share capital, at which time the Company will cancel
all or a portion of such shares, determined by the Management Board. The Company
proposes to cancel the shares in two tranches, or such higher number of tranches
as the Management Board shall determine, with no tranche to exceed 10% of the
then issued share capital of the Company. The total number of shares to be
prospectively canceled by the Company will not exceed 20% of the current issued
share capital, or a total of 2,503,510 shares.
With regard to the requirements of sec.2.99, subsection 7, Dutch Civil
Code, the resolution to cancel shares prospectively held by the Company of its
share capital will become effective after filing thereof with the Commercial
Register and after expiry of a two-month period after publication of such filing
in a daily newspaper distributed nationally in The Netherlands, provided no
opposition is instituted by creditors against such resolution. If opposition is
instituted, such resolution shall become effective as soon as possible, with due
observance of the law. Upon effectiveness of such resolution, the capital
decrease will be filed with the
22
<PAGE> 25
Commercial Register, the shareholders register of the Company will reflect the
cancellation of registered shares and bearer share certificates and registered
share certificates, if any, will be destroyed. The above-mentioned filing with
the Commercial Register will show which number of shares have been canceled in
the relevant tranche. For every cancellation tranche, a filing will be made.
The affirmative vote of a majority of the votes cast, or the affirmative
vote of 2/3 of the votes cast if less than 50% of the issued capital is
represented at the meeting, is required to adopt the proposal to prospectively
cancel shares to be acquired by the Company of its share capital.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL
TO PROSPECTIVELY CANCEL SHARES TO BE ACQUIRED BY THE COMPANY OF ITS SHARE
CAPITAL, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY
INSTRUCTIONS ARE INDICATED THEREON.
ITEM 7
AMEND THE ARTICLES OF ASSOCIATION TO
DECREASE THE AUTHORIZED CAPITAL OF THE COMPANY
Under Dutch law, issued capital of the Company must at all times be at
least 20% of its authorized capital stated in its Articles of Association.
Presently, the authorized capital of the Company is 500,000 Dutch Guilders (NLG
500,000) divided into 50,000,000 shares of one Dutch cent (NLG 0.01) each. In
effect, there must be issued at all times a minimum of 10,000,000 shares, which
would effectively limit the Company's ability to fully implement the share
repurchase program and share cancellations contemplated by Items 5 and 6 above.
Therefore, the Management Board proposes with the approval of the Supervisory
Board to reduce the authorized capital to NLG 350,000 divided into 35,000,000
shares of NLG 0.01 each, which would allow the Company to reduce its issued
share capital to 7,000,000 shares. The Supervisory Board believes such reduction
will leave available sufficient authorized capital for any action it may
contemplate in the foreseeable future.
The affirmative vote of a majority of the votes cast is required to adopt
the proposal to amend the Articles of Association to reduce authorized capital
from NLG 500,000 to NLG 350,000.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL
TO AMEND THE ARTICLES OF ASSOCIATION TO REDUCE AUTHORIZED CAPITAL, AND PROXIES
EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE
INDICATED THEREON.
ITEM 8
EXTENSION OF AUTHORITY OF SUPERVISORY BOARD TO ISSUE SHARES
OF COMMON STOCK UNTIL MAY 12, 2004
At the Annual Meeting, the shareholders will be asked to approve a further
extension of the authority of the Supervisory Board to issue and/or grant rights
on (including options to purchase unissued shares) shares of Common Stock for a
five-year period from the date of the Annual Meeting until May 12, 2004. A
designation may be effective for up to five years and may be renewed on an
annual rolling basis. At the 1998 Annual Meeting, the shareholders authorized
the Supervisory Board for a five-year period to issue and/or grant rights on
(including options to purchase) shares of Common Stock. This five-year period is
set to expire on May 12, 2003. (For a discussion of preemptive rights held by
holders of Common Stock, see Item 9 below.)
At the Annual Meeting, the shareholders will be asked to approve a further
extension of this authority for a five-year period from the date of the Annual
Meeting until May 12, 2004.
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<PAGE> 26
The affirmative vote of a majority of the votes cast at the meeting is
required to extend the authorization of the Supervisory Board to issue and/or to
grant rights on (including options to purchase unissued shares) shares of Common
Stock for a five-year period from the date of the Annual Meeting.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE EXTENSION
OF THE AUTHORITY OF THE SUPERVISORY BOARD TO ISSUE AND/OR GRANT RIGHTS ON
(INCLUDING OPTIONS TO PURCHASE) SHARES OF COMMON STOCK UNTIL MAY 12, 2004, AND
PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE
INDICATED THEREON.
ITEM 9
EXTENSION OF AUTHORITY OF SUPERVISORY BOARD TO LIMIT OR ELIMINATE
PREEMPTIVE RIGHTS UNTIL MAY 12, 2004
Under Dutch law and the Articles of Association, holders of Common Stock
have a pro rata preemptive right of subscription to any shares of Common Stock
issued for cash unless such right is limited or eliminated. Holders of Common
Stock have no pro rata preemptive subscription right with respect to any Common
Stock issued for consideration other than cash or pursuant to employee stock
plans. If designated for this purpose at the Annual Meeting, the Supervisory
Board has the power to limit or eliminate such rights. A designation may be
effective for up to five years and may be renewed on an annual rolling basis. At
the 1998 Annual Meeting, the shareholders authorized the Supervisory Board for a
five-year period to limit or eliminate from time to time the preemptive rights
of holders of Common Stock. This five-year period is set to expire on May 12,
2003.
At the Annual Meeting, the shareholders will be asked to approve a further
extension of this authority for a five-year period from the date of the Annual
Meeting until May 12, 2004.
The affirmative vote of a majority of the votes cast at the meeting is
required to extend the authorization of the Supervisory Board to limit or
eliminate the preemptive rights of holders of Common Stock for a five-year
period from the date of the Annual Meeting.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE EXTENSION
OF THE AUTHORITY OF THE SUPERVISORY BOARD TO LIMIT OR ELIMINATE PREEMPTIVE
RIGHTS OF HOLDERS OF COMMON STOCK UNTIL MAY 12, 2004, AND PROXIES EXECUTED AND
RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
ITEM 10
ADOPTION OF THE CHICAGO BRIDGE & IRON 1999 LONG-TERM INCENTIVE PLAN
Chicago Bridge & Iron Company, a subsidiary of the Company ("CB&I"), has
adopted the Chicago Bridge & Iron 1999 Long-Term Incentive Plan (the "1999
LTIP"), subject to approval of the 1999 LTIP by the shareholders of the Company.
REASONS FOR SEEKING STOCKHOLDER APPROVAL
Approval of the 1999 LTIP is necessary to permit compensation expense
recognized by the Company in connection with exercise of options, and payment of
performance-vested restricted stock and performance units or performance shares
to qualify as "performance-based" compensation for purposes of Section 162(m) of
the Code.
Under Section 162(m), the Company cannot claim a U.S. federal income tax
deduction for compensation paid to its chief executive officer or any of its
four other most highly compensated executive officers in excess of $1,000,000 in
any year, unless the compensation qualifies as shareholder-approved
"performance-
24
<PAGE> 27
based" compensation. Compensation attributable to exercise of options (the
"spread," or excess of the fair market value of the option shares at the time of
exercise over the option exercise price) is eligible to be considered as
performance-based compensation for purposes of Section 162(m). Compensation
attributable to certain other types of Awards (defined below) such as
performance-vested restricted stock, performance shares or performance units, is
eligible to be considered as performance-based compensation for purposes of
Section 162(m) if the shareholders have approved the material terms of the
performance goals set forth in the 1999 LTIP for such Awards. Awards made
pursuant to the 1999 LTIP will not satisfy the requirements of Section 162(m)
unless the shareholders of the Company approve the 1999 LTIP at the Annual
Meeting.
The 1999 LTIP is substantially similar to the Chicago Bridge & Iron
Long-Term Incentive Plan (the "1997 LTIP"), adopted January 17, 1997, prior to
the date the Company became a separate public company. As of March 1, 1999,
405,782 shares of Common Stock remain available for Awards under the 1997 LTIP.
Approval of the 1999 LTIP will also permit options granted under the 1999
LTIP that are intended to be incentive stock options ("ISOs") to qualify as
such. Finally, approval of the 1999 LTIP is required under the rules of the New
York Stock Exchange applicable to the Company, unless all shares of Common Stock
issued under the 1999 LTIP will be treasury shares.
If the 1999 LTIP is not approved at the Annual Meeting, the 1999 LTIP will
not go into effect, but Awards may continue to be made under the 1997 Plan until
the shares remaining for Awards under the 1997 LTIP are exhausted.
SUMMARY OF THE 1999 LTIP
The principal provisions of the 1999 LTIP are summarized below. This
summary is not a complete description of the 1999 LTIP and is qualified by the
full text of the 1999 LTIP, a copy of which is included in this Proxy Statement
as Appendix A.
Purpose. The objectives of the 1999 LTIP are to optimize the profitability
and growth of the Company and its subsidiaries through incentives which link the
personal interests of participants to those of the Company's shareholders; to
provide participants with an incentive for excellence in individual performance;
to promote teamwork among participants; and to provide flexibility to CB&I in
its ability to motivate, attract and retain the services of participants who
make significant contributions to CB&I's success and to allow participants to
share in its success.
Duration. The 1999 LTIP is effective as of May 1, 1999, subject to
approval by the shareholders of the Company. The 1999 LTIP will remain in
effect, subject to the right of the Board of Directors of CB&I to amend or
terminate the 1999 LTIP, until all shares subject to the 1999 LTIP shall have
been awarded.
Types of Awards. The 1999 LTIP permits the granting of the following types
of Awards to employees of the Company or any of its affiliates: (1) stock
options, including ISOs and options other than ISOs ("nonqualified options");
(2) restricted stock (whether in the form of restricted stock shares or
restricted stock units); and (3) performance shares or performance units
conditioned upon meeting performance criteria (collectively, the "Awards").
Administration. The 1999 LTIP will be administered by a Committee
("Committee") appointed by the Board of Directors of CB&I. However, as to Awards
to any individual who is a member of that Committee or an executive officer or a
director of the Company, the Organization and Compensation Committee of the
Supervisory Board will act as the Committee. In addition, the Organization and
Compensation Committee may in its discretion exercise directly any function of
the Committee, including the making of Awards to any employees or nonemployee
members of the Supervisory Board. Subject to the foregoing, the Committee will
have the power, among other things, to select employees of the Company and its
affiliates (and nonemployee members of the Supervisory Board) to whom Awards are
granted, and to determine the sizes and types of Awards and the terms and
conditions of Awards. The Committee is authorized to construe and interpret the
1999 LTIP and any related award agreements, to establish, amend or waive rules
relating to plan administration, to amend outstanding Awards, and to make all
other determinations which may be necessary or advisable for the administration
of the 1999 LTIP. The Committee may delegate its authority.
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<PAGE> 28
Shares Subject to the 1999 LTIP. Subject to the anti-dilution adjustment
described below, a total of 1,130,000 Shares are reserved for Awards under the
1999 LTIP. The number of Shares with respect to which Awards may be granted in
the form of options to any single participant in any one fiscal year may not
exceed 250,000. The number of Shares with respect to which Awards may be granted
in the form of restricted stock and performance shares/units combined to any
single participant in any one fiscal year may not exceed 125,000.
In the event of a stock dividend, stock split or other change in corporate
capitalization, or a corporate transaction such as a merger, consolidation or
spin-off, or a reorganization or liquidation of the Company, the Committee shall
adjust the number and class of Shares which may be issued under the 1999 LTIP,
the limitation on the number of Shares that may be the subject of Awards under
the 1999 LTIP, and the number, class and option or other purchase price of
Shares subject to outstanding Awards under the 1999 LTIP, as the Committee deems
appropriate and equitable to prevent dilution or enlargement of rights.
If any Shares subject to any Award granted under the 1999 LTIP are
forfeited or such Award otherwise terminates without the issuance of such Shares
or of other consideration in lieu of such Shares, the Shares subject to such
Award, to the extent of any such forfeiture or termination, shall again be
available for grant under the 1999 LTIP. If Shares are applied to pay the
exercise price upon exercise of an option pursuant to the 1999 LTIP or applied
to withholding of federal, state and local taxes pursuant to the 1999 LTIP, the
Shares so applied shall be added to the foregoing limitation in determining the
number of Shares remaining for grants pursuant to Awards, and shall be available
for grants under the 1999 LTIP. No fractional Shares are issued under the 1999
LTIP.
Eligibility. All employees of the Company and its affiliates, and
nonemployee members of the Supervisory Board (approximately 6,450 persons) are
eligible to be participants. The Committee selects from among these eligible
individuals those to whom Awards are actually granted.
Stock Options. The Committee grants options, which may be ISOs or
nonqualified options, pursuant to Award agreements. The option price per share
of Common Stock purchasable under any stock option will be determined by the
Committee, in its sole discretion, but cannot in any event be less than 100% of
the fair market value of a share of Common Stock on the date the option is
granted. On , 1999, the closing price of the Common Stock was $ per
share. The Committee determines, in its sole discretion, the term of each stock
option and the time or times when it may be exercised. Options may be exercised
by payment of the exercise price in cash, or, in the sole discretion of the
Committee, in Shares with a fair market value equal to the exercise price of the
option, or pursuant to a "cashless exercise" through a broker-dealer.
Restricted Stock. Restricted stock may be awarded in the form of
restricted stock shares (which are Shares issued by the Company subject to risk
of forfeiture and restrictions on such Shares), or restricted stock units (which
are bookkeeping units evidencing a participant's right to receive Shares in the
future upon or after the lapse of risks of forfeiture and restrictions on such
units). Restricted stock shares or units may not be disposed of by the recipient
until the restrictions established by the Committee lapse. Upon termination of
employment during the restriction period, all restricted stock shall be
forfeited, subject to such exceptions, if any, made by the Committee. Award
agreements may impose other restrictions or vesting conditions, including
achievement of specific Company-wide, divisional or individual performance goals
(which can include the performance goals described below).
Recipients are not required to pay for restricted stock other than by
rendering of services or the payment of any minimum amount required by law. With
respect to restricted stock shares, the participant has all of the rights of a
shareholder, including the right to vote the Shares and the right to receive any
cash dividends, unless the Committee shall otherwise determine. With respect to
restricted stock units, the participant has the right to receive the equivalent
of any cash dividends, unless the Committee shall otherwise determine, but not
the right to vote the Shares. Restricted stock units are paid in certificates
for the applicable number of Shares at or after the satisfaction of the
applicable vesting date.
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Performance Awards. Performance shares pay out a variable number of shares
of Common Stock depending on goal achievement. Performance units provide for
payment of an amount, based either on the value of Shares or appreciation in the
price of Shares, upon the achievement of performance goals. Such shares or units
have an initial value determined by the Committee as of the date of grant. In
the case of a performance share, this value equals the value of a share of
Common Stock. The Committee selects the period during which one or more
performance criteria designated by the Committee are measured for the purpose of
determining the extent to which performance shares or units will have been
earned. The performance criteria which the Committee may designate are net
income (before or after interest, taxes, depreciation and amortization), share
price, earnings per share, operating income, return on net assets, return on
equity, return on capital or investments, total shareholder return, savings in
working capital, reductions in expense levels, operating cash flow, free cash
flow, or economic value added (EVA(1)), in each case where applicable determined
either on a Company-wide basis or in respect of any one or more business units.
Performance awards may be paid in cash, stock, other property or a
combination thereof. Recipients are not required to pay for performance awards
other than by rendering services and any minimum consideration required by
applicable law.
Change of Control. A change of control would occur in the event of the
acquisition by anyone other than the Company or a subsidiary of the Company of a
25% or greater interest in the Company; certain mergers and other transactions
which result in the Company's shareholders owning 70% or less of the surviving
corporation; or certain changes in the composition of the Supervisory Board.
Upon a change of control, all options become exercisable, all restriction
periods and restrictions on restricted stock lapse, and target payout
opportunities attainable under all outstanding Awards of restricted stock,
performance units and performance shares are deemed to be fully earned (with
such Award denominated in Shares becoming fully vested).
Power to Amend. The Board of Directors of CB&I may amend, alter or
discontinue the 1999 LTIP at any time without the approval of the shareholders
of the Company.
Other Provisions. ISOs are not transferrable unless an award agreement
provides for transferability. Restricted stock is not transferrable prior to
vesting. Performance shares and performance units are not transferrable prior to
payment except as provided in the Award agreement. However, all such Awards are
transferrable upon death under the laws of descent and distribution or by the
participant's designation of a beneficiary. In the discretion of the Committee,
withholding tax liabilities incident to the exercise of an option or other
taxable event may be satisfied by withholding of Shares.
NEW PLAN BENEFITS
No awards have been made to executive officers or non-employee directors of
the Company under the 1999 LTIP. Future awards are in the discretion of the
Committee (or, where applicable, the Supervisory Committee) and cannot be
determined at this time.
TAX ASPECTS OF THE 1999 LTIP
The following summarizes the U.S. federal tax consequences generally
arising under present law with respect to Awards granted under the 1999 LTIP.
The grant of an option creates no tax consequences for a grantee or the Company.
In general, the grantee will have no taxable income upon exercising an ISO if
the applicable ISO holding period is satisfied (except that the alternative
minimum tax may apply), and the Company will receive no deduction when an ISO is
exercised. In general, the grantee will realize ordinary income upon exercising
a nonqualified option. The income is equal to the difference between the option
price and the fair market value of Shares on the date of the exercise. The
Company will be entitled to a deduction for the same amount. Generally, there
will be no tax consequence to the Company in connection with a disposition of
Shares acquired by exercise of an option, except that the Company may be
entitled to a
- -------------------------
(1) EVA is a trademark of Stern Stewart & Co. EVA is determined by taking net
operating profit after tax and subtracting a charge for the capital used to
generate that profit.
27
<PAGE> 30
deduction in the case of a disposition of Shares acquired by exercise of an ISO
before the applicable ISO holding periods have been satisfied.
The award of restricted stock shares or units generally will create no tax
consequences for a participant or the Company at the time of the award. The
participant will realize ordinary income (and the Company will normally be
entitled to a corresponding deduction) when the restricted stock shares become
freely transferable or the restrictions lapse, whichever occurs first, in the
amount of the fair market value of the restricted stock shares at that time. The
award of restricted stock units, performance shares, and performance units,
generally will create no tax for a participant or the Company at the time of the
award. The participant will realize ordinary income (and the Company will
normally be entitled to a corresponding deduction) when the restricted stock
units, performance stock, and performance units are transferred to the
participant in the form of Shares (or cash) at or after the units vest or the
performance goals are attained. If, however, the restricted stock units,
performance shares, or performance units are paid in the form of Shares which
continue to be nontransferable and subject to a substantial risk of forfeiture,
the participant's tax (and Company's deduction) will be incurred when those
restrictions lapse under the rules for restricted property described above.
The affirmative vote of a majority of the votes cast at the meeting is
required to adopt the 1999 LTIP.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE APPROVAL
OF THE 1999 LTIP, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS
CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
ITEM 11
ADOPTION OF THE INCENTIVE COMPENSATION PROGRAM
The Company has adopted the Incentive Compensation Program ("Incentive
Program") effective January 1, 2000, subject to the approval of the Incentive
Program by the shareholders of the Company.
REASONS FOR SEEKING STOCKHOLDER APPROVAL
Approval of the Incentive Program is necessary to permit the compensation
expense that the Company recognizes upon its payment of bonuses to certain of
its executive officers to qualify as "performance-based" compensation for
purposes of Section 162(m) of the Code. Under Section 162(m), the Company cannot
claim a U.S. federal income tax deduction for compensation paid to its chief
executive officer or any of its four other most highly compensated executive
officers in excess of $1,000,000 in any year, unless the compensation qualifies
as shareholder-approved "performance-based" compensation. For compensation to be
"performance-based" for purposes of Section 162(m), among other things, the
material terms of the performance goals must be disclosed to the Company's
shareholders and approved by them.
If shareholders do not approve the Incentive Program, it will not go into
effect and no payments under the Incentive Program will be made. However, annual
bonuses previously awarded, including provisional target bonuses dependent on
performance for the 1999 year, will remain payable.
SUMMARY OF THE INCENTIVE PROGRAM
The principal provisions of the Incentive Program are summarized below.
This summary is not a complete description of the Incentive Program and is
qualified by the full text of the Incentive Program, a copy of which is included
in this Proxy Statement as Appendix B.
Purpose. The Incentive Program provides contingent cash compensation to
key employees. It is intended to align the activities of key employees with the
achievement of specific financial performance and business unit performance
goals, as well as individual performance objectives.
Incentive Categories. Under the Incentive Program, employees will
generally receive either a Financial Performance Incentive or a Unit Performance
Incentive (described below). The Company expects (but is not required) to award
Financial Performance Incentives primarily to Executive Officers and Unit
Performance
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<PAGE> 31
Incentives primarily to other participants in the Incentive Program. The
Committee (as defined below) can also grant Discretionary Incentives (described
below). However, the total of all incentives (Financial Performance, Unit
Performance, and Discretionary) paid to any participant for any year may not
exceed 200% of the participant's base salary.
Administration. The Incentive Program is administered by the Organization
and Compensation Committee (the "Committee") of the Supervisory Board. The
Committee will directly determine financial performance goals, targets and
payout percentages for the Financial Performance Incentive and will certify the
achievement of such financial performance goals. The Committee will also
directly determine the target amount of the Financial Performance Incentive. The
Committee may delegate to the management of the Company these responsibilities
with respect to participants who are not executive officers.
Eligibility. The Committee approves the participants in the Incentive
Program who are executive officers. Management will determine the other
participants. The Company currently has approximately 200 employees eligible to
participate in the Incentive Program; a substantial majority of these employees
are expected to be selected as Participants in the Incentive Program. To be
entitled to a full incentive, a Participant must be employed for the full
calendar year. In certain circumstances, Participants employed for less than a
full calendar year may receive a prorated incentive. Any incentive otherwise
payable under the Incentive Program can be reduced or eliminated for any reason
at any time before payment.
Financial Performance Incentive. The Financial Performance Incentive is
based on Company-wide financial performance goals selected by the Committee. In
any year, the Committee may select any one or more of the following goals to be
measured on a Company-wide basis: operating income, earnings (before or after
any of interest, taxes, depreciation and amortization), return on net assets,
net income (before or after taxes), after-tax return on investment, sales,
revenues, earnings per share, total shareholder return, return on equity, total
business return, return on gross investment, return on invested capital,
operating cash flow, free cash flow, and economic value added (EVA(2)).
How Incentives are Determined. The Committee assigns each participant a
target amount for the Financial Performance Incentive based on the individual's
position and job level. The target amount cannot exceed 100% of a participant's
base salary. The Committee also sets minimum, target and maximum performance
levels to measure achievement of the performance goal. If actual financial
performance is below the minimum level, no Financial Performance Incentive is
payable. If performance is at the target level, the target amount of Financial
Performance Incentive is payable. If performance is at or above the maximum
level, a maximum Financial Performance Incentive is payable in an amount equal
to 200% of the target amount. The Committee may in its discretion reduce (but
not increase) any incentive that would otherwise be payable under the Incentive
Program to any covered employee.
Incentive Timing. The Committee establishes the financial performance
goals, target incentive amounts and payout percentages within the first 90 days
of each year. Prior to payment of the incentive and within the first 90 days of
the year following the incentive year, the Committee must certify the extent to
which the performance goal or goals were achieved for the incentive year.
Incentives will normally be paid in cash as soon as practicable after such
certification.
Adjustment of Performance Goals. The Committee may adjust any performance
goal to reflect or offset a change in accounting standards, a significant
acquisition or divestiture, a significant capital transaction, or any other
unusual, nonrecurring item that is separately identified on the Company's
financial statements and is attributable to an event occurring after such
performance goals were established.
Unit Performance Incentive. The Incentive Program also provides for a Unit
Performance Incentive. In general, the Unit Performance Incentive is calculated
and adjusted in the same manner as the Financial Performance Incentive described
above. However, the performance measures differ and may consist of business unit
performance, functional goals, achievement of safety criteria, and attainment of
individual goals.
- -------------------------
(2) EVA is a trademark of Stern Stewart & Co. EVA is determined by taking net
operating profit after tax and subtracting a charge for the capital used to
generate that profit.
29
<PAGE> 32
Company-wide performance does not directly affect the size of a participant's
Unit Performance Incentive, but will affect the aggregate amount available for
payment of Unit Performance Incentives for all participants as a group. If
performance is at the target level, the target amount of the Unit Performance
Incentive is payable. If performance is at or above the maximum level, a maximum
Unit Performance Incentive is payable of up to 200% of the target amount. The
Company believes that Unit Performance Incentives will generally not qualify as
performance-based compensation for purposes of Section 162(m), however, the
Company believes that Section 162(m)'s limitations will not be applicable to
participants who receive Unit Performance Incentives.
Discretionary Incentive. The Incentive Program allows the Committee to
award a Discretionary Incentive that does not qualify as either a Financial
Performance Incentive or a Unit Performance Incentive. Discretionary Incentives
will not qualify as performance-based compensation for purposes of Section
162(m).
Effective Date. The Incentive Program will become effective beginning with
the Company's fiscal year 2000 if the Incentive Program is approved by the
Company's shareholders. The Incentive Program does not have any termination
date.
Amendments. The Committee may, without further action by the shareholders,
amend the Incentive Program from time to time in any manner the Committee deems
desirable. However, no such amendment may enlarge the class of employees who may
be Participants in the Incentive Program, add to the permitted performance
measures for the Financial Performance Incentive, or increase the maximum
incentive payable under the Incentive Program beyond 200% of any Participant's
base salary, without the consent of shareholders.
NEW PLAN BENEFITS
No performance goals, payout percentages and targets have yet been
established under the Incentive Program. Since the Incentive Program requires
performance goals, payout percentages and target incentive amounts to be set for
each year, the Company cannot determine what benefits, if any, would have been
paid to any executive officer if the Incentive Program had been in effect during
1998.
The affirmative vote of a majority of the votes cast at the meeting is
required to adopt the Incentive Program.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE APPROVAL
OF THE INCENTIVE COMPENSATION PROGRAM, AND PROXIES EXECUTED AND RETURNED WILL BE
SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
ITEM 12
RATIFICATION OF APPOINTMENT OF ARTHUR ANDERSEN
AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR 1999
The Supervisory Board has appointed the firm of Arthur Andersen as the
Company's independent public accountants for the year ending December 31, 1999,
subject to ratification by the shareholders. Arthur Andersen has acted as the
Company's independent public accountants since inception and of the Company's
predecessors since 1939. Representatives of Arthur Andersen are expected to be
present at the Annual Meeting. They will have an opportunity to make a
statement, if they desire, and are expected to be available to respond to
appropriate questions.
The affirmative vote of a majority of the votes cast at the meeting is
required to ratify the appointment of Arthur Andersen as the Company's
independent public accountants for 1999.
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<PAGE> 33
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF ARTHUR ANDERSEN'S APPOINTMENT AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS FOR 1999, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED
UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
SHAREHOLDER PROPOSALS
Any proposal of a shareholder intended to be presented at the 2000 Annual
Meeting of Shareholders must be received at the Company's principal executive
offices no later than December 14, 1999, if the proposal is to be considered for
inclusion in the Company's proxy statement relating to such meeting.
By Order of the Board of
Supervisory Directors
Gerald M. Glenn
Chairman of the Board of
Supervisory Directors
Amsterdam, The Netherlands
April , 1999
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APPENDIX A
CHICAGO BRIDGE & IRON
1999 LONG-TERM INCENTIVE PLAN
(EFFECTIVE MAY 1, 1999)
<PAGE> 35
TABLE OF CONTENTS
<TABLE>
<S> <C>
Chicago Bridge & Iron 1999 Long-Term Incentive Plan.........
Article 1 -- Establishment, Objectives and Duration.......
1.1. Establishment of the Plan.........................
1.2 Objectives of the Plan
1.3. Duration of the Plan
Article 2. -- Definitions.................................
2.1. "Affiliate".......................................
2.2. "Award"...........................................
2.3. "Award Agreement".................................
2.4. "Beneficial Owner" or "Beneficial"................
2.5 "Board" or Board of Directors......................
2.6. "CB&I"............................................
2.7. "Change in Control"...............................
2.8. "Code.............................................
2.9. "Committee".......................................
2.10. "Company"........................................
2.11. "Director".......................................
2.12. "Disability".....................................
2.13. "Effective Date".................................
2.14. "Employee".......................................
2.15. "Exchange Act"...................................
2.16. "Fair Market Value"..............................
2.17. "Fiscal Year"....................................
2.18. "Incentive Stock Option" or "ISO"................
2.19. "Named Executive Officer"........................
2.20. "Nonemployee Director"...........................
2.21. "Nonqualified Stock Option" or "NQSO"............
2.22. "Option".........................................
2.23. "Option Price"...................................
2.24. "Optionee".......................................
2.25. "Participant"....................................
2.26. "Performance-Based Exception"....................
2.27. "Performance Share"..............................
2.28. "Performance Unit"...............................
2.29. "Period of Restriction"..........................
2.30. "Person".........................................
2.31. "Restricted Stock"...............................
2.32. "Restricted Stock Shares"........................
2.33. "Restricted Stock Units".........................
2.34. "Retirement".....................................
2.35. "Shares".........................................
</TABLE>
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<TABLE>
<S> <C>
2.36. "Subsidiary".....................................
2.37. "Supervisory Board"..............................
2.38. "Vesting Date"...................................
Article 3. -- Administration..............................
3.1 The Committee......................................
3.2 Authority of the Committee.........................
3.3 Decisions Binding..................................
Article 4. -- Shares Subject to the Plan and Maximum
Awards.................................................
4.1. Number of Shares Available for Grants.............
4.2 Forfeited and Reacquired Shares....................
4.3. Adjustments in Authorized Shares..................
4.4. Fractional Shares.................................
Article 5. -- Eligibility and Participation...............
5.1. Eligibility.......................................
5.2. Actual Participation..............................
Article 6. -- Stock Options...............................
6.1. Grant of Options..................................
6.2. Award Agreement...................................
6.3. Option Price......................................
6.4. Duration of Options...............................
6.5. Exercise of Options...............................
6.6. Payment...........................................
6.7. Restrictions on Share Transferability.............
6.8. Termination of Employment.........................
6.9. Nontransferability of Options.....................
(a) Incentive Stock Options.........................
(b) Nonqualified Stock Options......................
Article 7. -- Restricted Stock............................
7.1. Grant of Restricted Stock.........................
7.2. Restricted Stock Agreement........................
7.3. Transferability...................................
7.4. Other Restrictions................................
7.5. Voting Rights.....................................
7.6. Dividend and Other Distributions..................
7.7. Termination of Employment.........................
7.8. Rights Personal to Participant....................
Article 8. -- Performance Units and Performance Shares....
8.1. Grant of Performance Units/Shares.................
8.2. Value of Performance Units/Shares.................
</TABLE>
ii
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<TABLE>
<S> <C>
8.3. Earning of Performance Units/Shares...............
8.4. Form and Timing of Payment of Performance
Units/Shares..........................................
8.5. Termination of Employment Due to Death,
Disability, or Retirement.............................
8.6. Termination of Employment for Other Reasons.......
8.7. Nontransferability................................
Article 9. -- Performance Measures........................
Article 10. -- Beneficiary Designation....................
Article 11. -- Deferrals..................................
Article 12. -- Rights of Employees........................
12.1. Employment.......................................
12.2. Participation....................................
Article 13. -- Change in Control..........................
13.1. Treatment of Outstanding Awards..................
13.2. Termination, Amendment, and Modifications of
Change-in-Control Provisions..........................
Article 14. -- Amendment, Modification, and Termination...
14.1. Amendment, Modification, and Termination.........
14.2. Adjustment of Awards Upon the Occurrence of
Certain Unusual or Nonrecurring Events...........
14.3. Awards Previously Granted........................
Article 15 -- Withholding.................................
15.1. Tax Withholding..................................
15.2. Share Withholding................................
Article 16. -- Indemnification............................
Article 17. -- Successors.................................
Article 18. -- Legal Construction.........................
18.1. Gender and Number................................
18.2. Severability.....................................
18.3. Requirements of Law..............................
18.4. Securities Law Compliance........................
18.5. Governing Law....................................
</TABLE>
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CHICAGO BRIDGE & IRON
1999 LONG-TERM INCENTIVE PLAN
ARTICLE 1 -- ESTABLISHMENT, OBJECTIVES AND DURATION
1.1. ESTABLISHMENT OF THE PLAN. Chicago Bridge & Iron Company, a Delaware
corporation ("CB&I"), a wholly owned subsidiary of Chicago Bridge & Iron Company
N.V., a Netherlands corporation (the "Company"), hereby establishes an incentive
compensation plan to be known as the "Chicago Bridge & Iron 1999 Long-Term
Incentive Plan" (the "Plan"), as set forth in this document. The Plan permits
the grant of Nonqualified Stock Options, Incentive Stock Options, Restricted
Stock Shares, Restricted Stock Units, Performance Shares and Performance Units.
1.2 OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize
the profitability and growth of CB&I, the Company and their respective
Subsidiaries, through incentives which are consistent with CB&I's goals and
which link the personal interests of Participants to those of the Company's
shareholders; 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 CB&I in its ability
to motivate, attract, and retain the services of Participants who make
significant contributions to CB&I's success and to allow Participants to share
in the success of CB&I.
1.3. DURATION OF THE PLAN. The Plan shall become effective as of May 1,
1999 (the "Effective Date"), subject to its approval by the shareholders of the
Company, 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 14
hereof, until all Shares subject to it shall have been purchased or acquired
according to the Plan's provisions.
ARTICLE 2. -- DEFINITIONS
Whenever and wherever 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 under the Exchange Act.
2.2. "AWARD" means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock Shares,
Restricted Stock Units, Performance Shares or Performance Units.
2.3. "AWARD AGREEMENT" means an agreement setting forth the terms and
provisions applicable to an Award granted to a Participant 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 CB&I.
2.6. "CB&I" means Chicago Bridge & Iron Company, a Delaware corporation
and the sponsor of the Plan.
2.7. "CHANGE IN CONTROL" will be deemed to have occurred as of the first
day any one or more of the following paragraphs shall have been satisfied:
(a) Any Person, other than the Company, any Subsidiary or any employee
benefit plan (or related trust) of the Company or any such Subsidiary,
becomes the Beneficial Owner of 25% or more of the total voting power of
the Company's outstanding securities;
(b) During any period of two years or less, individuals who at the
beginning of such period constituted the Supervisory Board of the Company
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
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<PAGE> 39
Supervisory Board 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 considered for purposes of this paragraph (b) as having been a member at
the beginning of such period; or
(c) Upon the consummation of (i) any merger or other business
combination of the Company with or into another corporation pursuant to
which the persons who were shareholders of the Company immediately before
such consummation, do not own immediately after such consummation, more
than 70% of the voting power and the value of the stock of the surviving
corporation in substantially the same respective proportions as their
ownership of the common stock of the Company immediately prior to such
consummation, or (ii) the sale, exchange or other disposition of all or
substantially all the consolidated assets of the Company.
2.8. "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
2.9. "COMMITTEE" means the Committee appointed by the Board to administer
the Plan as provided in Article 3 herein or, to the extent it functions as the
Committee as provided in Article 3 herein, the Organization and Compensation
Committee of the Supervisory Board.
2.10. "COMPANY" means Chicago Bridge & Iron Company N.V., a Netherlands
corporation, including, as may be applicable to the context, any and all
Subsidiaries and Affiliates, and any successor thereto.
2.11. "DIRECTOR" means any individual who is a member of the Board of
Directors of CB&I or any Subsidiary or Affiliate.
2.12. "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. Any
determination of whether any condition of a Participant constitutes Disability
shall be made under rules uniformly applied to all Participants.
2.13. "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.3 hereof.
2.14. "EMPLOYEE" means any employee of CB&I or the Company or their
respective Subsidiaries and Affiliates. Directors who are not employed by any of
the foregoing shall not be considered Employees under this Plan.
2.15. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.16. "FAIR MARKET VALUE" of Shares as of any date shall be determined on
the basis of the closing sale price of Shares 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.
2.17. "FISCAL YEAR" means a fiscal year of CB&I.
2.18. "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares
which is designated as an Incentive Stock Option and which is intended to meet
the requirements of Code Section 422, granted to a Participant pursuant to
Article 6 herein.
2.19. "NAMED EXECUTIVE OFFICER" means a Participant who, as of the last
date of a taxable year of CB&I, is one of the group of "covered employees," as
defined in the regulations promulgated under Code Section 162(m), or any
successor statute.
2.20. "NONEMPLOYEE DIRECTOR" means an individual who is a member of the
Supervisory Board but who is not an Employee.
2.21. "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase
Shares which is not intended to meet the requirements of Code Section 422,
granted to a Participant pursuant to Article 6 herein.
2.22. "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option.
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2.23. "OPTION PRICE" means the price at which a Share may be purchased by
a Participant pursuant to an Option.
2.24. "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.
2.25. "PARTICIPANT" means an Employee or Nonemployee Director who has
outstanding an Award.
2.26. "PERFORMANCE-BASED EXCEPTION" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.27. "PERFORMANCE SHARE" means an Award providing for the payment of a
variable number of Shares depending on the achievement of performance goals,
granted to a Participant pursuant to Article 8 herein.
2.28. "PERFORMANCE UNIT" means an Award providing for the payment of an
amount based on either the Fair Market Value of Shares or the appreciation in
Fair Market Value of Shares upon the achievement of performance goals, granted
to a Participant, pursuant to Article 8 herein.
2.29. "PERIOD OF RESTRICTION" means the period during which the transfer
of Restricted Stock Shares or Restricted Stock Units 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.
2.30. "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, and
shall include a "group" as defined in Section 13(d) thereof.
2.31. "RESTRICTED STOCK" means Restricted Stock Shares or Restricted Stock
Units.
2.32. "RESTRICTED STOCK SHARES" means Shares which are issued and awarded
to Participants subject to a substantial risk of forfeiture and restrictions on
such Shares during the Period of Restriction as provided in Article 7 herein.
2.33. "RESTRICTED STOCK UNIT" means a bookkeeping unit that represents the
right of a Participant to be issued and to receive a Share upon lapse of risks
of forfeiture and restrictions on such Units during the Period of Restriction,
or at such later time as shall be determined by the Committee in its discretion
upon grant of the Award or, with the consent of the Participant, after grant of
the Award, as provided in Article 7 herein.
2.34. "RETIREMENT" means a termination of employment after (i) age 55 and
at least a 10 year period of employment by CB&I or the Company or their
respective present or former Subsidiaries or Affiliates, (ii) a 30-year period
of such employment, or (iii) age 65; provided, however, that the Committee as
part of an Award Agreement or otherwise may provide that for purposes of this
Section, a Participant may be credited with such additional years of age and
employment as the Committee in its sole discretion shall determine is
appropriate, and may provide such additional or different conditions for
Retirement as the Committee in its sole discretion shall determine is
appropriate.
2.35. "SHARES" means shares of common stock of the Company.
2.36. "SUBSIDIARY" means any corporation in which CB&I or the Company owns
directly, or indirectly through subsidiaries, at least 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 CB&I or the Company owns
at least 50% of the combined equity thereof.
2.37. "SUPERVISORY BOARD" means the Supervisory Board of the Company.
2.38. "VESTING DATE" means with respect to Restricted Stock and Restricted
Stock Units the date (if any) on which the risks of forfeiture and restrictions
on such Restricted Stock Shares or Units during the Period of Restriction have
terminated (by their terms or by other action of the Committee consistent with
this Plan) and all other conditions or restrictions applicable to such
Restricted Stock Shares or Units have been satisfied.
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ARTICLE 3. -- ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by a Committee, the
members of which shall be appointed from time to time by, and shall serve at the
discretion of, the Board; provided, however, that (i) with respect to grants and
Awards made or to be made to or held by any member of such Committee or any
Named Executive Officer, the Plan shall be administered by the Organization and
Compensation Committee of the Supervisory Board; and (ii) the Organization and
Compensation Committee of the Supervisory Board may in its sole discretion
exercise directly any power, right, duty or function of the Committee, including
but not limited to the grant or amendment of an Award to any Employee or
Nonemployee Director.
3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
Certificate of Incorporation or bylaws of CB&I, and subject to the provisions
herein, the Committee shall have full power to select Employees and Nonemployee
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 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 permitted by law, the Committee
may delegate its authority as specified herein.
3.3 DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the Plan and all related orders and resolutions of the
Board shall be final, conclusive and binding on all Persons, including CB&I, the
Company, their respective shareholders, Directors, members of the Supervisory
Board, 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 4.3 herein, the number of Shares reserved for issuance to
Participants under the Plan is 1,130,000. The maximum aggregate number of Shares
with respect to which Awards may be granted in any fiscal year to any
Participant in the form of Stock Options is 250,000. The maximum aggregate
number of Shares with respect to which Awards may be granted in the form of
Restricted Stock Shares, Restricted Stock Units, Performance Shares and
Performance Units combined in any fiscal year to any Participant is 125,000.
4.2 FORFEITED AND REACQUIRED SHARES. If any Shares subject to any Award
are forfeited or such Award otherwise terminates without the issuance of such
Shares or of other consideration in lieu of such Shares, the Shares subject to
such Award, to the extent of any such forfeiture or termination, shall again be
available for grant under the Plan. If Shares are applied to pay the Option
price upon exercise of an Option or to satisfy federal, state or local tax
withholding requirements pursuant Section 15.2, the Shares so applied shall be
added to the Shares permitted under the limitations of Section 4.1 in
determining the number of Shares remaining for issuance and for grants of Awards
with respect to such Shares under the Plan.
4.3. ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as a merger, consolidation, separation, spin-off, or other distribution of
stock or property of the Company, or 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, the Committee shall adjust
the number and class of Shares which may be issued under Section 4.1 and in the
limitation of Section 4.1 on grants of Awards with respect to Shares, in the
number, class and/or price of Shares subject to outstanding Awards, as the
Committee in its sole discretion determines to be appropriate and equitable to
prevent dilution or enlargement of rights; provided, however, that the number of
Shares subject to any Award shall always be a whole number.
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4.4. FRACTIONAL SHARES. No fractional Shares shall be issued to
Participants under the Plan. If for any reason an Award or adjustment thereto
would otherwise result in the issuance of a fractional Share to a Participant,
the Company shall pay the Participant in cash the Fair Market Value of such
fractional Share.
ARTICLE 5. -- ELIGIBILITY AND PARTICIPATION
5.1. ELIGIBILITY. Persons eligible to participate in this Plan include
all Employees, including Employees who are members of the Board, and Nonemployee
Directors.
5.2. ACTUAL PARTICIPATION. Subject to the terms and 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,
the Committee may grant Options to Participants in such number, and upon such
terms, and at any time and from time to time, as the Committee in its discretion
may determine. The date an Option is granted shall be the day on which the
Committee acts to award a specific number of Shares to a Participant at a
specific Option Price, 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 expiration date 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 or not the Option is intended to be an ISO.
6.3. OPTION PRICE. The Option Price for each grant of an Option under
this Plan shall be at least equal to 100% of the Fair Market Value of a Share on
the date the Option is granted.
6.4. DURATION OF OPTIONS. Each Option shall expire at such time (not
later than the 10th anniversary of its date of grant) as the Committee shall
determine at the time of grant. If an Award Agreement does not specify an
expiration date, the Option shall expire on the 10th anniversary of its date of
grant.
6.5. EXERCISE OF OPTIONS. Options 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.
6.6. PAYMENT. If the Award Agreement does not otherwise specify the
manner of exercise, Options shall be exercised by the delivery of a written
notice of exercise to CB&I identifying the Option(s) being exercised, completed
by the Optionee and delivered during regular business hours to the office of the
Secretary of CB&I, or sent by certified mail to the Secretary of CB&I,
accompanied by a negotiable check or other cash equivalent in full payment for
the Shares. A copy of such notice of exercise shall also be delivered by the
Optionee to the office of the Secretary of the Company.
In the discretion of the Committee and as set forth in the Award Agreement,
the Optionee may pay the Option Price to CB&I upon exercise of any Option by
tendering previously acquired Shares which have been held by the Optionee for at
least six months and which have an aggregate Fair Market Value at the time of
exercise equal to the total Option Price, or by a combination of such Shares and
a check or other cash equivalent.
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or exercise 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, CB&I shall
deliver, or have delivered, to the, Optionee, in the Optionee's name,
certificates for an appropriate number of Shares based upon the number of Shares
purchased under the Option(s).
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6.7. RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option under
this Article 6 as it may deem advisable, including, without limitation,
restrictions under applicable securities laws and under the requirements of any
stock exchange or market upon which such Shares are then listed and/or traded.
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 as an
Employee 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 may be sold, transferred,
pledged, assigned, or otherwise alienated, other than by will or by the
laws of descent and distribution. Further, all ISOs 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.
(B) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a
Participant's Award Agreement, no NQSO 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 may grant Awards of Restricted Stock Shares or
Restricted Stock Units to Participants in such amounts and upon such terms, and
at any time and from time to time, as the Committee shall in its discretion
determine.
7.2. RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify whether the
grant is an Award of Restricted Stock Shares or Restricted Stock Units, the
Period(s) of Restriction, the number of Shares or Units of Restricted Stock
granted, and such other provisions as the Committee shall determine.
7.3. TRANSFERABILITY. Except as otherwise provided in this Article 7,
Restricted Stock Units may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated; and Restricted Stock Shares 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 Stock Award Agreement. Except as
otherwise provided in this Article 7, Restricted Stock Shares shall become
freely transferable by the Participant upon the Vesting Date, and Shares issued
in respect of Restricted Stock Units shall be freely transferable by the
Participant upon issuance to the Participant on or after the Vesting Date.
7.4. OTHER RESTRICTIONS. The Committee may impose such other conditions
and/or restrictions on any Shares or Units 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 at a stipulated
time for each Share or Unit of Restricted Stock, restrictions and conditions of
vesting or forfeiture 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.
If the Restricted Stock Award is made in Restricted Stock Shares, CB&I
shall retain the certificates representing Shares in CB&I's possession until the
Vesting Date. If the Restricted Stock Award is made in
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Restricted Stock Units, no Shares shall be issued until the Vesting Date, but
Shares shall be issued in respect of such Units as of or after the Vesting Date.
In either case, certificates for Shares shall be delivered to the Participant on
or as soon as practicable after the Vesting Date, or at such later time or times
as shall be determined by the Committee in its discretion upon grant of the
Award or, with the consent of the Participant, after grant of the Award.
7.5. VOTING RIGHTS. Unless otherwise provided in the Award Agreement,
Participants awarded Restricted Stock Shares hereunder which have not been
forfeited may exercise full voting rights with respect to those Shares during
the Period of Restriction. Restricted Stock Units shall not confer any voting
rights (unless and until Shares are issued therefor on or after the Vesting
Date).
7.6. DIVIDEND AND OTHER DISTRIBUTIONS. Unless otherwise provided in the
Award Agreement, if during the Period of Restriction prior to a Vesting Date or
forfeiture of Restricted Stock:
(a) Cash dividends are paid on Shares, (i) the Company shall pay
Participants holding Restricted Stock Shares the regular cash dividends
paid with respect to the Shares; and (ii) the Company shall pay
Participants holding Restricted Stock Units an amount equal to the cash
dividends paid on an equivalent number of Shares;
(b) Dividends in Shares are paid in Shares, (i) Participants holding
Restricted Stock Shares shall be credited with such dividends as additional
Restricted Stock Shares subject to the same restrictions as the underlying
Shares; and (ii) Participants holding Restricted Stock Units shall be
credited with additional Restricted Stock Units equivalent to such
dividends, subject to the same restrictions as the underlying Units.
The Committee may in its discretion apply any restrictions to the dividends
that the Committee deems appropriate.
7.7. TERMINATION OF EMPLOYMENT. Except as otherwise provided in the Award
Agreement, if the Participant's employment as an Employee or service as a
Director with CB&I or the Company or their respective Subsidiaries and
Affiliates terminates for any reason during the Period of Restriction, all
Restricted Stock as to which the Period of Restriction has not yet expired or as
to which a Vesting Date has not otherwise occurred shall be forfeited. The
Committee in its discretion may set forth in the Award Agreement the extent to
which the Participant shall nevertheless have the right to receive vested
unrestricted Shares at or after termination of the Participant's employment as
an Employee 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 or
Units of Restricted Stock issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of employment.
7.8. RIGHTS PERSONAL TO PARTICIPANT. All rights prior to the Vesting Date
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 in
the event of the Participant's death prior to the Vesting Date, to the
Beneficiary designated in accordance with Article 10.
ARTICLE 8. -- PERFORMANCE UNITS AND PERFORMANCE SHARES
8.1. GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms and
provisions of the Plan, the Committee may grant Awards of Performance Units
and/or Performance Shares to Participants in such amounts and upon such terms,
and at any time and from time to time, as the Committee shall in its discretion
determine.
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. 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."
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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, as soon as
practicable after the Committee has certified the number of Performance
Units/Shares earned for the Performance Period, or at such later time or times
as shall be determined by the Committee in its discretion upon grant of the
Award or, with the consent of the Participant, after grant of the Award. Subject
to the terms of this Plan and except as otherwise provided in an Award
Agreement, the Committee shall pay earned Performance Shares in Shares but may
in its sole discretion pay earned Performance Units in the form of cash or in
Shares (or in a combination thereof) which have an aggregate Fair Market Value
equal to the value as of the date of distribution of the number of earned
Performance Units at the close of the applicable Performance Period. Such Shares
may be granted subject to any restrictions deemed appropriate by the Committee.
Unless otherwise provided in the Award Agreement, Participants shall be
entitled to receive any dividends paid with respect to Shares which have been
earned in connection with grants of Performance Units/Shares but not yet
distributed to Participants, such dividends to be subject to the same terms and
conditions as apply to dividends earned with respect to Restricted Stock, as set
forth in Section 7.6 herein.
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 in a reduced amount prorated according to the
ratio of the length of Participant's employment or service in the Performance
Period to the length of the Performance Period, 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 CB&I 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, 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.
The performance measure(s) to be used for purposes of Awards to Named
Executive Officers which are designed to qualify for the Performance-Based
Exception shall be chosen from among net income (either before or after
interests, taxes, depreciation and amortization), share price, earnings per
share, operating income, return on net assets, return on equity, return on
capital or investments, total shareholder return, savings in working capital,
reduction in expense levels, operating cash flow, free cash flow, or economic
value added, in each case where applicable determined either on a Company-wide
basis or in respect of any one or more business units.
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The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the pre-established performance goals; provided,
however, that Awards to Named Executive Officers, which are designed to qualify
for the Performance-Based Exception, may not be adjusted upward (the Committee
shall retain the discretion to adjust such Awards downward).
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, to exercise any Stock Option, or
succeed to the ownership of any Restricted Stock Performance Units/Shares or
other Award 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
Committee, and will be effective only when filed by the Participant in writing
with the Committee 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, subject to Section 14.3, in the Award Agreement or
otherwise, 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 CB&I to terminate any Participant's employment at any time,
nor confer upon any Participant any right to continue in the employ of CB&I.
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; and
(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 30 days following the effective date of the Change in Control an
amount based upon an assumed achievement of all relevant performance goals.
13.2. TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL
PROVISIONS. Notwithstanding any other provision of this Plan or any provision
of any Award Agreement, the provisions of this Article 13
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may not be terminated, amended, or modified on or after the date of Change in
Control to affect adversely any Award theretofore granted without the prior
written consent of the Participant with respect to said Participant's
outstanding Awards; provided, however, the Board, upon recommendation of the
Committee, may terminate, amend, or modify this Article 13 at any time and from
time to time prior to the date of a Change of 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.
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 CB&I or the Company, or the financial statements
of CB&I or 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.
14.3. AWARDS PREVIOUSLY GRANTED. The Committee may amend or modify any
outstanding Award Agreement in any manner consistent with this Plan for an
original Award Agreement, provided, however, that no amendment or modification
of an Award Agreement shall adversely affect in any material way the Award
previously granted without the written consent of the Participant holding such
Award. No termination, amendment or modification of the Plan shall adversely
affect in any material way any Award previously granted without the written
consent of the Participant holding such Award.
ARTICLE. 15. -- WITHHOLDING
15.1. TAX WITHHOLDING. CB&I shall have the power and the right to deduct
or withhold, or require a Participant to remit to CB&I, 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 CB&I 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. All such
elections shall be irrevocable, made in writing, 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 CB&I 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 party or in which he or she may be involved
by reasons 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 CB&I's
approval, or paid by him or her in satisfaction of any judgment of any such
action, suit, or proceeding against him or her, provided he or she shall give
CB&I 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 Association, CB&I's Certificate of Incorporation or bylaws, any
agreement, as a matter of law, or otherwise, or any power that CB&I may have to
indemnify them or hold them harmless.
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ARTICLE 17. -- SUCCESSORS
All obligations of CB&I under the Plan with respect to Awards granted
hereunder shall be binding on any successor to CB&I, whether such successor
arises as a result of a direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all of the business and/or assets of CB&I.
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.
18.4. SECURITIES LAW COMPLIANCE. Transactions under this Plan are intended
to comply with all applicable conditions of Rule 16b-3 under the Exchange Act
(or any successor rule). 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, without regard to its provisions regarding
conflict of laws.
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APPENDIX B
CHICAGO BRIDGE & IRON COMPANY N.V.
INCENTIVE COMPENSATION PROGRAM
OVERVIEW
This Incentive Compensation Program (the "Incentive Program") is designed
to align the activities of key managers and other key employees of Chicago
Bridge & Iron Company N.V. and its affiliates (the "Company") with the
achievement of specific financial performance goals, business unit performance
goals, and individual performance objectives. The Company's overall financial
goals are (1) to provide an above average return to shareholders and (2) to
provide sufficient capital for reinvestment in the business. The Incentive
Program's financial targets are set in accordance with these goals. Annual
incentive bonuses are paid in cash to eligible Participants depending upon the
achievement of financial performance, business performance and individual
targets. Achieving these goals will increase the Company's overall
competitiveness within the industry, and create increased value for
shareholders. The Incentive Program provides a method of rewarding the necessary
contributions and leadership behaviors to achieve those results.
The bonus opportunity of a Participant will generally comprise either or
both of a "Financial Performance Incentive" (defined below) and a "Unit
Performance Incentive" (defined below). However, the Committee reserves the
right to grant a "Discretionary Incentive" (defined below) in limited
circumstances.
ADMINISTRATION
The Incentive Program is administered by the Organization and Compensation
Committee (the "Committee") of the Supervisory Board of Chicago Bridge & Iron
Company N.V. The Committee in its discretion construes and interprets the
Incentive Program and determines all questions arising under the Incentive
Program. The Committee in its discretion directly determines Company-wide
financial performance goals, targets and payout percentages for the Financial
Performance Incentive for all Participants, and certifies the achievement of
such financial performance goals. For the Chief Executive Officer and any other
individual who is among the five highest compensated officers of the Company
(together with the Chief Executive Officer, the "Covered Executives") in the
fiscal year of the Company for which a bonus is payable (the "Bonus Year), the
Committee directly determines in its discretion the target Financial Performance
Incentive and the extent to which bonus otherwise payable under the Incentive
Program shall be reduced on the basis of nonattainment of individual performance
goals or other factors. The Committee may in its discretion delegate other
administrative responsibilities under the Incentive Program to the management of
the Company.
Management of the Company shall make such recommendations to the Committee
as the Committee may deem necessary or appropriate for the administration of
this Incentive Program.
ELIGIBILITY
Employees of the Company and its affiliates who are in salary grades 16 and
above are eligible to be selected to become participants ("Participants") in the
Incentive Program. The Committee in its discretion will directly select Covered
Executives who may be Participants. Company management with the approval of the
Committee in its discretion will select other eligible employees to become
Participants. Selection as a Participant for any Bonus Year shall not entitle
the individual to be a Participant for any subsequent Bonus Year unless again
selected to be a Participant in such subsequent Bonus Year.
A Participant hired during a Bonus Year shall have a prorated target
Financial Performance Incentive and (if applicable) a prorated target Unit
Performance Incentive, based on the number of weeks worked from the date of hire
to the end of the year. A Participant whose employment terminates before the
last day of the Bonus Year by reason of a reduction-in-force program, death,
disability or retirement, and whose employment terminates on or after April 1 of
the Bonus Year, shall have a prorated target Financial Performance Incentive and
(if applicable) a prorated target Unit Performance Incentive based on the number
of weeks worked from the beginning of the year to the date of termination. A
Participant whose employment terminates during the
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Bonus Year under circumstances not described in the preceding sentence shall not
be entitled to a Financial Performance Incentive or Unit Performance Incentive
for such Bonus Year.
As a condition to receipt of a bonus a Participant must keep both his or
her eligibility and bonus targets strictly confidential. Neither of these may be
discussed with, or disclosed to, any individual other than (i) the Vice
President of Human Resources, Human Resources staff administering the program,
or superiors in the Participant's chain of command, (ii) a Participant's spouse,
attorney or accountant who undertake not to further disclose the Participant's
eligibility and bonus target, or (iii) in a disclosure required by law.
Notwithstanding anything in this Incentive Program to the contrary, no
Participant shall have any vested right to a bonus. The Committee in its sole
discretion may reduce or cancel a Participant's incentive bonus for any reason
at any time prior to actual payment.
FINANCIAL PERFORMANCE INCENTIVE
A Participant may receive an incentive bonus (a "Financial Performance
Incentive") based on his or her bonus target and the achievement by the Company
of the Company-wide financial performance goals described below.
FINANCIAL PERFORMANCE TARGET
The Committee may assign each Participant an individual Financial
Performance Incentive target for each Bonus Year. The target for the Financial
Performance Incentive is set at a percentage of the Participant's base salary at
the time the performance goal is established ("Base Salary") based on the
Participant's position and job level. The target amount shall not exceed 100% of
Base Salary.
PERFORMANCE GOALS
The Committee selects Company-wide financial performance goals from among
(i) operating income, (ii) earnings (before or after any of interest, taxes,
depreciation and amortization), (iii) return on net assets, (iv) net income
(before or after taxes), (v) after-tax return on investment, (vi) sales, (vii)
revenues, (viii) earnings per share, (ix) total shareholder return, (x) return
on equity, (xi) total business return, (xii) return on gross investment, (xiii)
operating cash flow, (xiv) free cash flow, and (xv) economic value added.
ADJUSTMENT OF TARGET INCENTIVE FOR PERFORMANCE
The Committee may adjust the attainment of any performance goal to reflect
or offset (i) a change in accounting standards, (ii) a significant acquisition
or divestiture, (iii) a significant capital transaction, or (iv) any other
unusual, nonrecurring item; provided in any such case such item is separately
identified on the Company's audited financial statements in accordance with
generally accepted accounting principles, and is attributable to an event
occurring after the performance goals for the year have been established.
However, the actual cost of this Incentive Program will be part of the
calculation of income from operations.
THRESHOLDS
The Committee selects minimum, target and maximum thresholds for the
performance goal it has selected. If performance is less than minimum, no
Financial Performance Incentive will be paid. If performance is at the minimum,
20% of the target Financial Performance Incentive may be paid. If performance is
at target, 100% of target Financial Performance Incentive may be paid. If
performance is at or above maximum, 200% percent of target Financial Performance
Incentive may be paid. If performance results fall between two designated
thresholds, the Financial Performance Incentive will be determined by
interpolation as determined or approved by the Committee. In no event will the
Financial Performance Incentive exceed 200% of target Financial Performance
Incentive; and in no event will the Financial Performance Incentive exceed 200%
of Base Salary.
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APPLICATION OF GOALS AND THRESHOLDS
A single specific financial performance goal (or fixed combination of more
than one financial performance goal) and designated thresholds and payout
percentages for that goal or goals selected by the Committee for Company-wide
financial performance for any Bonus Year shall be uniformly applicable to all
Participants entitled to a Financial Performance Incentive for that Bonus Year.
The Committee shall establish the Company-wide financial performance goal or
goals, designated thresholds and payout percentages, within the first 90 days of
the each year. Prior to the payment of a Financial Performance Incentive and
within the first 90 days of the year following the Bonus Year, the Committee
shall certify the extent of achievement of the Company-wide financial
performance goal or goals for the Bonus Year.
DISCRETIONARY REDUCTION OF FINANCIAL PERFORMANCE INCENTIVE
The Committee in its sole and absolute discretion may reduce the Financial
Performance Incentive otherwise determined under this Financial Performance
Incentive for any Participant for any reason.
UNIT PERFORMANCE INCENTIVE
A Participant may receive an incentive bonus (a "Unit Performance
Incentive") based on his or her Unit Performance Incentive target and the
achievement by the Participant's business unit or subunit of the performance
goals determined as described below.
UNIT PERFORMANCE TARGET
The Committee may assign each Participant an individual Unit Performance
Incentive target for each Bonus Year. The target for the Unit Performance
Incentive is set at a percentage of the Participant's Base Salary based on the
Participant's position and job level. The sum of the target amounts for the
Financial Performance Incentive and the Unit Performance Incentive shall not
exceed 100% of Base Salary.
PERFORMANCE GOALS
The Committee selects business unit performance goals from among (1) the
financial performance goals specified above for the Financial Performance
Incentive but applied to the business unit or subunit in which the Participant
is employed, (2) functional non-financial operating goals specific to such
business unit or subunit, (3) operating safety management of the business unit
or subunit, or (4) such similar factors as the Committee deems appropriate. To
the extent the Committee in its discretion deems feasible, the criteria for
measuring attainment of business unit performance goals shall be objective and
relate to matters which can be influenced by the Participant in his or her area
of responsibilities, and chosen to contribute to meeting the Company's short-and
long-term financial goals. The performance goals for the Unit Performance
Incentive may be different for each Participant.
ADJUSTMENT OF UNIT PERFORMANCE INCENTIVE FOR PERFORMANCE
The Unit Performance Incentive will be adjusted for unit performance based
on the achievement of the applicable performance goals between 20% and 200% of
target in the same manner as the Financial Performance Incentive. The Unit
Performance Incentive shall also be adjusted for Company-wide financial
performance, such that the total of all Unit Performance Incentives does not
exceed such amount as the Committee in its discretion shall specify, on the
basis of the achievement of Company-wide financial performance. In no event will
the Unit Performance Incentive exceed 200% of target Unit Performance Incentive;
and in no event will the aggregate Financial Performance Incentive and Unit
Performance Incentive for any employee exceed 200% of Base Salary.
DISCRETIONARY REDUCTION OF UNIT PERFORMANCE INCENTIVE
The Committee in its sole and absolute discretion may reduce the Unit
Performance Incentive otherwise determined under this Incentive Program for any
Participant for any reason.
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DISCRETIONARY INCENTIVE
The Committee may determine that a Participant or any class or group of
Participants shall be entitled to a bonus (a "Discretionary Incentive") in an
amount determined by the Committee upon a determination by the Committee in its
sole discretion, which may take into account individual efforts and
contributions of the Participant not necessarily reflected in Company-wide
financial performance or business unit performance. The sum of the actual
Financial Performance Incentive, Unit Performance Incentive and Discretionary
Incentive for any Participant for a Bonus Year will not exceed 200% of Base
Salary for the Bonus Year.
MISCELLANEOUS PROVISIONS
Incentive Bonus under this Incentive Program will be payable in cash as
soon as practicable after the Committee has certified the achievement of the
Company-wide financial performance goal for the Bonus Year and the amount of the
incentive bonus is determined.
This Incentive Program shall be effective, beginning with the Company's
fiscal year 2000, upon its approval by the shareholders of Chicago Bridge & Iron
Company N.V.
The Committee may, without further action by the shareholders, amend this
Incentive Program from time to time, effective prospectively or retroactively,
in any manner the Committee deems desirable provided, however, that no such
amendment shall enlarge the class of employees who may be Participants in this
Incentive Program, add to the permitted performance measures for the Financial
Performance Incentive, or increase the maximum bonus payable under this
Incentive beyond 200% of any Participant's base salary, without the consent of
the shareholders of Chicago Bridge & Iron Company N.V.
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CHICAGO BRIDGE & IRON COMPANY N.V.
VOTING INSTRUCTION CARD
(MUST BE PRESENTED AT THE MEETING OR RECEIVED BY MAIL PRIOR TO THE CLOSE OF
BUSINESS ON MAY 5, 1999)
The undersigned registered holder of Shares of New York Registry (each
representing one Common Share of NLG 0.01 nominal amount of Chicago Bridge &
Iron Company N.V.), hereby appoints The Bank of New York, as New York Transfer
Agent and Registrar, through its agent, as the proxy of the undersigned to
attend and address the Annual General Meeting of Shareholders of Chicago Bridge
& Iron Company N.V. to be held in Amsterdam, The Netherlands, on May 12, 1999
and, in general, to exercise all rights the undersigned could exercise in
respect of such Common Shares if personally present thereat upon all matters
which may properly become before such Meeting and every adjournment thereof,
and instructs such proxy to endeavor, in so far as practicable, to vote or
cause to be voted on a poll (if a poll shall be taken) the Common Shares of
Chicago Bridge & Iron Company N.V. represented by Shares of New York Registry
registered in the name of the undersigned on the books of the New York Transfer
Agent and Registrar as of the close of business on April 1, 1999, at such
Meeting in respect of the resolutions specified on the reverse side hereof.
NOTE: PLEASE DIRECT YOUR PROXY HOW IT IS TO VOTE BY PLACING AN X IN THE
APPROPRIATE BOX OPPOSITE THE RESOLUTIONS SPECIFIED ON THE REVERSE SIDE
HEREOF.
CHICAGO BRIDGE & IRON COMPANY N.V.
P.O. BOX 11436
NEW YORK, N.Y. 10203-0436
(Continued and to be dated and signed on the reverse side)
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FOR AGAINST ABSTAIN
1. To re-elect the following members of the Board of Supervisory Directors to
serve until the Annual Meeting of Shareholders in 2002, and until their
successors have been duly elected and qualified:
J. Charles Jennett [ ] [ ] [ ]
Gary L. Neale [ ] [ ] [ ]
Marsha C. Williams [ ] [ ] [ ]
2. To adopt the Dutch Statutory Annual Accounts [ ] [ ] [ ]
of the Company for the fiscal year ended
December 31, 1998;
3. To approve the distribution of profits for the [ ] [ ] [ ]
fiscal year ended December 31, 1998 in the
amount of US$.24 per share of common stock
previously paid as interim dividends;
4. To cancel shares held by the Company in its own [ ] [ ] [ ]
share capital;
5. To approve the extension of the authority of the [ ] [ ] [ ]
Management Board to repurchase up to 30% of the
outstanding share capital of the Company until
November 12, 2000;
6. To cancel shares to be acquired by the Company [ ] [ ] [ ]
in its own share capital;
7. To amend the Articles of Association to decrease [ ] [ ] [ ]
the authorized capital of the Company;
8. To approve the extension of the authority of the [ ] [ ] [ ]
Supervisory Board to Issue and/or grant rights on
(including options to purchase) common stock of
the Company until May 12, 2004;
9. To approve the extension of the authority of the [ ] [ ] [ ]
Supervisory Board to limit or exclude the
pre-emptive rights of the holders of the common
stock of the Company until May 12, 2004;
10. To adopt the Chicago Bridge & Iron 1999 Long- [ ] [ ] [ ]
Term Incentive Plan;
11. To adopt the Incentive Compensation Program; and [ ] [ ] [ ]
12. To approve the appointment of Arthur Andersen as [ ] [ ] [ ]
the Company's Independent public accountants for
the fiscal year ending December 31, 1999.
Change of Address and
or Comments Mark Here [ ]
This Form must be signed by the person in
whose name the relevant Common Share is
registered on the books of the New York
Transfer Agent and Registrar. In the case of
a Corporation the Form should be executed by
a duly authorized Officer or Attorney.
Dated: , 1999
--------------------------------
---------------------------------------------
Signature of Registered Holder
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<S> <C>
Please date, sign and return promptly in the accompanying envelope. Votes must be indicated (X) in Black or Blue Ink. [X]
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