1
EXHIBIT 10.9
March 4, 1999
Xx. Xxxxxx X. Xxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
CHANGE OF CONTROL SEVERANCE AGREEMENT
Dear Xx. Xxxxx:
Chicago Bridge & Iron Company, a Delaware corporation, (the "Company")
is a wholly-owned subsidiary of Chicago Bridge & Iron Company N.V., a
Netherlands corporation (the "Holding Corporation"). The Company recognizes that
members of senior management may become concerned about the effect of a Change
of Control (as defined below) on their job and financial security. The Company
considers the maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and the Holding
Corporation. Accordingly, the Board of Directors of the Company has determined
that the Company should enter into this agreement (your "Agreement") to provide
you with severance benefits in the event your employment with the Company
(including any subsidiary of the Company by which you are then employed)
terminates following a Change of Control under certain circumstances.
The purpose of entering into this Agreement is to induce you to remain
in the employ of the Company pending and after any Change of Control. Therefore,
in consideration of your continued employment with the Company under these
circumstances, the Company and you agree as follows:
1. Termination Benefits.
(a) Basic Benefits. In the event your employment with the
Company and any subsidiary of the Company terminates by reason of a Qualifying
Termination within two years after a Change of Control, you shall receive,
within thirty days after your employment terminates, a lump sum amount equal to
Seven Hundred Fifty Thousand Dollars ($750,000.00). In addition, if your
employment with the Company and any subsidiary by which you are employed is
terminated by the Company or any such subsidiary for any reason (other than your
willful misconduct or gross negligence in the performance of your duties as an
employee which results in a material detriment to either the Company or the
Holding Corporation) within six months prior to the occurrence of a Change of
Control, you shall be paid the lump sum referred to in the immediately preceding
sentence, minus the gross amount of any severance benefits otherwise paid to
you, within ten days following such Change of Control.
2
Page 2
Xxxxx 0, 0000
(x) Outplacement. In the event of a Qualifying Termination (or
a termination of your employment prior to a Change of Control with respect to
which you are entitled to receive a payment under Section 1(a) of this
Agreement), the Company agrees that, upon a written request from you, it will
engage on your behalf an outplacement or similar firm of your choice to provide
you with customary services and support in seeking other appropriate employment.
(c) Certain Further Payments.
(i) Additional Payments in Respect of Excise Taxes. In the
event that any amount or benefit paid or distributed to you pursuant to this
Agreement, taken together with any amounts or benefits otherwise paid or
distributed to you (the "Covered Payments"), are or become subject to the tax
(the "Excise Tax") imposed under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any similar tax that may hereafter be imposed,
the Company shall pay you, at the same time as it pays the severance benefit
described above, an additional amount (the "Tax Reimbursement Payment") such
that the net amount retained by you with respect to such Covered Payments, after
deduction of any Excise Tax on the Covered Payments and any Federal, state and
local income or employment tax and Excise Tax on the Tax Reimbursement Payment
provided for by this Section 1(b), but before deduction for any Federal, state
or local income or employment tax withholding on such Covered Payments, shall be
equal to the amount of the Covered Payments.
(ii) Calculation of the Excise Tax. For purposes of
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax,
(A) all "parachute payments" in excess of the "base
amount" (as defined under Section 280G(b)(3)) of the Code)
shall be treated as subject to the Excise Tax, unless, and
except to the extent that, in the good faith judgment of the
Company's independent certified public accountants appointed
prior to the Change of Control or tax counsel selected by such
Accountants (the "Accountants"), the Company has a reasonable
basis to conclude that such Covered Payments (in whole or in
part) represent reasonable compensation for personal services
actually rendered (within the meaning of Section 280G(b)(4)(B)
of the Code) in excess of the "base amount," or such
"parachute payments" are otherwise not subject to such Excise
Tax, and
3
Page 3
Xxxxx 0, 0000
(X) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G
of the Code.
(iii) Calculation of the Tax Reimbursement Payment. For
purposes of determining the amount of the Tax Reimbursement Payment, you shall
be deemed to pay:
(A) Federal income taxes at the highest applicable
marginal rate of Federal income taxation for the calendar year
in which the Tax Reimbursement Payment is to be made, and
(B) any applicable state and local income taxes at
the highest applicable marginal rate of taxation for the
calendar year in which the Tax Reimbursement Payment is to be
made, net of the maximum reduction in Federal income taxes
which could be obtained from the deduction of such state or
local taxes if paid in such year.
(d) Adjustments to Tax Reimbursement Payment. In the event
that the Excise Tax is subsequently determined by the Accountants or pursuant to
any proceeding or negotiations with the Internal Revenue Service to be less than
the amount taken into account hereunder in calculating the Tax Reimbursement
Payment made, you shall repay to the Company, at the time that the amount of
such reduction in the Excise Tax is finally determined, the portion of such
prior Tax Reimbursement Payment that would not have been paid if such Excise Tax
had been applied in initially calculating such Tax Reimbursement Payment, plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any
portion of the Tax Reimbursement Payment to be refunded to the Company has been
paid to any Federal, state or local tax authority, repayment thereof shall not
be required until actual refund or credit of such portion has been made to you.
You and the Company shall mutually agree upon the course of action to be pursued
if your good faith claim for refund or credit is denied, provided that the
Company shall bear the cost of any expenses incurred which are related to
pursuing any recovery of any amount paid in respect of the Excise Tax.
In the event that the Excise Tax is later determined by the
Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to exceed the amount taken into account hereunder at the time
the Tax Reimbursement Payment is made (including, but not limited to, by reason
of any payment the existence or amount of which cannot be determined at the time
of the Tax Reimbursement Payment), the Company shall make an additional Tax
Reimbursement Payment in respect of such excess (plus any interest or penalty
payable with respect to such excess) at the time that the amount of such excess
is finally determined.
4
Page 4
March 4, 1999
2. Definitions.
(a) Change of Control When the Company or the Holding
Corporation is Public. A "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such
terms are used in Section 13 of the Securities and Exchange
Act of 1934, as amended (the "Exchange Act"), other than
Holding Corporation, the Company or any majority owned
subsidiary of the Holding Corporation or the Company, becomes
the "beneficial owner" (as such term is used in Section 13 of
the Exchange Act) of 25% or more of the total voting power of
the Company's or the Holding Corporation's outstanding
securities;
(ii) upon the consummation of (A) any merger or other
business combination of the Company or the Holding Corporation
with or into another company pursuant to which the
stockholders of the Company or the Holding Corporation, as the
case may be, do not own, immediately after the transaction,
more than 50% of the voting power and the value of the stock
of the company that survives, or (B) the sale, exchange or
other disposition of all or substantially all of the assets of
the Company or the Holding Corporation; or
(iii) if, during any period of two years or less,
individuals who at the beginning of such period constituted
the Board of Directors of the Company or the Holding
Corporation, as the case may be, cease for any reason to
constitute at least a majority thereof; provided that any new
director who is elected to, or nominated for election to, the
Board of Directors with the approval of at least 75% of the
directors then still in office who were directors at the
beginning of the period shall be treated as though having been
a director at the beginning of such period.
(b) "Qualifying Termination" means the termination of your
employment with the Company and any of its subsidiaries by which you are
employed (i) by the Company or any such subsidiary for any reason other than
your willful misconduct or gross negligence in the performance of your duties as
an employee which results in a material detriment to the Company or the Holding
Corporation or (ii) by you within 180 days following the occurrence of any of
the following events (without your prior written consent):
5
Page 5
March 4, 1999
(A) any significant reduction in your
positions, duties, titles, responsibilities and status with
the Company and its subsidiaries from those in effect
immediately prior to such Change of Control;
(B) a reduction in your base salary, a
reduction in your annual bonus opportunity or a material
reduction in the aggregate value of your participation in the
Company's employee benefits programs, as each was in effect
immediately prior to such Change of Control;
(C) your principal place of employment is
moved to a location more than 50 miles from your principal
place of employment immediately prior to such Change of
Control or you are required in the performance of your duties
to travel to an extent substantially more burdensome than your
travel obligations immediately prior to such Change of
Control; or
(D) the letter of credit or escrow referred
to in Section 3.1(b) fail for any reason to be in force in
accordance with Section 3.1(b).
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
3. Miscellaneous.
(a) Arbitration: Related Expenses. Any dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration held in accordance with the rules of the American Arbitration
Association pertaining to the resolution of employment disputes. Any such
arbitration shall be held in Chicago, Illinois or such other location which the
parties have mutually agreed to in writing. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The Company shall pay on a
current basis all legal expenses (including attorneys' fees) incurred by you in
connection with such arbitration, subject to your obligation to repay such
amounts, plus interest at the short-term annual Applicable Federal Rate (as
determined under Section 1274(b) of the Code as in effect on the date your
employment terminates), if you should not prevail as to at least one material
issue adjudicated in such proceeding.
6
Page 6
Xxxxx 0, 0000
(x) Letter of Credit: Escrow. To secure its obligations under
Section 3.1(a), the Company shall procure and maintain in force until at least
one year after your termination of employment a letter of credit and an escrow
in favor of you (together with other senior management executives similarly
situated). The letter of credit shall be issued by a bank or trust company
organized under the laws of the United States or Canada or a state or province
thereof and having a combined capital and surplus of not less than one hundred
million dollars ($100,000,000), shall be in the aggregate amount of two million
dollars ($2,000,000), and shall be substantially in the form of that attached
(with its attached Annexes and Exhibits) to this Agreement as Exhibit A. The
Company shall notify you not less than 15 days before the scheduled expiry date
of the letter of credit whether or not the letter of credit has been renewed or
the Company has obtained a substitute letter of credit whose provisions (other
than the expiration terms thereof) are identical to those of the letter of
credit in all material respects and which expires not less than one (1) year
from the date of issuance. The escrow shall be maintained in the State of
Illinois under an escrow agreement with a bank or trust company organized under
the laws of the United States or Canada or a state or province thereof and
having a combined capital and surplus of not less than one hundred million
dollars ($100,000,000), and shall be substantially in the form of that attached
(with its attached Exhibits) to this Agreement as Exhibit B.
(c) No Offset: No Mitigation. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against you or others whether by reason of your
subsequent employment or otherwise. You shall not be obligated to mitigate any
damages you incur by reason of any Qualifying Termination and the amounts
payable hereunder shall not be reduced by any amounts received by you as a
result of your employment or self-employment following your termination
hereunder.
(d) Entire Obligation of Company. In the event your employment
with the Company and any subsidiary of the Company by which you are employed
terminates following a Change of Control, the amounts payable to you hereunder
and any vested amounts or benefits owing to you under the Company's otherwise
applicable employee benefit plans and programs and any accrued vacation pay not
yet paid, shall constitute the entire obligation of the Company and its
affiliates to you. Payment or other satisfaction thereof shall be contingent
upon your execution of a release in favor of the Company substantially in the
form of that attached hereto as Exhibit C, stating that the payments and other
benefits referred to in the immediately preceding sentence constitute full
settlement of any claim under law or in equity that you might otherwise assert
against the Company or any of its subsidiaries on account of such termination.
7
Page 7
March 4, 1999
(e) Employment at Will. This Agreement shall neither obligate
the Company or any subsidiary of the Company to continue you in its employ (or
to employ you in any particular office or to perform any specified
responsibility) nor obligate you to continue in the employ of the Company or any
subsidiary of the Company.
(f) Successors. This Agreement shall be binding upon and inure
to the benefit of you, your estate and the Company and any successor of the
Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by you.
(g) Governing Law. This Agreement shall be governed by the
laws of the State of Illinois, applied without reference to principles of
conflict of laws.
(h) Severability. If any provision of this contract as applied
to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
of this Agreement.
(i) Waiver. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in a writing signed by you and such officer as may be specifically designated by
the Board of Directors of the Company or a duly authorized Committee thereof. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of any other condition or provision at any
time.
(j) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. This Agreement specifically supersedes the Change of
Control Severance Agreement between you and the Company dated January 31, 1997.
The express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof. This Agreement may
not be modified or amended other than by an agreement in writing.
8
Page 8
March 4, 1999
If you are in agreement with the foregoing, please so indicate by
signing and returning to the Company the enclosed copy of this letter, whereupon
this letter shall constitute a binding agreement between you and the Company.
Very truly yours,
CHICAGO BRIDGE & IRON COMPANY
By:
---------------------------------
Agreed:
---------------------------------
Employee
9
March 4, 1999
Xx. Xxxxxxx X. Xxxxxxx
0000 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
CHANGE OF CONTROL SEVERANCE AGREEMENT
Dear Xx. Xxxxxxx:
Chicago Bridge & Iron Company, a Delaware corporation, (the "Company")
is a wholly-owned subsidiary of Chicago Bridge & Iron Company N.V., a
Netherlands corporation (the "Holding Corporation"). The Company recognizes that
members of senior management may become concerned about the effect of a Change
of Control (as defined below) on their job and financial security. The Company
considers the maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and the Holding
Corporation. Accordingly, the Board of Directors of the Company has determined
that the Company should enter into this agreement (your "Agreement") to provide
you with severance benefits in the event your employment with the Company
(including any subsidiary of the Company by which you are then employed)
terminates following a Change of Control under certain circumstances.
The purpose of entering into this Agreement is to induce you to remain
in the employ of the Company pending and after any Change of Control. Therefore,
in consideration of your continued employment with the Company under these
circumstances, the Company and you agree as follows:
1. Termination Benefits.
(a) Basic Benefits. In the event your employment with the
Company and any subsidiary of the Company terminates by reason of a Qualifying
Termination within two years after a Change of Control, you shall receive,
within thirty days after your employment terminates, a lump sum amount equal to
One Million Dollars ($1,000,000.00). In addition, if your employment with the
Company and any subsidiary by which you are employed is terminated by the
Company or any such subsidiary for any reason (other than your willful
misconduct or gross negligence in the performance of your duties as an employee
which results in a material detriment to either the Company or the Holding
Corporation) within six months prior to the occurrence of a Change of Control,
you shall be paid the lump sum referred to in the immediately preceding
sentence, minus the gross amount of any severance benefits otherwise paid to
you, within ten days following such Change of Control.
10
Page 2
Xxxxx 0, 0000
(x) Outplacement. In the event of a Qualifying Termination (or
a termination of your employment prior to a Change of Control with respect to
which you are entitled to receive a payment under Section 1(a) of this
Agreement), the Company agrees that, upon a written request from you, it will
engage on your behalf an outplacement or similar firm of your choice to provide
you with customary services and support in seeking other appropriate employment.
(c) Certain Further Payments.
(i) Additional Payments in Respect of Excise Taxes.
In the event that any amount or benefit paid or distributed to you pursuant to
this Agreement, taken together with any amounts or benefits otherwise paid or
distributed to you (the "Covered Payments"), are or become subject to the tax
(the "Excise Tax") imposed under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any similar tax that may hereafter be imposed,
the Company shall pay you, at the same time as it pays the severance benefit
described above, an additional amount (the "Tax Reimbursement Payment") such
that the net amount retained by you with respect to such Covered Payments, after
deduction of any Excise Tax on the Covered Payments and any Federal, state and
local income or employment tax and Excise Tax on the Tax Reimbursement Payment
provided for by this Section 1(b), but before deduction for any Federal, state
or local income or employment tax withholding on such Covered Payments, shall be
equal to the amount of the Covered Payments.
(ii) Calculation of the Excise Tax. For purposes of
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax,
(A) all "parachute payments" in excess of
the "base amount" (as defined under Section 280G(b)(3)) of the
Code) shall be treated as subject to the Excise Tax, unless,
and except to the extent that, in the good faith judgment of
the Company's independent certified public accountants
appointed prior to the Change of Control or tax counsel
selected by such Accountants (the "Accountants"), the Company
has a reasonable basis to conclude that such Covered Payments
(in whole or in part) represent reasonable compensation for
personal services actually rendered (within the meaning of
Section 280G(b)(4)(B) of the Code) in excess of the "base
amount," or such "parachute payments" are otherwise not
subject to such Excise Tax, and
11
Page 3
Xxxxx 0, 0000
(X) the value of any non-cash benefits or
any deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G
of the Code.
(iii) Calculation of the Tax Reimbursement Payment.
For purposes of determining the amount of the Tax Reimbursement Payment, you
shall be deemed to pay:
(A) Federal income taxes at the highest
applicable marginal rate of Federal income taxation for the
calendar year in which the Tax Reimbursement Payment is to be
made, and
(B) any applicable state and local income
taxes at the highest applicable marginal rate of taxation for
the calendar year in which the Tax Reimbursement Payment is to
be made, net of the maximum reduction in Federal income taxes
which could be obtained from the deduction of such state or
local taxes if paid in such year.
(d) Adjustments to Tax Reimbursement Payment. In the event
that the Excise Tax is subsequently determined by the Accountants or pursuant to
any proceeding or negotiations with the Internal Revenue Service to be less than
the amount taken into account hereunder in calculating the Tax Reimbursement
Payment made, you shall repay to the Company, at the time that the amount of
such reduction in the Excise Tax is finally determined, the portion of such
prior Tax Reimbursement Payment that would not have been paid if such Excise Tax
had been applied in initially calculating such Tax Reimbursement Payment, plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any
portion of the Tax Reimbursement Payment to be refunded to the Company has been
paid to any Federal, state or local tax authority, repayment thereof shall not
be required until actual refund or credit of such portion has been made to you.
You and the Company shall mutually agree upon the course of action to be pursued
if your good faith claim for refund or credit is denied, provided that the
Company shall bear the cost of any expenses incurred which are related to
pursuing any recovery of any amount paid in respect of the Excise Tax.
In the event that the Excise Tax is later determined by the
Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to exceed the amount taken into account hereunder at the time
the Tax Reimbursement Payment is made (including, but not limited to, by reason
of any payment the existence or amount of which cannot be determined at the time
of the Tax Reimbursement Payment), the Company shall make an additional Tax
Reimbursement Payment in respect of such excess (plus any interest or penalty
payable with respect to such excess) at the time that the amount of such excess
is finally determined.
12
Page 4
March 4, 1999
2. Definitions.
(a) Change of Control When the Company or the Holding
Corporation is Public. A "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such
terms are used in Section 13 of the Securities and Exchange
Act of 1934, as amended (the "Exchange Act"), other than
Holding Corporation, the Company or any majority owned
subsidiary of the Holding Corporation or the Company, becomes
the "beneficial owner" (as such term is used in Section 13 of
the Exchange Act) of 25% or more of the total voting power of
the Company's or the Holding Corporation's outstanding
securities;
(ii) upon the consummation of (A) any merger or other
business combination of the Company or the Holding Corporation
with or into another company pursuant to which the
stockholders of the Company or the Holding Corporation, as the
case may be, do not own, immediately after the transaction,
more than 50% of the voting power and the value of the stock
of the company that survives, or (B) the sale, exchange or
other disposition of all or substantially all of the assets of
the Company or the Holding Corporation; or
(iii) if, during any period of two years or less,
individuals who at the beginning of such period constituted
the Board of Directors of the Company or the Holding
Corporation, as the case may be, cease for any reason to
constitute at least a majority thereof; provided that any new
director who is elected to, or nominated for election to, the
Board of Directors with the approval of at least 75% of the
directors then still in office who were directors at the
beginning of the period shall be treated as though having been
a director at the beginning of such period.
(b) "Qualifying Termination" means the termination of your
employment with the Company and any of its subsidiaries by which you are
employed (i) by the Company or any such subsidiary for any reason other than
your willful misconduct or gross negligence in the performance of your duties as
an employee which results in a material detriment to the Company or the Holding
Corporation or (ii) by you within 180 days following the occurrence of any of
the following events (without your prior written consent):
13
Page 5
March 4, 1999
(A) any significant reduction in your
positions, duties, titles, responsibilities and status with
the Company and its subsidiaries from those in effect
immediately prior to such Change of Control;
(B) a reduction in your base salary, a
reduction in your annual bonus opportunity or a material
reduction in the aggregate value of your participation in the
Company's employee benefits programs, as each was in effect
immediately prior to such Change of Control;
(C) your principal place of employment is
moved to a location more than 50 miles from your principal
place of employment immediately prior to such Change of
Control or you are required in the performance of your duties
to travel to an extent substantially more burdensome than your
travel obligations immediately prior to such Change of
Control; or
(D) the letter of credit or escrow referred
to in Section 3.1(b) fail for any reason to be in force in
accordance with Section 3.1(b).
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
3. Miscellaneous.
(a) Arbitration: Related Expenses. Any dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration held in accordance with the rules of the American Arbitration
Association pertaining to the resolution of employment disputes. Any such
arbitration shall be held in Chicago, Illinois or such other location which the
parties have mutually agreed to in writing. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The Company shall pay on a
current basis all legal expenses (including attorneys' fees) incurred by you in
connection with such arbitration, subject to your obligation to repay such
amounts, plus interest at the short-term annual Applicable Federal Rate (as
determined under Section 1274(b) of the Code as in effect on the date your
employment terminates), if you should not prevail as to at least one material
issue adjudicated in such proceeding.
14
Page 6
Xxxxx 0, 0000
(x) Letter of Credit: Escrow. To secure its obligations under
Section 3.1(a), the Company shall procure and maintain in force until at least
one year after your termination of employment a letter of credit and an escrow
in favor of you (together with other senior management executives similarly
situated). The letter of credit shall be issued by a bank or trust company
organized under the laws of the United States or Canada or a state or province
thereof and having a combined capital and surplus of not less than one hundred
million dollars ($100,000,000), shall be in the aggregate amount of two million
dollars ($2,000,000), and shall be substantially in the form of that attached
(with its attached Annexes and Exhibits) to this Agreement as Exhibit A. The
Company shall notify you not less than 15 days before the scheduled expiry date
of the letter of credit whether or not the letter of credit has been renewed or
the Company has obtained a substitute letter of credit whose provisions (other
than the expiration terms thereof) are identical to those of the letter of
credit in all material respects and which expires not less than one (1) year
from the date of issuance. The escrow shall be maintained in the State of
Illinois under an escrow agreement with a bank or trust company organized under
the laws of the United States or Canada or a state or province thereof and
having a combined capital and surplus of not less than one hundred million
dollars ($100,000,000), and shall be substantially in the form of that attached
(with its attached Exhibits) to this Agreement as Exhibit B.
(c) No Offset: No Mitigation. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against you or others whether by reason of your
subsequent employment or otherwise. You shall not be obligated to mitigate any
damages you incur by reason of any Qualifying Termination and the amounts
payable hereunder shall not be reduced by any amounts received by you as a
result of your employment or self-employment following your termination
hereunder.
(d) Entire Obligation of Company. In the event your employment
with the Company and any subsidiary of the Company by which you are employed
terminates following a Change of Control, the amounts payable to you hereunder
and any vested amounts or benefits owing to you under the Company's otherwise
applicable employee benefit plans and programs and any accrued vacation pay not
yet paid, shall constitute the entire obligation of the Company and its
affiliates to you. Payment or other satisfaction thereof shall be contingent
upon your execution of a release in favor of the Company substantially in the
form of that attached hereto as Exhibit C, stating that the payments and other
benefits referred to in the immediately preceding sentence constitute full
settlement of any claim under law or in equity that you might otherwise assert
against the Company or any of its subsidiaries on account of such termination.
15
Page 7
March 4, 1999
(e) Employment at Will. This Agreement shall neither obligate
the Company or any subsidiary of the Company to continue you in its employ (or
to employ you in any particular office or to perform any specified
responsibility) nor obligate you to continue in the employ of the Company or any
subsidiary of the Company.
(f) Successors. This Agreement shall be binding upon and inure
to the benefit of you, your estate and the Company and any successor of the
Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by you.
(g) Governing Law. This Agreement shall be governed by the
laws of the State of Illinois, applied without reference to principles of
conflict of laws.
(h) Severability. If any provision of this contract as applied
to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
of this Agreement.
(i) Waiver. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in a writing signed by you and such officer as may be specifically designated by
the Board of Directors of the Company or a duly authorized Committee thereof. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of any other condition or provision at any
time.
(j) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. This Agreement specifically supersedes the Change of
Control Severance Agreement between you and the Company dated January 31, 1997.
The express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof. This Agreement may
not be modified or amended other than by an agreement in writing.
16
Page 8
March 4, 1999
If you are in agreement with the foregoing, please so indicate by
signing and returning to the Company the enclosed copy of this letter, whereupon
this letter shall constitute a binding agreement between you and the Company.
Very truly yours,
CHICAGO BRIDGE & IRON COMPANY
By:
-------------------------------
Agreed:
--------------------------------
Employee
17
March 4, 1999
Xx. Xxxxxx X. Xxxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
CHANGE OF CONTROL SEVERANCE AGREEMENT
Dear Xx. Xxxxxx:
Chicago Bridge & Iron Company, a Delaware corporation, (the "Company")
is a wholly-owned subsidiary of Chicago Bridge & Iron Company N.V., a
Netherlands corporation (the "Holding Corporation"). The Company recognizes that
members of senior management may become concerned about the effect of a Change
of Control (as defined below) on their job and financial security. The Company
considers the maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and the Holding
Corporation. Accordingly, the Board of Directors of the Company has determined
that the Company should enter into this agreement (your "Agreement") to provide
you with severance benefits in the event your employment with the Company
(including any subsidiary of the Company by which you are then employed)
terminates following a Change of Control under certain circumstances.
The purpose of entering into this Agreement is to induce you to remain
in the employ of the Company pending and after any Change of Control. Therefore,
in consideration of your continued employment with the Company under these
circumstances, the Company and you agree as follows:
1. Termination Benefits.
(a) Basic Benefits. In the event your employment with the
Company and any subsidiary of the Company terminates by reason of a Qualifying
Termination within two years after a Change of Control, you shall receive,
within thirty days after your employment terminates, a lump sum amount equal to
One Million Dollars ($1,000,000.00). In addition, if your employment with the
Company and any subsidiary by which you are employed is terminated by the
Company or any such subsidiary for any reason (other than your willful
misconduct or gross negligence in the performance of your duties as an employee
which results in a material detriment to either the Company or the Holding
Corporation) within six months prior to the occurrence of a Change of Control,
you shall be paid the lump sum referred to in the immediately preceding
sentence, minus the gross amount of any severance benefits otherwise paid to
you, within ten days following such Change of Control.
18
Page 2
Xxxxx 0, 0000
(x) Outplacement. In the event of a Qualifying Termination (or
a termination of your employment prior to a Change of Control with respect to
which you are entitled to receive a payment under Section 1(a) of this
Agreement), the Company agrees that, upon a written request from you, it will
engage on your behalf an outplacement or similar firm of your choice to provide
you with customary services and support in seeking other appropriate employment.
(c) Certain Further Payments.
(i) Additional Payments in Respect of Excise Taxes.
In the event that any amount or benefit paid or distributed to you pursuant to
this Agreement, taken together with any amounts or benefits otherwise paid or
distributed to you (the "Covered Payments"), are or become subject to the tax
(the "Excise Tax") imposed under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any similar tax that may hereafter be imposed,
the Company shall pay you, at the same time as it pays the severance benefit
described above, an additional amount (the "Tax Reimbursement Payment") such
that the net amount retained by you with respect to such Covered Payments, after
deduction of any Excise Tax on the Covered Payments and any Federal, state and
local income or employment tax and Excise Tax on the Tax Reimbursement Payment
provided for by this Section 1(b), but before deduction for any Federal, state
or local income or employment tax withholding on such Covered Payments, shall be
equal to the amount of the Covered Payments.
(ii) Calculation of the Excise Tax. For purposes of
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax,
(A) all "parachute payments" in excess of
the "base amount" (as defined under Section 280G(b)(3)) of the
Code) shall be treated as subject to the Excise Tax, unless,
and except to the extent that, in the good faith judgment of
the Company's independent certified public accountants
appointed prior to the Change of Control or tax counsel
selected by such Accountants (the "Accountants"), the Company
has a reasonable basis to conclude that such Covered Payments
(in whole or in part) represent reasonable compensation for
personal services actually rendered (within the meaning of
Section 280G(b)(4)(B) of the Code) in excess of the "base
amount," or such "parachute payments" are otherwise not
subject to such Excise Tax, and
19
Page 3
Xxxxx 0, 0000
(X) the value of any non-cash benefits or
any deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G
of the Code.
(iii) Calculation of the Tax Reimbursement Payment.
For purposes of determining the amount of the Tax Reimbursement Payment, you
shall be deemed to pay:
(A) Federal income taxes at the highest
applicable marginal rate of Federal income taxation for the
calendar year in which the Tax Reimbursement Payment is to be
made, and
(B) any applicable state and local income
taxes at the highest applicable marginal rate of taxation for
the calendar year in which the Tax Reimbursement Payment is to
be made, net of the maximum reduction in Federal income taxes
which could be obtained from the deduction of such state or
local taxes if paid in such year.
(d) Adjustments to Tax Reimbursement Payment. In the event
that the Excise Tax is subsequently determined by the Accountants or pursuant to
any proceeding or negotiations with the Internal Revenue Service to be less than
the amount taken into account hereunder in calculating the Tax Reimbursement
Payment made, you shall repay to the Company, at the time that the amount of
such reduction in the Excise Tax is finally determined, the portion of such
prior Tax Reimbursement Payment that would not have been paid if such Excise Tax
had been applied in initially calculating such Tax Reimbursement Payment, plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any
portion of the Tax Reimbursement Payment to be refunded to the Company has been
paid to any Federal, state or local tax authority, repayment thereof shall not
be required until actual refund or credit of such portion has been made to you.
You and the Company shall mutually agree upon the course of action to be pursued
if your good faith claim for refund or credit is denied, provided that the
Company shall bear the cost of any expenses incurred which are related to
pursuing any recovery of any amount paid in respect of the Excise Tax.
In the event that the Excise Tax is later determined by the
Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to exceed the amount taken into account hereunder at the time
the Tax Reimbursement Payment is made (including, but not limited to, by reason
of any payment the existence or amount of which cannot be determined at the time
of the Tax Reimbursement Payment), the Company shall make an additional Tax
Reimbursement Payment in respect of such excess (plus any interest or penalty
payable with respect to such excess) at the time that the amount of such excess
is finally determined.
20
Page 4
March 4, 1999
2. Definitions.
(a) Change of Control When the Company or the Holding
Corporation is Public. A "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such
terms are used in Section 13 of the Securities and Exchange
Act of 1934, as amended (the "Exchange Act"), other than
Holding Corporation, the Company or any majority owned
subsidiary of the Holding Corporation or the Company, becomes
the "beneficial owner" (as such term is used in Section 13 of
the Exchange Act) of 25% or more of the total voting power of
the Company's or the Holding Corporation's outstanding
securities;
(ii) upon the consummation of (A) any merger or other
business combination of the Company or the Holding Corporation
with or into another company pursuant to which the
stockholders of the Company or the Holding Corporation, as the
case may be, do not own, immediately after the transaction,
more than 50% of the voting power and the value of the stock
of the company that survives, or (B) the sale, exchange or
other disposition of all or substantially all of the assets of
the Company or the Holding Corporation; or
(iii) if, during any period of two years or less,
individuals who at the beginning of such period constituted
the Board of Directors of the Company or the Holding
Corporation, as the case may be, cease for any reason to
constitute at least a majority thereof; provided that any new
director who is elected to, or nominated for election to, the
Board of Directors with the approval of at least 75% of the
directors then still in office who were directors at the
beginning of the period shall be treated as though having been
a director at the beginning of such period.
(b) "Qualifying Termination" means the termination of your
employment with the Company and any of its subsidiaries by which you are
employed (i) by the Company or any such subsidiary for any reason other than
your willful misconduct or gross negligence in the performance of your duties as
an employee which results in a material detriment to the Company or the Holding
Corporation or (ii) by you within 180 days following the occurrence of any of
the following events (without your prior written consent):
21
Page 5
March 4, 1999
(A) any significant reduction in your
positions, duties, titles, responsibilities and status with
the Company and its subsidiaries from those in effect
immediately prior to such Change of Control;
(B) a reduction in your base salary, a
reduction in your annual bonus opportunity or a material
reduction in the aggregate value of your participation in the
Company's employee benefits programs, as each was in effect
immediately prior to such Change of Control;
(C) your principal place of employment is
moved to a location more than 50 miles from your principal
place of employment immediately prior to such Change of
Control or you are required in the performance of your duties
to travel to an extent substantially more burdensome than your
travel obligations immediately prior to such Change of
Control; or
(D) the letter of credit or escrow referred
to in Section 3.1(b) fail for any reason to be in force in
accordance with Section 3.1(b).
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
3. Miscellaneous.
(a) Arbitration: Related Expenses. Any dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration held in accordance with the rules of the American Arbitration
Association pertaining to the resolution of employment disputes. Any such
arbitration shall be held in Chicago, Illinois or such other location which the
parties have mutually agreed to in writing. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The Company shall pay on a
current basis all legal expenses (including attorneys' fees) incurred by you in
connection with such arbitration, subject to your obligation to repay such
amounts, plus interest at the short-term annual Applicable Federal Rate (as
determined under Section 1274(b) of the Code as in effect on the date your
employment terminates), if you should not prevail as to at least one material
issue adjudicated in such proceeding.
22
Page 6
Xxxxx 0, 0000
(x) Letter of Credit: Escrow. To secure its obligations under
Section 3.1(a), the Company shall procure and maintain in force until at least
one year after your termination of employment a letter of credit and an escrow
in favor of you (together with other senior management executives similarly
situated). The letter of credit shall be issued by a bank or trust company
organized under the laws of the United States or Canada or a state or province
thereof and having a combined capital and surplus of not less than one hundred
million dollars ($100,000,000), shall be in the aggregate amount of two million
dollars ($2,000,000), and shall be substantially in the form of that attached
(with its attached Annexes and Exhibits) to this Agreement as Exhibit A. The
Company shall notify you not less than 15 days before the scheduled expiry date
of the letter of credit whether or not the letter of credit has been renewed or
the Company has obtained a substitute letter of credit whose provisions (other
than the expiration terms thereof) are identical to those of the letter of
credit in all material respects and which expires not less than one (1) year
from the date of issuance. The escrow shall be maintained in the State of
Illinois under an escrow agreement with a bank or trust company organized under
the laws of the United States or Canada or a state or province thereof and
having a combined capital and surplus of not less than one hundred million
dollars ($100,000,000), and shall be substantially in the form of that attached
(with its attached Exhibits) to this Agreement as Exhibit B.
(c) No Offset: No Mitigation. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against you or others whether by reason of your
subsequent employment or otherwise. You shall not be obligated to mitigate any
damages you incur by reason of any Qualifying Termination and the amounts
payable hereunder shall not be reduced by any amounts received by you as a
result of your employment or self-employment following your termination
hereunder.
(d) Entire Obligation of Company. In the event your employment
with the Company and any subsidiary of the Company by which you are employed
terminates following a Change of Control, the amounts payable to you hereunder
and any vested amounts or benefits owing to you under the Company's otherwise
applicable employee benefit plans and programs and any accrued vacation pay not
yet paid, shall constitute the entire obligation of the Company and its
affiliates to you. Payment or other satisfaction thereof shall be contingent
upon your execution of a release in favor of the Company substantially in the
form of that attached hereto as Exhibit C, stating that the payments and other
benefits referred to in the immediately preceding sentence constitute full
settlement of any claim under law or in equity that you might otherwise assert
against the Company or any of its subsidiaries on account of such termination.
23
Page 7
March 4, 1999
(e) Employment at Will. This Agreement shall neither obligate
the Company or any subsidiary of the Company to continue you in its employ (or
to employ you in any particular office or to perform any specified
responsibility) nor obligate you to continue in the employ of the Company or any
subsidiary of the Company.
(f) Successors. This Agreement shall be binding upon and inure
to the benefit of you, your estate and the Company and any successor of the
Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by you.
(g) Governing Law. This Agreement shall be governed by the
laws of the State of Illinois, applied without reference to principles of
conflict of laws.
(h) Severability. If any provision of this contract as applied
to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
of this Agreement.
(i) Waiver. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in a writing signed by you and such officer as may be specifically designated by
the Board of Directors of the Company or a duly authorized Committee thereof. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of any other condition or provision at any
time.
(j) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
24
Page 8
March 4, 1999
If you are in agreement with the foregoing, please so indicate by
signing and returning to the Company the enclosed copy of this letter, whereupon
this letter shall constitute a binding agreement between you and the Company.
Very truly yours,
CHICAGO BRIDGE & IRON COMPANY
By:
-------------------------------
Agreed:
----------------------------
Employee
25
March 4, 1999
Xx. Xxxxxxx X. Xxxxx
00000 Xxxxxx Xxxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
CHANGE OF CONTROL SEVERANCE AGREEMENT
Dear Xx. Xxxxx:
Chicago Bridge & Iron Company, a Delaware corporation, (the "Company")
is a wholly-owned subsidiary of Chicago Bridge & Iron Company N.V., a
Netherlands corporation (the "Holding Corporation"). The Company recognizes that
members of senior management may become concerned about the effect of a Change
of Control (as defined below) on their job and financial security. The Company
considers the maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and the Holding
Corporation. Accordingly, the Board of Directors of the Company has determined
that the Company should enter into this agreement (your "Agreement") to provide
you with severance benefits in the event your employment with the Company
(including any subsidiary of the Company by which you are then employed)
terminates following a Change of Control under certain circumstances.
The purpose of entering into this Agreement is to induce you to remain
in the employ of the Company pending and after any Change of Control. Therefore,
in consideration of your continued employment with the Company under these
circumstances, the Company and you agree as follows:
1. Termination Benefits.
(a) Basic Benefits. In the event your employment with the
Company and any subsidiary of the Company terminates by reason of a Qualifying
Termination within two years after a Change of Control, you shall receive,
within thirty days after your employment terminates, a lump sum amount equal to
Two Hundred Forty Thousand Dollars ($240,000.00). In addition, if your
employment with the Company and any subsidiary by which you are employed is
terminated by the Company or any such subsidiary for any reason (other than your
willful misconduct or gross negligence in the performance of your duties as an
employee which results in a material detriment to either the Company or the
Holding Corporation) within six months prior to the occurrence of a Change of
Control, you shall be paid the lump sum referred to in the immediately preceding
sentence, minus the gross amount of any severance benefits otherwise paid to
you, within ten days following such Change of Control.
26
Page 2
Xxxxx 0, 0000
(x) Outplacement. In the event of a Qualifying Termination (or
a termination of your employment prior to a Change of Control with respect to
which you are entitled to receive a payment under Section 1(a) of this
Agreement), the Company agrees that, upon a written request from you, it will
engage on your behalf an outplacement or similar firm of your choice to provide
you with customary services and support in seeking other appropriate employment.
(c) Certain Further Payments.
(i) Additional Payments in Respect of Excise Taxes.
In the event that any amount or benefit paid or distributed to you pursuant to
this Agreement, taken together with any amounts or benefits otherwise paid or
distributed to you (the "Covered Payments"), are or become subject to the tax
(the "Excise Tax") imposed under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any similar tax that may hereafter be imposed,
the Company shall pay you, at the same time as it pays the severance benefit
described above, an additional amount (the "Tax Reimbursement Payment") such
that the net amount retained by you with respect to such Covered Payments, after
deduction of any Excise Tax on the Covered Payments and any Federal, state and
local income or employment tax and Excise Tax on the Tax Reimbursement Payment
provided for by this Section 1(b), but before deduction for any Federal, state
or local income or employment tax withholding on such Covered Payments, shall be
equal to the amount of the Covered Payments.
(ii) Calculation of the Excise Tax. For purposes of
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax,
(A) all "parachute payments" in excess of
the "base amount" (as defined under Section 280G(b)(3)) of the
Code) shall be treated as subject to the Excise Tax, unless,
and except to the extent that, in the good faith judgment of
the Company's independent certified public accountants
appointed prior to the Change of Control or tax counsel
selected by such Accountants (the "Accountants"), the Company
has a reasonable basis to conclude that such Covered Payments
(in whole or in part) represent reasonable compensation for
personal services actually rendered (within the meaning of
Section 280G(b)(4)(B) of the Code) in excess of the "base
amount," or such "parachute payments" are otherwise not
subject to such Excise Tax, and
27
Page 3
Xxxxx 0, 0000
(X) the value of any non-cash benefits or
any deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G
of the Code.
(iii) Calculation of the Tax Reimbursement Payment.
For purposes of determining the amount of the Tax Reimbursement Payment, you
shall be deemed to pay:
(A) Federal income taxes at the highest
applicable marginal rate of Federal income taxation for the
calendar year in which the Tax Reimbursement Payment is to be
made, and
(B) any applicable state and local income
taxes at the highest applicable marginal rate of taxation for
the calendar year in which the Tax Reimbursement Payment is to
be made, net of the maximum reduction in Federal income taxes
which could be obtained from the deduction of such state or
local taxes if paid in such year.
(d) Adjustments to Tax Reimbursement Payment. In the event
that the Excise Tax is subsequently determined by the Accountants or pursuant to
any proceeding or negotiations with the Internal Revenue Service to be less than
the amount taken into account hereunder in calculating the Tax Reimbursement
Payment made, you shall repay to the Company, at the time that the amount of
such reduction in the Excise Tax is finally determined, the portion of such
prior Tax Reimbursement Payment that would not have been paid if such Excise Tax
had been applied in initially calculating such Tax Reimbursement Payment, plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any
portion of the Tax Reimbursement Payment to be refunded to the Company has been
paid to any Federal, state or local tax authority, repayment thereof shall not
be required until actual refund or credit of such portion has been made to you.
You and the Company shall mutually agree upon the course of action to be pursued
if your good faith claim for refund or credit is denied, provided that the
Company shall bear the cost of any expenses incurred which are related to
pursuing any recovery of any amount paid in respect of the Excise Tax.
In the event that the Excise Tax is later determined by the
Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to exceed the amount taken into account hereunder at the time
the Tax Reimbursement Payment is made (including, but not limited to, by reason
of any payment the existence or amount of which cannot be determined at the time
of the Tax Reimbursement Payment), the Company shall make an additional Tax
Reimbursement Payment in respect of such excess (plus any interest or penalty
payable with respect to such excess) at the time that the amount of such excess
is finally determined.
28
Page 4
March 4, 1999
2. Definitions.
(a) Change of Control When the Company or the Holding
Corporation is Public. A "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such
terms are used in Section 13 of the Securities and Exchange
Act of 1934, as amended (the "Exchange Act"), other than
Holding Corporation, the Company or any majority owned
subsidiary of the Holding Corporation or the Company, becomes
the "beneficial owner" (as such term is used in Section 13 of
the Exchange Act) of 25% or more of the total voting power of
the Company's or the Holding Corporation's outstanding
securities;
(ii) upon the consummation of (A) any merger or other
business combination of the Company or the Holding Corporation
with or into another company pursuant to which the
stockholders of the Company or the Holding Corporation, as the
case may be, do not own, immediately after the transaction,
more than 50% of the voting power and the value of the stock
of the company that survives, or (B) the sale, exchange or
other disposition of all or substantially all of the assets of
the Company or the Holding Corporation; or
(iii) if, during any period of two years or less,
individuals who at the beginning of such period constituted
the Board of Directors of the Company or the Holding
Corporation, as the case may be, cease for any reason to
constitute at least a majority thereof; provided that any new
director who is elected to, or nominated for election to, the
Board of Directors with the approval of at least 75% of the
directors then still in office who were directors at the
beginning of the period shall be treated as though having been
a director at the beginning of such period.
(b) "Qualifying Termination" means the termination of your
employment with the Company and any of its subsidiaries by which you are
employed (i) by the Company or any such subsidiary for any reason other than
your willful misconduct or gross negligence in the performance of your duties as
an employee which results in a material detriment to the Company or the Holding
Corporation or (ii) by you within 180 days following the occurrence of any of
the following events (without your prior written consent):
29
Page 5
March 4, 1999
(A) any significant reduction in your
positions, duties, titles, responsibilities and status with
the Company and its subsidiaries from those in effect
immediately prior to such Change of Control;
(B) a reduction in your base salary, a
reduction in your annual bonus opportunity or a material
reduction in the aggregate value of your participation in the
Company's employee benefits programs, as each was in effect
immediately prior to such Change of Control;
(C) your principal place of employment is
moved to a location more than 50 miles from your principal
place of employment immediately prior to such Change of
Control or you are required in the performance of your duties
to travel to an extent substantially more burdensome than your
travel obligations immediately prior to such Change of
Control; or
(D) the letter of credit or escrow referred
to in Section 3.1(b) fail for any reason to be in force in
accordance with Section 3.1(b).
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
3. Miscellaneous.
(a) Arbitration: Related Expenses. Any dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration held in accordance with the rules of the American Arbitration
Association pertaining to the resolution of employment disputes. Any such
arbitration shall be held in Chicago, Illinois or such other location which the
parties have mutually agreed to in writing. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The Company shall pay on a
current basis all legal expenses (including attorneys' fees) incurred by you in
connection with such arbitration, subject to your obligation to repay such
amounts, plus interest at the short-term annual Applicable Federal Rate (as
determined under Section 1274(b) of the Code as in effect on the date your
employment terminates), if you should not prevail as to at least one material
issue adjudicated in such proceeding.
30
Page 6
Xxxxx 0, 0000
(x) Letter of Credit: Escrow. To secure its obligations under
Section 3.1(a), the Company shall procure and maintain in force until at least
one year after your termination of employment a letter of credit and an escrow
in favor of you (together with other senior management executives similarly
situated). The letter of credit shall be issued by a bank or trust company
organized under the laws of the United States or Canada or a state or province
thereof and having a combined capital and surplus of not less than one hundred
million dollars ($100,000,000), shall be in the aggregate amount of two million
dollars ($2,000,000), and shall be substantially in the form of that attached
(with its attached Annexes and Exhibits) to this Agreement as Exhibit A. The
Company shall notify you not less than 15 days before the scheduled expiry date
of the letter of credit whether or not the letter of credit has been renewed or
the Company has obtained a substitute letter of credit whose provisions (other
than the expiration terms thereof) are identical to those of the letter of
credit in all material respects and which expires not less than one (1) year
from the date of issuance. The escrow shall be maintained in the State of
Illinois under an escrow agreement with a bank or trust company organized under
the laws of the United States or Canada or a state or province thereof and
having a combined capital and surplus of not less than one hundred million
dollars ($100,000,000), and shall be substantially in the form of that attached
(with its attached Exhibits) to this Agreement as Exhibit B.
(c) No Offset: No Mitigation. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against you or others whether by reason of your
subsequent employment or otherwise. You shall not be obligated to mitigate any
damages you incur by reason of any Qualifying Termination and the amounts
payable hereunder shall not be reduced by any amounts received by you as a
result of your employment or self-employment following your termination
hereunder.
(d) Entire Obligation of Company. In the event your employment
with the Company and any subsidiary of the Company by which you are employed
terminates following a Change of Control, the amounts payable to you hereunder
and any vested amounts or benefits owing to you under the Company's otherwise
applicable employee benefit plans and programs and any accrued vacation pay not
yet paid, shall constitute the entire obligation of the Company and its
affiliates to you. Payment or other satisfaction thereof shall be contingent
upon your execution of a release in favor of the Company substantially in the
form of that attached hereto as Exhibit C, stating that the payments and other
benefits referred to in the immediately preceding sentence constitute full
settlement of any claim under law or in equity that you might otherwise assert
against the Company or any of its subsidiaries on account of such termination.
31
Page 7
March 4, 1999
(e) Employment at Will. This Agreement shall neither obligate
the Company or any subsidiary of the Company to continue you in its employ (or
to employ you in any particular office or to perform any specified
responsibility) nor obligate you to continue in the employ of the Company or any
subsidiary of the Company.
(f) Successors. This Agreement shall be binding upon and inure
to the benefit of you, your estate and the Company and any successor of the
Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by you.
(g) Governing Law. This Agreement shall be governed by the
laws of the State of Illinois, applied without reference to principles of
conflict of laws.
(h) Severability. If any provision of this contract as applied
to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
of this Agreement.
(i) Waiver. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in a writing signed by you and such officer as may be specifically designated by
the Board of Directors of the Company or a duly authorized Committee thereof. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of any other condition or provision at any
time.
(j) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. This Agreement specifically supersedes the Change of
Control Severance Agreement between you and the Company dated January 31, 1997.
The express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof. This Agreement may
not be modified or amended other than by an agreement in writing.
32
Page 8
March 4, 1999
If you are in agreement with the foregoing, please so indicate by
signing and returning to the Company the enclosed copy of this letter, whereupon
this letter shall constitute a binding agreement between you and the Company.
Very truly yours,
CHICAGO BRIDGE & IRON COMPANY
By:
-------------------------------
Agreed:
-----------------------------
Employee
33
March 4, 1999
Xx. Xxxxxxx X. Xxxxx
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
CHANGE OF CONTROL SEVERANCE AGREEMENT
Dear Xx. Xxxxx:
Chicago Bridge & Iron Company, a Delaware corporation, (the "Company")
is a wholly-owned subsidiary of Chicago Bridge & Iron Company N.V., a
Netherlands corporation (the "Holding Corporation"). The Company recognizes that
members of senior management may become concerned about the effect of a Change
of Control (as defined below) on their job and financial security. The Company
considers the maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and the Holding
Corporation. Accordingly, the Board of Directors of the Company has determined
that the Company should enter into this agreement (your "Agreement") to provide
you with severance benefits in the event your employment with the Company
(including any subsidiary of the Company by which you are then employed)
terminates following a Change of Control under certain circumstances.
The purpose of entering into this Agreement is to induce you to remain
in the employ of the Company pending and after any Change of Control. Therefore,
in consideration of your continued employment with the Company under these
circumstances, the Company and you agree as follows:
1. Termination Benefits.
(a) Basic Benefits. In the event your employment with the
Company and any subsidiary of the Company terminates by reason of a Qualifying
Termination within two years after a Change of Control, you shall receive,
within thirty days after your employment terminates, a lump sum amount equal to
Seven Hundred Fifty Thousand Dollars ($750,000.00). In addition, if your
employment with the Company and any subsidiary by which you are employed is
terminated by the Company or any such subsidiary for any reason (other than your
willful misconduct or gross negligence in the performance of your duties as an
employee which results in a material detriment to either the Company or the
Holding Corporation) within six months prior to the occurrence of a Change of
Control, you shall be paid the lump sum referred to in the immediately preceding
sentence, minus the gross amount of any severance benefits otherwise paid to
you, within ten days following such Change of Control.
34
Page 2
Xxxxx 0, 0000
(x) Outplacement. In the event of a Qualifying Termination (or
a termination of your employment prior to a Change of Control with respect to
which you are entitled to receive a payment under Section 1(a) of this
Agreement), the Company agrees that, upon a written request from you, it will
engage on your behalf an outplacement or similar firm of your choice to provide
you with customary services and support in seeking other appropriate employment.
(c) Certain Further Payments.
(i) Additional Payments in Respect of Excise Taxes.
In the event that any amount or benefit paid or distributed to you pursuant to
this Agreement, taken together with any amounts or benefits otherwise paid or
distributed to you (the "Covered Payments"), are or become subject to the tax
(the "Excise Tax") imposed under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any similar tax that may hereafter be imposed,
the Company shall pay you, at the same time as it pays the severance benefit
described above, an additional amount (the "Tax Reimbursement Payment") such
that the net amount retained by you with respect to such Covered Payments, after
deduction of any Excise Tax on the Covered Payments and any Federal, state and
local income or employment tax and Excise Tax on the Tax Reimbursement Payment
provided for by this Section 1(b), but before deduction for any Federal, state
or local income or employment tax withholding on such Covered Payments, shall be
equal to the amount of the Covered Payments.
(ii) Calculation of the Excise Tax. For purposes of
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax,
(A) all "parachute payments" in excess of
the "base amount" (as defined under Section 280G(b)(3)) of the
Code) shall be treated as subject to the Excise Tax, unless,
and except to the extent that, in the good faith judgment of
the Company's independent certified public accountants
appointed prior to the Change of Control or tax counsel
selected by such Accountants (the "Accountants"), the Company
has a reasonable basis to conclude that such Covered Payments
(in whole or in part) represent reasonable compensation for
personal services actually rendered (within the meaning of
Section 280G(b)(4)(B) of the Code) in excess of the "base
amount," or such "parachute payments" are otherwise not
subject to such Excise Tax, and
35
Page 3
Xxxxx 0, 0000
(X) the value of any non-cash benefits or
any deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G
of the Code.
(iii) Calculation of the Tax Reimbursement Payment.
For purposes of determining the amount of the Tax Reimbursement Payment, you
shall be deemed to pay:
(A) Federal income taxes at the highest
applicable marginal rate of Federal income taxation for the
calendar year in which the Tax Reimbursement Payment is to be
made, and
(B) any applicable state and local income
taxes at the highest applicable marginal rate of taxation for
the calendar year in which the Tax Reimbursement Payment is to
be made, net of the maximum reduction in Federal income taxes
which could be obtained from the deduction of such state or
local taxes if paid in such year.
(d) Adjustments to Tax Reimbursement Payment. In the event
that the Excise Tax is subsequently determined by the Accountants or pursuant to
any proceeding or negotiations with the Internal Revenue Service to be less than
the amount taken into account hereunder in calculating the Tax Reimbursement
Payment made, you shall repay to the Company, at the time that the amount of
such reduction in the Excise Tax is finally determined, the portion of such
prior Tax Reimbursement Payment that would not have been paid if such Excise Tax
had been applied in initially calculating such Tax Reimbursement Payment, plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any
portion of the Tax Reimbursement Payment to be refunded to the Company has been
paid to any Federal, state or local tax authority, repayment thereof shall not
be required until actual refund or credit of such portion has been made to you.
You and the Company shall mutually agree upon the course of action to be pursued
if your good faith claim for refund or credit is denied, provided that the
Company shall bear the cost of any expenses incurred which are related to
pursuing any recovery of any amount paid in respect of the Excise Tax.
In the event that the Excise Tax is later determined by the
Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to exceed the amount taken into account hereunder at the time
the Tax Reimbursement Payment is made (including, but not limited to, by reason
of any payment the existence or amount of which cannot be determined at the time
of the Tax Reimbursement Payment), the Company shall make an additional Tax
Reimbursement Payment in respect of such excess (plus any interest or penalty
payable with respect to such excess) at the time that the amount of such excess
is finally determined.
36
Page 4
March 4, 1999
2. Definitions.
(a) Change of Control When the Company or the Holding
Corporation is Public. A "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such
terms are used in Section 13 of the Securities and Exchange
Act of 1934, as amended (the "Exchange Act"), other than
Holding Corporation, the Company or any majority owned
subsidiary of the Holding Corporation or the Company, becomes
the "beneficial owner" (as such term is used in Section 13 of
the Exchange Act) of 25% or more of the total voting power of
the Company's or the Holding Corporation's outstanding
securities;
(ii) upon the consummation of (A) any merger or other
business combination of the Company or the Holding Corporation
with or into another company pursuant to which the
stockholders of the Company or the Holding Corporation, as the
case may be, do not own, immediately after the transaction,
more than 50% of the voting power and the value of the stock
of the company that survives, or (B) the sale, exchange or
other disposition of all or substantially all of the assets of
the Company or the Holding Corporation; or
(iii) if, during any period of two years or less,
individuals who at the beginning of such period constituted
the Board of Directors of the Company or the Holding
Corporation, as the case may be, cease for any reason to
constitute at least a majority thereof; provided that any new
director who is elected to, or nominated for election to, the
Board of Directors with the approval of at least 75% of the
directors then still in office who were directors at the
beginning of the period shall be treated as though having been
a director at the beginning of such period.
(b) "Qualifying Termination" means the termination of your
employment with the Company and any of its subsidiaries by which you are
employed (i) by the Company or any such subsidiary for any reason other than
your willful misconduct or gross negligence in the performance of your duties as
an employee which results in a material detriment to the Company or the Holding
Corporation or (ii) by you within 180 days following the occurrence of any of
the following events (without your prior written consent):
37
Page 5
March 4, 1999
(A) any significant reduction in your
positions, duties, titles, responsibilities and status with
the Company and its subsidiaries from those in effect
immediately prior to such Change of Control;
(B) a reduction in your base salary, a
reduction in your annual bonus opportunity or a material
reduction in the aggregate value of your participation in the
Company's employee benefits programs, as each was in effect
immediately prior to such Change of Control;
(C) your principal place of employment is
moved to a location more than 50 miles from your principal
place of employment immediately prior to such Change of
Control or you are required in the performance of your duties
to travel to an extent substantially more burdensome than your
travel obligations immediately prior to such Change of
Control; or
(D) the letter of credit or escrow referred
to in Section 3.1(b) fail for any reason to be in force in
accordance with Section 3.1(b).
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
3. Miscellaneous.
(a) Arbitration: Related Expenses. Any dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration held in accordance with the rules of the American Arbitration
Association pertaining to the resolution of employment disputes. Any such
arbitration shall be held in Chicago, Illinois or such other location which the
parties have mutually agreed to in writing. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The Company shall pay on a
current basis all legal expenses (including attorneys' fees) incurred by you in
connection with such arbitration, subject to your obligation to repay such
amounts, plus interest at the short-term annual Applicable Federal Rate (as
determined under Section 1274(b) of the Code as in effect on the date your
employment terminates), if you should not prevail as to at least one material
issue adjudicated in such proceeding.
38
Page 6
Xxxxx 0, 0000
(x) Letter of Credit: Escrow. To secure its obligations under
Section 3.1(a), the Company shall procure and maintain in force until at least
one year after your termination of employment a letter of credit and an escrow
in favor of you (together with other senior management executives similarly
situated). The letter of credit shall be issued by a bank or trust company
organized under the laws of the United States or Canada or a state or province
thereof and having a combined capital and surplus of not less than one hundred
million dollars ($100,000,000), shall be in the aggregate amount of two million
dollars ($2,000,000), and shall be substantially in the form of that attached
(with its attached Annexes and Exhibits) to this Agreement as Exhibit A. The
Company shall notify you not less than 15 days before the scheduled expiry date
of the letter of credit whether or not the letter of credit has been renewed or
the Company has obtained a substitute letter of credit whose provisions (other
than the expiration terms thereof) are identical to those of the letter of
credit in all material respects and which expires not less than one (1) year
from the date of issuance. The escrow shall be maintained in the State of
Illinois under an escrow agreement with a bank or trust company organized under
the laws of the United States or Canada or a state or province thereof and
having a combined capital and surplus of not less than one hundred million
dollars ($100,000,000), and shall be substantially in the form of that attached
(with its attached Exhibits) to this Agreement as Exhibit B.
(c) No Offset: No Mitigation. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against you or others whether by reason of your
subsequent employment or otherwise. You shall not be obligated to mitigate any
damages you incur by reason of any Qualifying Termination and the amounts
payable hereunder shall not be reduced by any amounts received by you as a
result of your employment or self-employment following your termination
hereunder.
(d) Entire Obligation of Company. In the event your employment
with the Company and any subsidiary of the Company by which you are employed
terminates following a Change of Control, the amounts payable to you hereunder
and any vested amounts or benefits owing to you under the Company's otherwise
applicable employee benefit plans and programs and any accrued vacation pay not
yet paid, shall constitute the entire obligation of the Company and its
affiliates to you. Payment or other satisfaction thereof shall be contingent
upon your execution of a release in favor of the Company substantially in the
form of that attached hereto as Exhibit C, stating that the payments and other
benefits referred to in the immediately preceding sentence constitute full
settlement of any claim under law or in equity that you might otherwise assert
against the Company or any of its subsidiaries on account of such termination.
39
Page 7
March 4, 1999
(e) Employment at Will. This Agreement shall neither obligate
the Company or any subsidiary of the Company to continue you in its employ (or
to employ you in any particular office or to perform any specified
responsibility) nor obligate you to continue in the employ of the Company or any
subsidiary of the Company.
(f) Successors. This Agreement shall be binding upon and inure
to the benefit of you, your estate and the Company and any successor of the
Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by you.
(g) Governing Law. This Agreement shall be governed by the
laws of the State of Illinois, applied without reference to principles of
conflict of laws.
(h) Severability. If any provision of this contract as applied
to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
of this Agreement.
(i) Waiver. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in a writing signed by you and such officer as may be specifically designated by
the Board of Directors of the Company or a duly authorized Committee thereof. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of any other condition or provision at any
time.
(j) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
40
Page 8
March 4, 1999
If you are in agreement with the foregoing, please so indicate by
signing and returning to the Company the enclosed copy of this letter, whereupon
this letter shall constitute a binding agreement between you and the Company.
Very truly yours,
CHICAGO BRIDGE & IRON COMPANY
By:
----------------------------------
Agreed:
--------------------------------
Employee
