AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CHICAGO BRIDGE & IRON COMPANY N.V.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
THE NETHERLANDS 1798 NONE
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION)
P.O. BOX 74658
1070 BR AMSTERDAM
THE NETHERLANDS
31-20-664-4461
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(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT H. WOLFE
CHICAGO BRIDGE & IRON COMPANY
1501 NORTH DIVISION STREET
PLAINFIELD, ILLINOIS 60544
(815) 439-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S AGENT FOR SERVICE)
COPIES TO:
GEOFFREY E. LIEBMANN, ESQ. MORTON A. PIERCE, ESQ.
CAHILL GORDON & REINDEL DEWEY BALLANTINE
EIGHTY PINE STREET 1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10005 NEW YORK, NEW YORK 10019
(212) 701-3000 (212) 259-8000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_]
PROPOSED
MAXIMUM
AGGREGATE
TITLE OF EACH CLASS OF OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------
Common Shares, par value NLG .01 per share...... $264,500,000 $80,152(2)
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(2) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be used in connection with an offering in the United States and Canada (the "U.S. Prospectus") and one to be used in a concurrent offering outside the United States and Canada (the "International Prospectus"). The two prospectuses are identical except for the front and back cover pages, the inside front cover page, the table of contents and the sections entitled "Underwriting" and "Subscription and Sale." The form of U.S. Prospectus is included herein and is followed by the alternate pages to be used in the International Prospectus. Each of the alternate pages for the International Prospectus included herein is labeled "Alternate International Prospectus Page." Final forms of each Prospectus will be filed with the Securities and Exchange Commission under Rule 424(b).
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE + |
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 20, 1997
10,500,000 Shares
[COMPANY LOGO] CHICAGO BRIDGE & IRON COMPANY N.V.
LOGO (A company incorporated in The Netherlands with its registered seat in
Amsterdam)
Common Shares
(NLG 0.01 par value)
All of the Common Shares, NLG 0.01 par value (the "Common Shares"), of Chicago
Bridge & Iron Company N.V. (the "Issuer") offered hereby are being sold by
Praxair, Inc. (the "Selling Shareholder"). The Issuer will not receive any of
the proceeds from the sale of shares offered hereby. Of the Common Shares
being offered, 8,400,000 shares are initially being offered in the United
States and Canada (the "U.S. Shares") by the U.S. Underwriters (the "U.S.
Offering") and 2,100,000 shares are initially being concurrently offered
outside the United States and Canada (the "International Offering" and,
together with the U.S. Offering, the "Common Share Offering"). Prior to
the Common Share Offering, the Issuer was a wholly owned subsidiary of
Praxair, Inc. Upon consummation of the Common Share Offering, the
Issuer will no longer be a subsidiary of Praxair, Inc., and Praxair,
Inc. will continue to own approximately 8% (and, if the Underwriters
exercise their over-allotment option in full, none) of the then
outstanding Common Shares. The offering price and underwriting
discounts and commissions of the U.S. Offering and the
International Offering are identical.
Prior to the offering, there has been no public market for the Common Shares. It is anticipated that the initial public offering price will be between $20 and $23 per share. For information relating to the factors considered in determining the initial public offering price to the public, see "Underwriting."
The Common Shares have been approved for listing on the New York Stock Exchange under the symbol "CBI," subject to notice of issuance. The Issuer has applied to list the Common Shares in bearer form on the Official Market of the AEX- Effectenbeurs nv (the "Amsterdam Stock Exchange") under the symbol "CBI." See
"Share Certificates and Transfer."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON SHARES, SEE "RISK FACTORS" BEGINNING
ON PAGE 12.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting Proceeds to
Price to Discounts and Selling
Public Commissions Shareholder(1)
-------- ------------- --------------
Per Share(2).............................. $ $ $
Total(3).................................. $ $ $
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(1) Before deducting expenses payable by the Issuer and the Selling Shareholder
estimated at $2,000,000 and $ , respectively.
(2) The price per Common Share in Dutch guilders will be the Dutch guilder
equivalent of the U.S. dollar price per Common Share based on the noon
buying rate in New York City for cable transfers into Dutch guilders as
certified for customs purposes by the Federal Reserve Bank of New York on
the pricing date.
(3) The Selling Shareholder has granted the U.S. Underwriters and the Managers
an option, exercisable by Credit Suisse First Boston Corporation for 30
days from the date of this Prospectus, to purchase a maximum of 1,000,000
additional Common Shares to cover over-allotments of shares. If such option
is exercised in full, the total Price to Public will be $ , Underwriting
Discounts and Commissions will be $ and Proceeds to Selling Shareholder
will be $ .
The U.S. Shares are offered by the several U.S. Underwriters when, as and if delivered to and accepted by the U.S. Underwriters and subject to their right to reject orders in whole or in part. It is expected that the U.S. Shares will be ready for delivery on or about , 1997 against payment in immediately available funds in U.S. dollars through the book-entry facilities of The Depository Trust Company and against payment therefor in immediately available funds in Dutch guilders through NECIGEF, Euroclear and Cedel.
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
UBS SECURITIES
Prospectus dated , 1997.
[DESCRIPTION OF PHOTOS ON INSIDE FRONT COVER]
[COMPANY LOGO]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. Unless the context otherwise requires, all references to the "Issuer" herein refer to Chicago Bridge & Iron Company N.V., a corporation organized under the laws of The Netherlands, all references to the "Company" or "CB&I" herein refer to the Issuer, together with its predecessors and subsidiaries, in each case after giving effect to the Reorganization (as defined below), all references to "Praxair" herein refer to Praxair, Inc. and its subsidiaries and all references to the "Selling Shareholder" herein refer to Praxair, Inc. In this Prospectus, references to "guilders" and "NLG" are to Dutch guilders, and references to "dollars," "U.S. $" and "$" are to United States dollars. Unless otherwise indicated, all data in this Prospectus assumes no exercise of the Underwriters' over-allotment option.
THE COMPANY
CB&I is a global engineering and construction company specializing in the engineering and design, materials procurement, fabrication, erection, repair and modification of steel tanks and other steel plate structures and associated systems such as petroleum terminals, refinery pressure vessels, low temperature and cryogenic storage facilities and elevated water storage tanks. Based on its knowledge of and experience in its industry, the Company believes it is the leading provider of field erected steel tanks and other steel plate structures, associated systems and related services in North America and one of the leading providers of these specialized products and services in the world. CB&I seeks to maintain its leading industry position by focusing on its technological expertise in design, metallurgy and welding, along with its ability to complete logistically and technically complex metal plate projects virtually anywhere in the world. CB&I has been continuously engaged in the engineering and construction industry since its founding in 1889. In 1996, the Company was involved in over 500 projects for over 250 customers in 34 countries.
In 1996, the Company generated revenues of $663.7 million, and its project backlog as of December 31, 1996 was $485.7 million. The Company's operating income improved to $31.3 million in 1996 from a loss of $30.5 million in 1995. CB&I primarily serves customers in the petroleum, petrochemical, chemical, electric and gas utility, pulp and paper, and metals and mining industries, both directly and through other companies which service these customers. Approximately 60% of the Company's revenues during 1996 were attributable to petroleum and petrochemical industry-related projects. The Company operates on a global basis and has the supporting infrastructure to compete in key geographic markets worldwide. In 1996, CB&I derived approximately one-half of its revenues from operations outside of the United States. Demand for the Company's products and services depends primarily on its clients' capital expenditures for construction. The Company seeks to benefit from recently higher levels of current and projected capital expenditures by its primary customer base in the petroleum and petrochemical industries, which it believes have resulted from increases in worldwide crude oil prices during 1996.
RECENT DEVELOPMENTS
In the first quarter of 1996, Praxair acquired CBI Industries, Inc. ("Industries"), then the parent company of CB&I, for the purpose of owning its industrial gas operations. At that time, Praxair announced its intention to divest those businesses of Industries which were not strategic to Praxair, including the Company. Praxair undertook to strategically reposition the Company and, as part of this process, a new management team was assembled for the Company, headed by Gerald M. Glenn as President and Chief Executive Officer. Mr. Glenn has over 30 years of combined experience with Fluor Corporation, the world's largest publicly-owned engineering and construction company, and Daniel International Corporation, and
from 1986 to 1994 served as Group President of Fluor Corporation's principal operating subsidiary, Fluor Daniel, Inc. The new management team has focused its efforts on (i) redirecting and accelerating a restructuring program designed to increase the Company's base profitability; (ii) implementing a new compensation program linking management incentives to improvements in shareholder value; and (iii) developing a business strategy to enhance CB&I's future growth and profitability.
RESTRUCTURING PROGRAM
The comprehensive restructuring program (the "Restructuring Program") currently being implemented by the Company's new management team achieved estimated cost savings of approximately $10 million in 1996, and is expected to result in estimated annual cost savings of approximately $21 million in 1997 and approximately $23 million in 1998, relative to the Company's 1995 cost base. The benefits of the Restructuring Program have been an integral component in the Company's recent improvement in operating income.
The Restructuring Program is based on initiatives begun in 1994, and was significantly refocused and accelerated in 1996 following the appointment of the new management team. The program is expected to be fully implemented by the end of 1997. The Restructuring Program initially focused on consolidating the Company's organizational structure from six separate, decentralized business units into a single global business operation. On-going enhancements in connection with such consolidation include centralization of procurement, equipment and personnel mobilization, and certain financial functions, as well as streamlining and consolidating administrative and engineering support. As part of the program, seven fabrication plants or warehouses have been closed and three administrative office sites have been downsized or relocated, including the headquarters of the Company's United States operations. The Company also has targeted a reduction of approximately 160 salaried positions, of which approximately 147 had been eliminated as of December 31, 1996.
COMPENSATION PROGRAM
In order to more closely align the interests of the Company's management and employees with those of its shareholders, CB&I is redesigning its compensation program to include long-term, equity-based incentives. In addition, Praxair and the Company have agreed to compensate approximately 40 to 60 officers and key management employees of the Company for their services in connection with the further development and implementation of the Restructuring Program and the Company's initial public offering. As a result, on or immediately before the consummation of the Common Share Offering, the Company will adopt the CB&I Management Defined Contribution Plan (the "Management Plan") and upon consummation of the Common Share Offering, contribute to the Management Plan approximately 1,017,552 Common Shares (assuming an initial public offering price of $21.50 per share) (the "Management Plan Shares"), representing approximately 8% of the total number of Common Shares outstanding upon consummation of the Common Share Offering. The Management Plan Shares will vest three years (and with respect to one participant, two years) after the date of the Common Share Offering.
BUSINESS STRATEGY
The Company is committed to increasing shareholder value by seeking to build on the success established in 1996 and growing its business in the global marketplace through a combination of strategic initiatives including the following:
. FOCUS ON CORE BUSINESS. The Company seeks to leverage its perceived competitive advantages in design engineering, metallurgy and welding, and its ability to execute projects virtually anywhere in the world, to actively pursue growth opportunities in its core business. Prior management of the Company's parent pursued a diversification strategy during the 1980s and 1990s, which included acquisitions of significant, unrelated businesses. Under CB&I's new management team, the Company is committed to focusing on its core activities of engineering and design, fabrication, erection, repair and modification of steel tanks and other steel plate structures.
. CONTINUE COST REDUCTIONS AND PRODUCTIVITY IMPROVEMENTS. CB&I's management believes that the Company's Restructuring Program represents the foundation for a long-term strategy of reducing the costs of its products and services, with the goal of establishing and maintaining a position as a low cost provider in its markets. All key functions of the organization--engineering, procurement, construction, project management, finance and administrative support--will be required to demonstrate improvements in productivity, and will be provided compensation incentives for achieving such goals.
. TARGET GLOBAL GROWTH MARKETS. The Company intends to aggressively pursue business opportunities in selected key growth markets, such as China, India, Mexico and the former Soviet Union, on which prior management placed relatively low priority. CB&I intends to leverage its significant international experience and technological strengths to expand into these new geographic areas, where it believes that its ability to rapidly mobilize project management and skilled craft personnel, combined with its global material supply and equipment logistics capabilities, provides a key competitive advantage.
. IMPROVE FINANCIAL CONTROLS AND MANAGEMENT. The Company believes it will improve the management of project profitability through the on-going implementation of new systems which enhance cost estimating, bidding, capital utilization and project execution. Under the new systems, project economics will be evaluated on a centralized basis under various risk and costing assumptions, using global software systems tailored specifically for the Company's operations.
. PURSUE PARTNERING AND STRATEGIC ALLIANCES. The Company intends to expand its use of partnering and strategic alliances with customers and vendors. These relationships can serve as a vehicle for improvements in quality, productivity and profitability for both parties. CB&I's existing partnering relationships include several with major international oil companies. The Company believes that such customers recognize CB&I's ability to deliver high quality, on-time projects and select CB&I as a preferred supplier to achieve significant cost savings in building and operating tankage and related systems.
CORPORATE STRUCTURE
Prior to the Company's reorganization described below (the "Reorganization"), the Company's operations were conducted by Chicago Bridge & Iron Company, a Delaware corporation ("Old CBIC"), and its subsidiaries. After the Reorganization, the primary holding company for the Company's U.S. operating subsidiaries will be a wholly owned Delaware subsidiary of the Issuer ("New CBIC") formed by a wholly owned subsidiary of the Selling Shareholder ("Bridge Holdings") and which will become a wholly owned subsidiary of the Issuer in the Reorganization, and the Company's primary holding company for non-United States subsidiaries will be Chicago Bridge & Iron Company B.V. ("CBICBV"), a
wholly owned subsidiary of the Issuer organized under the laws of The
Netherlands with its registered seat in Amsterdam. In the Reorganization (i)
the shares of substantially all of Old CBIC's non-U.S. subsidiaries will be
transferred by dividend to its parent corporation, Bridge Holdings, and
contributed to CBICBV in exchange for newly issued common shares of CBICBV;
(ii) the shares of substantially all of Old CBIC's U.S. subsidiaries will be
transferred by dividend to Bridge Holdings and contributed to New CBIC in
exchange for newly issued common stock of New CBIC; (iii) Bridge Holdings will
contribute the shares held by it of each of New CBIC and CBICBV to the Issuer
in exchange for additional Common Shares of the Issuer; and (iv) New CBIC will
assume any remaining assets and liabilities of Old CBIC. After the
Reorganization and prior to the consummation of the Common Share Offering,
Bridge Holdings will be merged into the Selling Shareholder such that the
Selling Shareholder will then directly own all of the then outstanding Common
Shares of the Issuer. Upon consummation of the Reorganization, both New CBIC
and CBICBV will be wholly owned direct subsidiaries of the Issuer, as set out
in the diagram below.
POST-REORGANIZATION AND POST-OFFERING STRUCTURE(1)
Praxair, Inc. Public Shareholders Management Plan
8% 84% 8%
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Chicago Bridge & Iron Company N.V.
(the "Issuer")
Delaware Subsidiary Chicago Bridge & Iron Company B.V.
("The CBIC") ("CBICBV")
Substantially All U.S. Substantially All Non-U.S.
Operations Operations
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The Issuer, with its corporate seat in Amsterdam, The Netherlands, maintains its registered office and the principal office of CBICBV at Koningslaan 32-36, 1075 AD Amsterdam, The Netherlands, and their mailing address is P.O. Box 74658, 1070 BR Amsterdam, The Netherlands, and their telephone number at such address is 31-20-664-4461. The executive office of New CBIC is located at 1501 North Division Street, Plainfield, Illinois 60544, and its telephone number at that address is (815) 439-6000.
THE OFFERING
U.S. Offering..................... 8,400,000 Shares
International Offering............ 2,100,000 Shares
----------
Total........................... 10,500,000 Shares
==========
Common Shares to be Outstanding
After the Common Share
Offering(1)...................... 12,517,552 Shares
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Use of Proceeds.............. The Company will not receive any of the proceeds
from the sale of shares offered hereby.
Listing of Shares............ The Common Shares of New York Registry ("New
York Shares") have been approved for listing on
the New York Stock Exchange (the "NYSE"),
subject to notice of issuance. The Issuer has
applied to list the Common Shares in bearer form
(the "Bearer Shares") on the Amsterdam Stock
Exchange.
Proposed New York Stock
Exchange Symbol............. CBI
Proposed Amsterdam Stock
Exchange Symbol............. CBI
Payment and Delivery......... Delivery of New York Shares will be made to
purchasers' book-entry accounts at The
Depository Trust Company ("DTC"), against
payment in U.S. dollars in same-day funds.
Bearer Shares will also be delivered to
purchasers' book entry accounts at Nederlands
Centraal Instituut voor Giraal Effectenverkeer
B.V. ("NECIGEF"), Morgan Guaranty Trust Company
of New York, Brussels office, as operator of the
Euroclear System ("Euroclear") and Cedel Bank,
societe anonyme ("Cedel") against payment in
Dutch guilders in same-day funds. Thereafter,
trading of New York Shares effected at the NYSE
will be settled in dollars and trading of Bearer
Shares effected on the Amsterdam Stock Exchange
generally will be settled in guilders, in each
case in accordance with the normal settlement
practices of those markets. A fee of $0.05 per
share will be charged to shareholders for the
exchange of New York Shares for Bearer Shares
(and for the reverse). See "Share Certificates
and Transfer."
Dividend Policy.............. Subject to restrictions contained in the
agreements governing the Company's indebtedness,
the Issuer currently expects to initially pay a
quarterly dividend of $0.06 per share. The
Issuer's first dividend is expected to be
payable on June 30, 1997 to shareholders of
record at the close of business on June 20,
1997. The declaration of any dividend, including
the amount thereof, generally will be at the
discretion of the Issuer's supervisory and
management boards and, in the
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case of annual dividends, the general
shareholders meeting, and will depend on the
Issuer's then financial condition, results of
operations and capital requirements, and such
other factors as such boards or the general
shareholders meeting deem relevant. See
"Dividend Policy."
- --------
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(1) Includes 1,017,552 Common Shares (assuming an initial public offering price of $21.50 per share (the mid-point of the price range as set forth on the cover page of this Prospectus)) to be contributed to the Management Plan which vest no earlier than the third anniversary (and with respect to one participant, the second anniversary) of the award date, but does not include 1,251,755 Common Shares reserved for issuance under the Incentive Plan (as defined), of which 500,702 shares will be subject to options to be granted at or prior to consummation of the Common Share Offering at an exercise price equal to the initial offering price. See "Management-- Compensation and Benefits--Executive Compensation--Long-Term Compensation" and "Management--Compensation and Benefits--Special Stock-Based, Long-Term Compensation Related to the Common Share Offering."
RISK FACTORS
Prospective purchasers of the Common Shares should consider carefully all of the information set forth in this Prospectus and, in particular, should evaluate the specific factors set forth under the caption "Risk Factors" beginning on page 12, which provides a discussion of the risks involved in an investment in the Common Shares.
SUMMARY HISTORICAL AND PRO FORMA
CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The summary historical and pro forma consolidated financial and other data set forth below should be read in conjunction with, and are qualified by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company and accompanying notes thereto (including without limitation "Operations by Geographic Segment" found on pages F-19 and F-38 hereof and "Quarterly Operating Results (unaudited)" found on pages F-21 and F-41 hereof) and other financial information included elsewhere in this Prospectus.
The unaudited pro forma consolidated financial and other data set forth below for the year ended December 31, 1996 give effect to the Common Share Offering and the Reorganization as if each had occurred at the beginning of the period indicated. Such unaudited pro forma consolidated financial and other data are based on the historical financial statements of the Company and the assumptions and adjustments described in the accompanying notes and under "Unaudited Pro Forma Consolidated Income Statement." The unaudited pro forma data are not designed to represent and do not represent what the Company's results of operations actually would have been had the Common Share Offering and the Reorganization been completed as of the beginning of the period indicated, or to project the Company's results of operations at any future date or for any future period.
HISTORICAL INFORMATION (1) PRO FORMA (2)
------------------------------------------------------------- -------------
POST-PRAXAIR
PRE-PRAXAIR ACQUISITION ACQUISITION
-------------------------------------------- ------------
YEAR ENDED DECEMBER 31, YEAR ENDED
------------------------------------------------------------- DECEMBER 31,
1992 1993 1994 1995 1996 1996
-------- -------- -------- -------- ------------ -------------
INCOME STATEMENT DATA:
Revenues................ $799,196 $680,541 $762,803 $621,938 $663,721 $663,721
Cost of revenues........ 678,129 630,978 692,266 614,230 590,030 590,030
-------- -------- -------- -------- -------- ----------
Gross profit........... 121,067 49,563 70,537 7,708 73,691 73,691
Selling and
administrative
expenses............... 44,006 44,193 45,503 43,023 42,921 44,821
Special charges......... -- 22,900 (3) 16,990 (4) 5,230 (5) -- --
Gain on the sale of
assets(6).............. (1,062) (118) (11,360) (10,030) (493) (493)
-------- -------- -------- -------- -------- ----------
Income (loss) from
operations............ 78,123 (17,412) 19,404 (30,515) 31,263 29,363
Interest expense........ (1,275) (298) (180) (799) (5,002) (5,002)
Other income............ 4,405 3,056 1,652 1,191 990 990
-------- -------- -------- -------- -------- ----------
Income (loss) before
taxes and minority
interest.............. 81,253 (14,654) 20,876 (30,123) 27,251 25,351
Income tax expense
(benefit).............. 21,882 (6,080) 3,074 (8,093) 7,789 7,037
-------- -------- -------- -------- -------- ----------
Income (loss) before
minority interest..... 59,371 (8,574) 17,802 (22,030) 19,462 18,314
Minority interest in
income................. (2,041) (1,247) (1,359) (3,576) (2,900) (2,900)
-------- -------- -------- -------- -------- ----------
Net income (loss)...... $ 57,330 $ (9,821) $ 16,443 $(25,606) $ 16,562 $ 15,414
======== ======== ======== ======== ======== ==========
Income (loss) per common
share(2)............... N/A N/A N/A N/A N/A $ 1.23
==========
Weighted average number
of common shares
outstanding............ N/A N/A N/A N/A N/A 12,517,552
==========
BALANCE SHEET DATA:
Total assets............ $410,492 $408,936 $359,912 $356,125 $351,496 N/A
Total long-term debt.... 1,000 -- -- -- 53,907 N/A
Total shareholder's
equity................. 222,027 217,231 183,101 186,507 90,746 N/A
CASH FLOW DATA:
Cash flow from operating
activities............. $ 37,571 $ (357) $ 38,447 $(39,151) $ 25,159 N/A
Cash flow from investing
activities............. (37,438) (11,764) 14,051 3,899 (11,348) N/A
Cash flow from financing
activities............. 1,030 2,662 (49,742) 32,012 (14,797) N/A
OTHER FINANCIAL DATA:
Depreciation and
amortization........... $ 12,821 $ 16,178 $ 15,569 $ 16,077 $ 17,281 $ 17,281
EBITDA(7)............... 89,882 21,548 40,603 (19,238) 48,051 46,151
Capital expenditures.... 44,465 19,232 18,772 14,880 20,425 20,425
OTHER DATA:
Number of employees:
Salaried............... 2,036 1,861 1,800 1,663 1,516 1,516
Hourly and craft....... 5,227 4,408 4,852 3,483 4,432 4,432
New business taken(8)... $732,415 $782,606 $648,082 $782,878 $687,227 $687,227
Backlog(8).............. 364,326 449,303 323,343 470,174 485,704 485,704
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RISK FACTORS
Prior to making an investment in the Common Shares, prospective purchasers should consider all of the information set forth in this Prospectus and, in particular, should evaluate the following risk factors:
OPERATING RISKS
Construction and heavy equipment involve a high degree of operational risk. Natural disasters, adverse weather conditions and operator error can cause personal injury or loss of life, severe damage to and destruction of property, equipment and the environment and suspension of operations. The occurrence of any such event could result in revenue and casualty loss, increased costs and significant liability to third parties. Litigation arising from such an occurrence may result in the Company being named as a defendant in lawsuits asserting substantial claims.
Although the Company maintains risk management, insurance and safety programs intended to mitigate the effects of loss or damage, there can be no assurance that any such programs will be sufficient or effective under all circumstances or against all hazards to which the Company may be subject. An enforceable claim for which the Company is not fully insured could have a material adverse effect on the Company's business, financial condition and results of operations. Moreover, no assurance can be given that the Company will be able to maintain adequate insurance in the future at rates that it considers reasonable. See "Business--Legal Proceedings and Insurance."
RISK ASSOCIATED WITH FIXED PRICE CONTRACTS
A substantial portion of the Company's projects are currently performed on a fixed price or lump sum basis, although some projects are performed on a cost reimbursable or day rate basis or some combination of the foregoing. The Company attempts to cover increased costs of changes in labor, material and service costs of its long term contracts (which typically extend from one to three years) either through an estimation of such changes, which is reflected in the original price, or through price adjustment clauses. Despite these attempts, however, the revenue, cost and gross profit realized on a fixed price or lump sum contract will often vary from the estimated amounts because of unforeseen conditions or changes in job conditions and variations in labor and equipment productivity over the term of the contract. These variations and the risks generally inherent in construction may result in gross profits realized by the Company being different from those originally estimated and may result in the Company experiencing reduced profitability or losses on projects. Depending on the size of a project, these variations from estimated contract performance could have a material adverse effect on the Company's business, financial condition and results of operations for any period. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview--Contracts" and "Business--Contracting Methods."
RISK ASSOCIATED WITH PERCENTAGE OF COMPLETION ACCOUNTING
The Company's contract revenues are recognized using the percentage of completion method. Under this method, estimated contract revenues are accrued based generally on the percentage that costs to date bear to total estimated costs. Estimated contract losses are recognized in full when determined. Accordingly, contract revenues and total cost estimates are reviewed and revised periodically as the work progresses and as change orders are approved, and adjustments based upon the percentage of completion are reflected in contract revenues in the period when such estimates are revised. Such estimates are based on management's reasonable assumptions and experience, and are only estimates. Variation of actual results from such assumptions or the Company's historical experience could be material. To the extent that these adjustments result in a reduction or an elimination of previously reported contract revenues, the Company would recognize a charge against current earnings, which could have a material adverse effect on the Company's business, financial condition and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Overview--Revenue Recognition."
FLUCTUATING REVENUES AND CASH FLOW
The Company is dependent upon major construction projects in cyclical industries, including the petroleum, petrochemical, chemical, pulp and paper, electric and gas utility, and water and wastewater industries, for its revenues and cash flow. In the petroleum and petrochemical industry, which in recent years has accounted for the largest component of the Company's revenues, numerous factors influence capital expenditure decisions, including current and projected oil and gas prices; exploration, extraction, production and transportation costs; the discovery rate of new oil and gas reserves; the sale and expiration dates of leases and concessions; local and international political and economic conditions; technological advances; and the abilities of oil and gas companies to generate capital. These factors are beyond the control of the Company. The selection of, timing of or failure to obtain projects, the delay in awards of projects, the cancellation of projects or delays in completion of contracts could result in the under-utilization of the Company's resources which could have a material adverse impact on the Company's business, financial condition, results of operations and cash flows. In addition, construction projects for which the Company's services are contracted may require significant expenditures by the Company prior to receipt of relevant payments by a customer. Such expenditures could have a material adverse impact on the Company's cash flows. In addition, quarterly results may fluctuate depending on factors including those described above which may affect the realization by the Company of its backlog. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources."
SUBSTANTIAL LIQUIDITY REQUIREMENTS
The Company's operations require significant amounts of working capital for acquisitions of and improvements to heavy-duty equipment and for the procurement of materials for contracts to be performed over relatively long periods of time. Capital expenditures for the acquisitions of and improvements to heavy-duty equipment are generally part of the Company's normal annual capital expenditure program. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." In addition, the Company's contract arrangements with customers frequently require the Company to provide bid and performance bonds or letters of credit to partially secure the Company's obligations under its bids and/or contracts as well as requiring significant expenditures prior to receipt of payments. Furthermore, the Company's customers will often retain a portion (generally about 10%) of amounts otherwise payable to the Company during the course of a project as a guarantee of completion of such project. See "-- Fluctuating Revenues and Cash Flow."
RISKS ASSOCIATED WITH HOLDING COMPANY STRUCTURE
The Issuer is a holding company and conducts no business operations of its own. The principal asset of the Issuer is the outstanding stock of its subsidiaries. The Company conducts all of its operations through subsidiaries of the Issuer and joint ventures between such subsidiaries and third parties. Accordingly, a substantial amount of the Issuer's consolidated assets are held by, and a substantial part of the Issuer's consolidated earnings and cash flows are attributable to, such subsidiaries and joint ventures. As a result, the Issuer's liquidity, and its ability to pay its expenses and meet its obligations and to pay cash dividends on the Common Shares, are substantially dependent upon its ability to obtain a flow of funds from such subsidiaries and joint ventures. There can be no assurance that such subsidiaries and joint ventures will generate sufficient earnings and cash flows to pay dividends or otherwise distribute funds to the Issuer to enable the Issuer to meet its obligations and pay its expenses and dividends. Certain subsidiaries and joint ventures may incur substantial indebtedness to third parties, the terms of which may restrict the ability of the Issuer to obtain funds from the applicable subsidiaries and/or joint ventures. In addition, the arrangements governing certain of the Company's joint ventures require approval of the other parties to those joint ventures before distribution can be made to the parties. These restrictions, along with restrictions imposed by the terms of the New Revolving Credit Facility (as defined under the caption "Description of New Revolving Credit Facility") and other credit arrangements entered into by the Company, could constrain the Issuer's liquidity and, as a result, the Issuer's ability to pay dividends or the Company's ability to secure future financings and could have a material adverse effect on the Company's business, financial condition and results of operations.
RISKS OF INTERNATIONAL OPERATIONS
The Company is a global contractor, with approximately 63% of its new business taken in 1996 relating to projects outside the United States, including in regions which may experience political instability. Since the operations of the Company are carried out internationally, they are subject to certain political, economic and other uncertainties, including, among others, risks of war, expropriation or nationalization of assets, renegotiation or nullification of existing contracts, changing political conditions, changing laws and policies affecting trade and investment, overlap of different tax structures, and the general hazards associated with the assertion of sovereignty over certain areas in which operations are conducted. Additionally, various jurisdictions have laws limiting the right and ability of subsidiaries and joint ventures to pay dividends and remit earnings to affiliated companies, unless specified conditions precedent are met.
Many aspects of the Company's operations are subject to governmental regulations in the countries in which the Company operates, including those relating to currency conversion and repatriation, taxation of its earnings and earnings of its personnel, and its use of local employees and suppliers. The Company's operations are also subject to the risk of changes in laws and policies in the various jurisdictions in which the Company operates which may impose restrictions on the Company, including trade restrictions, that could have a material adverse effect on the Company's business, financial condition and results of operations. Other types of government regulation which could, if enacted or implemented, materially and adversely affect the Company's operations include expropriation or nationalization decrees, confiscatory tax systems, primary or secondary boycotts directed at specific countries or companies, embargoes, import restrictions or other trade barriers, mandatory sourcing rules, high labor rates and fuel price regulation. The Company cannot determine to what extent future operations and earnings of the Company may be affected by new legislation, new regulations or changes in or new interpretations of existing regulations. See "Business--Governmental Regulations--General."
CURRENCY RISKS
As the Company's functional currency is the United States dollar, its non- U.S. operations sometimes face the additional risks of fluctuating currency values and exchange rates, hard currency shortages and controls on currency exchange. Through its contracts with its customers, the Company attempts to limit its exposure to currency and exchange rate fluctuations by attempting to match anticipated non-U.S. currency contract receipts with anticipated like non-U.S. currency disbursements. To the extent that it is unable to match the anticipated non-U.S. currency receipts and disbursements related to its contracts, the Company may enter, if the Company believes it is warranted under the circumstances, into forward exchange contracts, to the extent available, to hedge non-U.S. currency transactions on a continuing basis for periods consistent with its committed exposures. Because the Company generally does not hedge beyond its contract exposure, the Company believes this practice minimizes the impact of non-U.S. exchange rate movements on the Company's results of operations. There can be no assurance, however, that the attempted matching of non-U.S. currency receipts with disbursements or hedging activity will adequately moderate the risk of currency or exchange rate fluctuations which could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, since the Company generates revenues in countries around the world, there can be no assurance that forward exchange contracts will be available with respect to any given currency in which the Company generates revenues. See "Business-- Geographic Markets."
POTENTIAL ENVIRONMENTAL LIABILITY
The Company's operations and properties are affected by numerous national, federal, state and local environmental protection laws and regulations, such as those governing discharges to air and water, as well as the handling and disposal of solid and hazardous wastes in each of the countries where the Company operates. The requirements of these laws and regulations have tended to become increasingly stringent, complex and costly to comply with. This is true for the Company's United States operations and
for its non-U.S. operations, which operations historically have been conducted generally pursuant to less stringent environmental laws and regulations than exist in the United States. While the Company has an environmental compliance program in place, it cannot guarantee that any non-compliance, if it exists, would not have a material adverse effect on the Company. There also can be no assurance that environmental laws and regulations or their interpretation will not change in the future in a manner that could materially and adversely affect the Company. In addition, the Company may be subject to claims alleging personal injury or property damage as a result of alleged exposure to toxic and hazardous substances.
Certain environmental laws, such as the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA" or "Superfund") in the United States, provide for strict and joint and several liability for investigation and remediation of spills and other releases of toxic and hazardous substances. Such laws may apply to conditions at properties currently or formerly owned or operated by an entity or its predecessors, as well as to conditions at properties at which wastes or other contamination attributable to an entity or its predecessors come to be located. The Company can give no assurance that it, or entities for which it may be responsible, will not incur such liability in connection with the investigation and remediation of facilities it currently owns or operates (or formerly owned or operated) or other locations in a manner that could materially and adversely affect the Company.
The Company's business sometimes involves working around and with volatile, toxic and hazardous substances, which exposes it to risks of liability for personal injury or property damage caused by any release, spill, or other accident involving such substances that occurs as a result of the conduct of its business. The Company has been (and may continue to be) unable to obtain adequate environmental damage or pollution insurance at a reasonable cost. Although the Company maintains general liability insurance, this insurance is subject to coverage limitations, deductibles and exclusions and may exclude coverage for losses or liabilities relating to pollution damage. Therefore, there can be no assurance that liabilities that may be incurred by the Company will be covered by its insurance policies, or, if covered, that the dollar amount of such liabilities will not exceed the Company's policy limits. Even a partially uninsured claim, if successful and of significant magnitude, could have a material adverse effect on the Company's business, financial condition and results of operations. See "Business--Governmental Regulations-- Environmental," "Business--Legal Proceedings and Insurance" and "Certain Transactions; Relationship with Praxair."
DEPENDENCE ON PETROLEUM AND PETROCHEMICAL INDUSTRY
In recent years, demand from the worldwide petroleum and petrochemical industry has been the largest component of the Company's revenues, and accounted for approximately 60% of revenues in 1996. Therefore, no assurance can be given that the Company's business, financial condition and results of operations will not be materially adversely affected because of reduced activity in the oil and gas industry. In addition, the Company may be materially adversely affected by changing taxes, price controls and laws and regulations relating to the petroleum and petrochemical industries generally. See "--Fluctuating Revenues and Cash Flow" and "Business--Customers."
COMPETITION
Several large companies offer metal plate products and services that compete with some, but not all, of those of the Company. Local and regional companies offer competition in one or more geographical areas and in certain product lines. Although the Company believes customers consider, among other things, the availability and technical capabilities of equipment and personnel, efficiency, condition of equipment, safety record and reputation, price competition is currently a principal factor in determining which qualified contractor is awarded a contract.
In recent years, competition has resulted in substantial pressure on pricing and operating margins. The Company expects overcapacity and other competitive pressures in the industry to continue for the
foreseeable future. Several of the Company's competitors may have substantially greater capital resources, experience, sales and marketing capabilities and broader product and service offerings than the Company and are well established in their respective markets. The Company's competitors, either alone or together with competitors having sufficient resources, could engage in a variety of actions, including aggressive price competition, increased commitment of resources to compete, offering a higher level of customer service and efforts to recruit the Company's customers, which may have the effect of delaying or preventing the implementation of the Company's business strategy or adversely affecting the Company's ability to compete profitably. Given the nature of the construction industry, certain of the Company's costs, including construction equipment and personnel, are essentially fixed over the short term. In order to avoid additional expenses associated with temporarily idling equipment and personnel, the Company may from time to time choose to bid its, and its competitors may bid their, services out for hire at less than attractive rates, depending on the prevailing contractual rates in a given region. See "Business--Competition."
RELIANCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon the performance of its key employees, the loss of one or more of whom could have a material adverse effect on the Company's business, financial condition and results of operations. The Company carries no key-man life insurance. The Company believes that its future success will also depend in large part on its ability to attract and retain highly skilled managerial, supervisory, technical, sales and marketing personnel, who are in great demand. There can be no assurance that the Company will be successful in attracting or retaining such personnel, and the failure to attract or retain such personnel could have a material adverse effect on the Company's business, financial condition and results of operations.
UNCERTAINTY IN ENFORCING UNITED STATES JUDGMENTS AGAINST NETHERLANDS CORPORATIONS,DIRECTORS AND OTHERS
The Issuer is a Netherlands company and a substantial portion of its assets are located outside the United States. In addition, certain members of the Issuer's management and supervisory boards may be residents of countries other than the United States. As a result, judgments of United States courts, including judgments against the Issuer or members of its management or supervisory boards predicated on the civil liability provisions of the federal or state securities laws of the United States, may be difficult to enforce in The Netherlands. See "Service of Process and Enforcement of Civil Liabilities."
POSSIBLE ANTITAKEOVER EFFECTS
The Issuer's Articles of Association and the applicable law of The Netherlands contain provisions that may be deemed to have anti-takeover effects. Among other things, these provisions provide for a staggered board of supervisory directors and a binding nomination process. Such provisions may delay, defer or prevent a takeover attempt that a shareholder might consider in the best interest of the Company's shareholders. See "Description of Share Capital." In addition, certain United States tax laws may discourage third parties from accumulating significant blocks of the Common Shares. See "Taxation--United States Federal Income Taxes--Foreign Personal Holding Company Classification" and "Taxation--United States Federal Income Taxes-- Controlled Foreign Corporation Classification."
OTHER MATTERS RELATED TO COMPANIES INCORPORATED IN THE NETHERLANDS
As a Netherlands "naamloze vennootschap" (N.V.), the Issuer will be subject to certain requirements not generally applicable to corporations organized in United States jurisdictions. Among other things, the issuance of shares by an N.V. must be submitted for resolution of the general meeting of shareholders, except to the extent such authority to issue shares has been delegated by the general meeting of shareholders to another corporate body. The Issuer's shareholders are expected to authorize, prior to the Common Share Offering, the Issuer's Supervisory Board (as defined below under "Management") to issue
such additional authorized but unissued Common Shares as the Supervisory Board shall determine. Under the law of The Netherlands, such authorization can only be granted for a maximum period of five years and the above-mentioned authorization is expected to expire on or about the date that is five years from the date of this Prospectus, subject to future extension(s).
In addition, the issuance of the shares is generally subject to shareholder preemptive rights, except to the extent that such preemptive rights have been excluded or limited by the general meeting of shareholders (subject to a qualified majority of two-thirds of the votes if less than 50% of the outstanding share capital is present or represented) or by the corporate body empowered to do so by the general meeting of shareholders or the articles of association. Shareholders do not have preemptive rights with respect to, inter alia, Common Shares which are issued against payment other than in cash nor with respect to shares issued to employees of the Issuer and its subsidiaries. Prior to the consummation of the Common Share Offering, the Issuer's shareholders are also expected to adopt a resolution providing the Supervisory Board with an irrevocable five-year authorization to exclude or limit shareholder preemptive rights. See "Description of Share Capital--Summary of Certain Provisions of the Articles of Association and Other Matters--Issue of Shares; Preemptive Rights."
NEW STATUS AS INDEPENDENT ENTITY
Prior to the Common Share Offering, the Issuer was a wholly owned subsidiary of Praxair, and prior thereto a wholly owned subsidiary of Industries, and the Company has depended upon Praxair and Industries for certain financial and administrative support. Upon completion of the Common Share Offering, the Company will be responsible for its own financing and administering its own treasury, cash management, accounting, legal, tax, insurance, human resources and other services (after an interim transition period during which Praxair may continue to provide certain credit guarantees which are already outstanding and will provide certain pension-related services for specified fees). Praxair may continue to provide certain benefits-related services to the Company in the future. The Company is expected to incur additional general and administrative expenses estimated to be approximately $1.9 million annually in connection with the Company's status as an independent publicly traded company. In addition, prior to the consummation of the Common Share Offering, both Industries and Praxair provided credit support under arrangements providing for performance bonds and letters of credit issued on behalf of the Company. Such credit support will not extend to new utilization under such arrangements and may not continue with respect to outstanding obligations, which totalled approximately $72.7 million of contingent letters of credit or bank guarantees and $212.3 million of performance bonds as of December 31, 1996. To the extent the Company cannot obtain new utilization under such arrangements, the Company may be required to utilize letters of credit under the New Revolving Credit Facility, if available. Prior to the consummation of the Common Share Offering, certain stand-by letters of credit required in connection with the Company's insurance requirements were provided by or on behalf of Praxair. As of December 31, 1996, such letters of credit totalled approximately $22 million. The Company will be required to obtain new letters of credit and indemnify and compensate Praxair with respect to letters of credit and guarantees provided by Praxair which are not replaced by those obtained by the Company. Furthermore, the Company has generated significant revenue from services provided to Praxair, Industries and their affiliates. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" and "Certain Transactions; Relationship with Praxair."
RISKS OF JOINT VENTURES AND LESS THAN 100% OWNED OPERATIONS
The Company conducts a significant portion of its operations through joint ventures and less than 100% owned affiliates, all of which the Company manages. In 1996, the Company recorded $0.9 million in income from unconsolidated affiliates, and $112.6 million in revenues from consolidated entities less than 100% owned by the Company, which represented approximately 18% of the Company's total consolidated revenues in 1996. At any given time, the revenues or new business taken of a particular joint venture or less than 100% owned affiliate could be significant. The Company's joint venture partners and
the minority owners of such affiliates may from time to time have economic or business interests or goals which are inconsistent with the business interests or goals of the Company. The Company may not have control over the operations or assets of a joint venture or affiliate if the joint venture, other agreements or governing law so provide. Although the Company generally manages the operations of its joint ventures and less than 100% owned affiliates in the same manner as it manages the operations of its wholly owned affiliates, the Company may be required to consider the interests of its joint venture partners and the minority owners of such affiliates in connection with decisions concerning the operations of the joint ventures and affiliates. The expenses of managing the operation of each joint venture and affiliate are allocated to such joint venture or affiliate. All such joint ventures and affiliates are organized as corporate entities, and the equity holders of such entities, as shareholders, generally are not subject to liability with respect to the activities of the joint ventures and affiliates. The Company generally is not liable to any joint venture or affiliate for activities undertaken on behalf of such joint venture or affiliate in accordance with authority granted by the joint venture or affiliate. Although each joint venture and affiliate also maintains insurance coverages required by law as well as additional coverages, there can be no assurance that such coverage will be adequate. The Company also faces the risk that a joint venture partner or minority owner of an affiliate may be unable to meet its economic or other obligations and that the Company may be required or choose to fulfill those obligations. See also "--Risks Associated with Holding Company Structure."
SELLING SHAREHOLDER INFLUENCE OVER THE COMPANY
Upon consummation of the merger of Bridge Holdings into the Selling Shareholder, the Selling Shareholder will own directly 100% of the outstanding Common Shares. Upon completion of the Common Share Offering and the contribution to the Management Plan, the Selling Shareholder will own approximately 8% (and, if the Underwriters' over-allotment option is exercised in full, none) of the then outstanding Common Shares. In addition, under the Issuer's Articles of Association, the Selling Shareholder will have the right to appoint, remove and replace two members of the Supervisory Board so long as the Selling Shareholder owns at least 20% of the outstanding Common Shares, and the right to appoint, remove and replace one member of the Supervisory Board so long as the Selling Shareholder owns at least 10% but less than 20% of the outstanding Common Shares. As a result, the Selling Shareholder may be in a position to influence the management and affairs of the Company, including with respect to the election and removal of directors, amendments to the Issuer's Articles of Association and with respect to transactions which could cause a change of control of the Issuer. Furthermore, the Company and Praxair have entered into various agreements in connection with the Reorganization and the Common Share Offering. The Registration Rights Agreement (as defined) provides that in certain instances the Selling Shareholder's consent is required prior to the Issuer's registering additional Common Shares (or similar securities) under the Securities Act. See "Management--Supervisory Board," "Certain Transactions; Relationship with Praxair" and "Description of Share Capital."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Upon completion of the Common Share Offering and the contribution to the Management Plan, the Issuer will have 12,517,552 outstanding Common Shares, including 1,000,000 Common Shares owned by the Selling Shareholder (none if the Underwriters' over-allotment option is exercised in full) and including the 1,017,552 Management Plan Shares as described under "Management-- Compensation and Benefits--Special Stock-Based, Long-Term Compensation Related to the Common Share Offering" (assuming an initial public offering price of $21.50 per share (the mid-point of the price range as set forth on the cover page of this Prospectus)). The 10,500,000 Common Shares (11,500,000 if the Underwriters' over-allotment option is exercised in full) offered hereby will be eligible for sale in the public market after the completion of the Common Share Offering, except for any shares purchased by an "affiliate" of the Issuer, which will be subject to the resale limitations of Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"). In the underwriting agreements among the Issuer, the Selling Shareholder and the U.S. Underwriters and Managers, respectively, the Issuer and the Selling Shareholder, as well as certain
directors and executive officers of the Company, will agree (subject to certain exceptions) not to sell any Common Shares for a period of 180 days after the date of this Prospectus without the prior consent of Credit Suisse First Boston Corporation. Upon the expiration, or waiver, of the restrictions contained in such underwriting agreements, the remaining outstanding Common Shares will be "restricted securities" for purposes of Rule 144, and may not be resold unless registered under the Securities Act or sold pursuant to an exemption from registration thereunder. Praxair has certain rights to require the Issuer to register Common Shares held by the Selling Shareholder (or its transferees) for sale under the Securities Act to permit the public sale of such shares. Significant sales of Common Shares (whether such shares are currently outstanding or subsequently issued) under a registration statement, pursuant to Rule 144 or otherwise in the future, or the prospect of such sales, may depress the price of the Common Shares or any market that may develop, and may also render difficult the sale of the Common Shares purchased by investors hereunder. See "Certain Transactions; Relationship with Praxair-- Registration Rights Agreement" and "Shares Eligible for Future Sale."
ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF SHARE PRICE
Prior to the Common Share Offering, there has been no public market for the Common Shares and there can be no assurance that an active trading market will develop or be sustained in the future. The initial public offering price of the Common Shares will be determined solely by negotiations among the Issuer, the Selling Shareholder and the representatives of the Underwriters and will not necessarily reflect the market price of the Common Shares after completion of the Common Share Offering or the price at which Common Shares may be sold in the public market after the Common Share Offering. The initial public offering price of the Common Shares will be determined by negotiations among the Company, the Selling Shareholder and the representatives of the Underwriters based on various factors. The market price of the Common Shares after the Common Share Offering could be subject to significant fluctuations in response to various factors, including variations in quarterly operating results, future announcements concerning the Company or its competitors, interest rates, foreign exchange rates, the depth and liquidity of the market for the Common Shares, investor perceptions of the Company and general economic, market and other conditions.
DILUTION
The initial public offering price per share of Common Shares will exceed the net tangible book value per Common Share. Accordingly, the purchasers of the Common Shares offered hereby will experience immediate and substantial dilution of $15.23 in their investment (assuming an initial public offering price of $21.50 per share, the mid-point of the price range as set forth on the cover page of this Prospectus). Additional dilution may occur following the exercise by directors, management and other employees of options to purchase Common Shares granted in the future under the Company's option plans and agreements or purchases of shares under employee share purchase plans. See "Dilution" and "Management--Compensation and Benefits--Executive Compensation--Long-Term Compensation" and "Management--Employee Share Purchase Plan."
RISK OF U.S. TAXATION OF FOREIGN OPERATIONS
The Issuer and its non-U.S. subsidiaries will carry out their activities in a manner which the Company believes will not constitute the conduct of a trade or business in the United States. Accordingly, although the Company reports taxable income and pays taxes in the countries where it operates, the Company believes that income earned by the Issuer and its non-U.S. subsidiaries from operations outside the United States is not reportable in the United States for tax purposes and is not subject to U.S. income tax. If income earned by the Issuer or its non-U.S. subsidiaries from operations outside the United States is determined to be income effectively connected to a United States trade or business and as a result becomes taxable in the United States, the Company could be subject to U.S. taxes on a basis significantly more adverse than generally would apply to such business operations. If the Company were to be deemed to be subject to such taxes, there can be no assurance that the Company's business, financial condition and results of operations will not be materially and adversely affected.
RISK OF BEING CLASSIFIED AS A FOREIGN PERSONAL HOLDING COMPANY
If certain events occur, the Issuer or any of its non-U.S. subsidiaries may be classified, for U.S. tax purposes, as a foreign personal holding company ("FPHC"). The events which would trigger the classification as an FPHC are, in part, beyond the control of the Company. The Issuer would be classified as an FPHC if in any taxable year (i) five or fewer individuals who are U.S. citizens or residents own (directly or constructively through certain attribution rules) more than 50% of the voting power or the value of the outstanding Common Shares and (ii) at least 60% of its gross income is "foreign personal holding company income," which is defined under Section 553 of the Internal Revenue Code of 1986, as amended (the "Code"), to include, among other things, dividends, interest, rent and royalties. If the Issuer were to be classified as an FPHC, this would generally require each U.S. shareholder who held Common Shares on the last day of the Company's taxable year to include in such shareholder's gross income as a dividend that shareholder's pro rata portion of undistributed income of the Issuer and of any non-U.S. subsidiaries that are also FPHCs. The Issuer believes that it will not be an FPHC at the time of the Common Share Offering made by this Prospectus but undertakes no obligation to determine if it is an FPHC at any time. There can be no assurance that the Issuer or any of its non-U.S. subsidiaries will not be classified as FPHCs in the future. See "Taxation -- United States Federal Income Taxes--Foreign Personal Holding Company Classification."
RISK OF BEING CLASSIFIED AS A CONTROLLED FOREIGN CORPORATION
The Issuer is incorporated in The Netherlands and is not expected to be a
"controlled foreign corporation" for purposes of U.S. tax law after the Common
Share Offering. However, the Company would be classified as a controlled
foreign corporation if any United States person acquires 10% or more of the
shares of the Issuer (including ownership through the attribution rules of
Section 958 of the Code) and the sum of the percentage ownership by all such
persons exceeds 50% (by voting power or value) of the Issuer's stock. There is
no assurance that the Issuer will not be determined to be a controlled foreign
corporation in the future. In the event that such a determination were made,
all U.S. holders of 10% or more of the shares of the Issuer will be subject to
taxation under Subpart F of the Code. The ultimate consequences of this
determination are fact-specific to each 10% or greater (including ownership
through the attribution rules of Section 958 of the Code) U.S. shareholder but
could include possible taxation of such U.S. shareholder on income of the
Issuer even in the absence of distribution by the Issuer of such income. See
"Taxation--United States Federal Income Taxes--Controlled Foreign Corporation
Classification."
THE COMPANY
CB&I is a global engineering and construction company specializing in the engineering and design, materials procurement, fabrication, erection, repair and modification of steel tanks and other steel plate structures and associated systems such as petroleum terminals, refinery pressure vessels, low temperature and cryogenic storage facilities and elevated water storage tanks. Based on its knowledge of and experience in its industry, the Company believes it is the leading provider of field erected steel tanks and other steel plate structures, associated systems and related services in North America and one of the leading providers of these specialized products and services in the world. CB&I seeks to maintain its leading industry position by focusing on its technological expertise in design, metallurgy and welding, along with its ability to complete logistically and technically complex metal plate projects virtually anywhere in the world. CB&I has been continuously engaged in the engineering and construction industry since its founding in 1889. In 1996, the Company was involved in over 500 projects for over 250 customers in 34 countries.
The Issuer, with its corporate seat at Amsterdam, The Netherlands, is a corporation organized under the laws of The Netherlands, was incorporated in November 1996 and maintains its registered office and the principal office of CBICBV at P.O. Box 74658, 1070BR Amsterdam, The Netherlands. The Issuer's telephone number at such address is 31-20-664-4461. The executive office of New CBIC is located at 1501 North Division Street, Plainfield, Illinois 60544, and its telephone number at that address is (815) 439-6000. The Issuer is registered in the trade register of the Chamber of Commerce of Amsterdam under No. 286.441.
The Issuer's objects clause as contained in its Articles of Association is
formulated in a broad manner, enabling the Issuer to do all such things as may
be in the broadest sense in furtherance of the business of the Company as
described herein (see "Business"), including, among other things, to:
incorporate, own, participate in, manage and promote businesses; perform
industrial, financial and commercial activities; design, develop, manufacture,
market, sell and service products of any nature; and to borrow, lend and raise
funds and render guarantees.
DIVIDEND POLICY
It is anticipated that following the consummation of the Common Share Offering, the Issuer will initially pay quarterly cash dividends which, on an annual basis, will aggregate $0.24 per Common Share and which may be changed over time as its earnings and prospects warrant. However, no such dividend has been declared and the declaration and payment of dividends will be a business decision to be made by the Management Board (as defined below under "Management") and the Supervisory Board of the Issuer from time to time, subject to, in the case of annual dividends, the determination by shareholders at a general meeting and subject to applicable mandatory provisions of Dutch law, and based on a variety of factors including, among others, the Company's earnings, financial position, capital needs and such other considerations as such boards or the general meeting of shareholders deem relevant as well as any restrictions under the Issuer's debt instruments. See "Description of Share Capital--Summary of Certain Provisions of the Articles of Association and Other Matters--Dividends." The Issuer's first dividend is expected to be payable on June 30, 1997 to shareholders of record at the close of business on June 20, 1997. Although under Dutch law dividends generally are paid annually after being approved at a general meeting of shareholders, quarterly dividends in anticipation of an annual dividend may be distributed by a company's management board, in the case of the Issuer, with the approval of its Supervisory Board. See "Description of Share Capital--Summary of Certain Provisions of the Articles of Association and Other Matters--Dividends."
It is expected that cash dividends, if any, will be declared in dollars. For a description of the basis on which dividends may be converted into Dutch guilders, see "Description of Share Capital--Summary of Certain Provisions of the Articles of Association and Other Matters--Dividends." As regards cash payments, the rights to dividends and distributions shall lapse if such dividends or distributions are not claimed within five years following the day after the date on which they were made available.
There are no legislative or other legal provisions currently in force in The Netherlands or arising under the Issuer's Articles of Association restricting dividends to holders of the Common Shares not resident in The Netherlands. Insofar as the law of The Netherlands is concerned, cash dividends paid in any currency may be transferred from The Netherlands and converted into any other convertible currency. Dividends payable by the Issuer are subject to Dutch withholding tax at the current rate of 25%. The withholding tax on dividends paid to holders of Common Shares who are not residents of The Netherlands may be reduced by virtue of an applicable income tax convention in effect between The Netherlands and the country of residence of the recipient of the dividends. See "Taxation--Netherlands Taxes--Netherlands Dividend Withholding Tax."
The Issuer is a newly formed corporation with no accumulated earnings and profits for U.S. federal income tax purposes. If the Issuer declares dividends in the Issuer's first taxable year after the Common Share Offering in excess of the Issuer's current earnings and profits for such year, the excess of the dividend paid with respect to a particular class of the Issuer's shares over the earnings and profits allocable to such class of shares shall be treated for United States federal income tax purposes as a return of capital to the extent of the shareholder's basis in the shares, and a capital gain to the extent of any amount of such excess distributed to the shareholder in excess of such basis.
The Issuer is a holding company that derives all of its cash flow from its subsidiaries. Consequently, the Issuer's ability to pay dividends is dependent on the earnings of its subsidiaries and the receipt by the Issuer of distributions from such subsidiaries. In addition, the New Revolving Credit Facility limits, and any other credit arrangements which the Company may enter into may limit, the Issuer's ability to pay dividends. See "Risk Factors-- Substantial Liquidity Requirements," "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" and "Description of New Revolving Credit Facility."
DILUTION
Dilution is the reduction in the value of a purchaser's investment in Common Shares measured by the difference between the purchase price per share and the net tangible book value per Common Share after the purchase. Giving effect to the Reorganization, the consolidated net tangible book value of the Issuer as of December 31, 1996 was $71.8 million or $6.24 per share and, after giving effect to the Common Share Offering (at assumed initial public offering price of $21.50 per share, the mid-point of the price range as set forth on the cover page of this Prospectus and including the deduction of estimated offering expenses payable by the Issuer and the contribution of Common Shares to the Management Plan), was $78.4 million or $6.27 per share. The net tangible book value per share is determined by dividing the consolidated net tangible book value of the Issuer by the number of Common Shares outstanding at that date. The consolidated net tangible book value of the Issuer represents its total assets less its total liabilities and intangible assets (consisting of goodwill). Without taking into account any other changes in such consolidated net tangible book value after December 31, 1996, other than to give effect to the sale of the Common Shares offered hereby (at assumed initial public offering price of $21.50 per share), purchasers of Common Shares in the Common Share Offering would experience immediate dilution of $15.23 per share, which is equal to the difference between the assumed initial public offering price and the net tangible book value per Common Share as of September 30, 1996. The following table illustrates this per share dilution:
Assumed initial public offering price per share..................... $21.50
Net tangible book value per share as of December 31, 1996 after
giving effect to the Common Share Offering......................... 6.27
------
Dilution per share to purchasers in the Common Share Offering(1).... $15.23
======
|
USE OF PROCEEDS
The net proceeds to the Selling Shareholder from the sale of the Common Shares in the Common Share Offering are estimated to be approximately $214 million, after deducting estimated underwriting discounts and commissions but before estimated offering expenses payable by the Selling Shareholder. The Company will not receive any of the proceeds from the sale of Common Shares in the Common Share Offering.
CAPITALIZATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The following table sets forth the cash, consolidated short-term debt and capitalization of the Company at December 31, 1996 (after giving effect to the Reorganization) and as adjusted to give effect to the Common Share Offering, the contribution of Common Shares to the Management Plan and the Reorganization. This table should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Prospectus.
AS OF DECEMBER 31, 1996
--------------------------
ACTUAL (1) AS ADJUSTED (2)
---------- ---------------
Cash and cash equivalents........................... $ 11,923 $ 9,923 (3)
======== ========
Short-term notes payable............................ $ 3,114 $ 3,114
-------- --------
Long-term debt to Praxair........................... 53,907 53,907 (4)
-------- --------
Shareholders' Equity:
Common stock, NLG .01 par value, 50,000,000
authorized, 11,500,000 actual shares issued and
outstanding;
12,517,552 as adjusted shares issued and
outstanding (5).................................. 65 74
Additional paid-in capital........................ 79,953 99,821 (3)
Retained earnings................................. 11,562 (1,652)
Cumulative translation adjustment................. (775) (775)
-------- --------
Total shareholders' equity...................... 90,805 97,468 (6)
-------- --------
Total capitalization.......................... $147,826 $154,489
======== ========
|
(2) Reflects amounts after giving effect to the Reorganization, the Common
Share Offering and the contribution of 1,017,552 Common Shares to the
Management Plan valued at $21.9 million (which would result in an increase
to Common Stock and Additional paid-in capital) and a related pre-tax
charge of $21.9 million (which would result in a $13.2 million reduction
in Retained earnings, net of tax effect) assuming an initial offering
price of $21.50 per share.
(3) The Issuer will not receive any proceeds from the Common Share Offering
but will pay a portion of the offering costs, which portion will not
exceed $2.0 million.
(4) The Company intends to refinance its long-term debt to Praxair with
indebtedness incurred under the New Revolving Credit Facility. As of
February 27, 1997, the aggregate amount of such indebtedness outstanding
to Praxair was approximately $73 million.
(5) Excludes Common Shares issuable upon exercise of options to be granted
under the Company's stock option plan.
(6) The $6.7 million net increase in Total shareholders' equity and Total capitalization reflects the $8.7 million increase resulting from the tax benefit associated with the contribution to the Management Plan, offset by the $2.0 million of offering costs to be paid by the Issuer, as described in footnotes 2 and 3 above.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
The following table sets forth Selected Consolidated Financial and Other Data for the periods and as of the dates indicated. The selected consolidated income statement data for each of the years in the three-year period ended December 31, 1996 and the selected consolidated balance sheet data as of December 31, 1996, 1995 and 1994 have been derived from, and are qualified by reference to, the Audited Consolidated Financial Statements of the Company included elsewhere in this Prospectus. The selected consolidated income statement data for the year ended December 31, 1993 have been derived from the Company's audited financial statements. The selected consolidated income statement data for the year ended December 31, 1992 and the selected consolidated balance sheet data as of December 31, 1993 and 1992 have been derived from the Company's unaudited financial statements.
The selected consolidated financial and other data set forth below should be read in conjunction with, and are qualified by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company and accompanying notes thereto (including without limitation "Operations by Geographic Segment" found on pages F-19 and F-38 hereof and "Quarterly Operating Results (unaudited)" found on pages F-21 and F-41 hereof) and other financial information included elsewhere in this Prospectus.
POST-PRAXAIR
PRE-PRAXAIR ACQUISITION (1) ACQUISITION
-------------------------------------------- ------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- ------------
INCOME STATEMENT DATA:
Revenues................ $799,196 $680,541 $762,803 $621,938 $663,721
Cost of revenues........ 678,129 630,978 692,266 614,230 590,030
-------- -------- -------- -------- --------
Gross profit........... 121,067 49,563 70,537 7,708 73,691
Selling and
administrative
expenses............... 44,006 44,193 45,503 43,023 42,921
Special charges......... -- 22,900 (2) 16,990 (3) 5,230 (4) --
Gain on the sale of
assets(5).............. (1,062) (118) (11,360) (10,030) (493)
-------- -------- -------- -------- --------
Income (loss) from
operations............ 78,123 (17,412) 19,404 (30,515) 31,263
Interest expense........ (1,275) (298) (180) (799) (5,002)
Other income............ 4,405 3,056 1,652 1,191 990
-------- -------- -------- -------- --------
Income (loss) before
taxes and minority
interest.............. 81,253 (14,654) 20,876 (30,123) 27,251
Income tax expense
(benefit).............. 21,882 (6,080) 3,074 (8,093) 7,789
-------- -------- -------- -------- --------
Income (loss) before
minority interest..... 59,371 (8,574) 17,802 (22,030) 19,462
Minority interest in
income................. (2,041) (1,247) (1,359) (3,576) (2,900)
-------- -------- -------- -------- --------
Net income (loss)...... $ 57,330 $ (9,821) $ 16,443 $(25,606) $ 16,562
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Total assets............ $410,492 $408,936 $359,912 $356,125 $351,496
Total long-term debt.... 1,000 -- -- -- 53,907
Total shareholder's
equity................. 222,027 217,231 183,101 186,507 90,746
CASH FLOW DATA:
Cash flow from operating
activities............. $ 37,571 $ (357) $ 38,447 $(39,151) $ 25,159
Cash flow from investing
activities............. (37,438) (11,764) 14,051 3,899 (11,348)
Cash flow from financing
activities............. 1,030 2,662 (49,742) 32,012 (14,797)
OTHER FINANCIAL DATA:
Depreciation and
amortization........... $ 12,821 $ 16,178 $ 15,569 $ 16,077 $ 17,281
EBITDA(6)............... 89,882 21,548 40,603 (19,238) 48,051
Capital expenditures.... 44,465 19,232 18,772 14,880 20,425
OTHER DATA:
Number of employees:
Salaried............... 2,036 1,861 1,800 1,663 1,516
Hourly and craft....... 5,227 4,408 4,852 3,483 4,432
New business taken(7)... $732,415 $782,606 $648,082 $782,878 $687,227
Backlog(7).............. 364,326 449,303 323,343 470,174 485,704
|
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The following Unaudited Pro Forma Consolidated Income Statement for the year ended December 31, 1996 gives effect to the Common Share Offering and the Reorganization as if each had occurred at the beginning of the period indicated. The Unaudited Pro Forma Consolidated Income Statement is based on the historical financial statements of the Company and the assumptions and adjustments described in the accompanying notes.
As described under the captions "Management--Compensation and Benefits-- Special Stock-Based, Long-Term Compensation Related to the Common Share Offering" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview--Management Plan," upon consummation of the Common Share Offering, the Company will make a contribution to the Management Plan in the form of Common Shares having a value of approximately $21.9 million (assuming an initial public offering price of $21.50 per share (the mid-point of the price range as set forth on the cover page of this Prospectus)). Accordingly, the Company will record a pretax charge of approximately $21.9 million (assuming an initial public offering price of $21.50 per share (the mid-point of the price range as set forth on the cover page of this Prospectus)) at the time of the contribution to the Management Plan. As this represents a non-recurring 1997 charge to income, it has not been reflected in the Unaudited Pro Forma Consolidated Income Statement for the year ended December 31, 1996.
The Unaudited Pro Forma Consolidated Income Statement is based upon assumptions that the Company believes are reasonable and should be read in conjunction with the Consolidated Financial Statements of the Company and the accompanying notes thereto included elsewhere in this Prospectus. The unaudited pro forma data are not designed to represent and do not represent what the Company's results of operations actually would have been had the Common Share Offering and the Reorganization been completed as of the beginning of the period indicated, or to project the Company's results of operations at any future date or for any future period. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
YEAR ENDED DECEMBER 31, 1996
------------------------------------
PRO FORMA AS
HISTORICAL ADJUSTMENTS ADJUSTED(3)
---------- ----------- -----------
Revenues............................... $663,721 $ -- $663,721
Cost of revenues....................... 590,030 -- 590,030
-------- ------- ----------
Gross profit......................... 73,691 -- 73,691
Selling and administrative expenses.... 42,921 1,900 (1) 44,821
Gain on sale of assets................. (493) -- (493)
-------- ------- ----------
Income from operations............... 31,263 (1,900) 29,363
Interest expense....................... (5,002) -- (5,002)
Other income........................... 990 -- 990
-------- ------- ----------
Income before taxes and minority
interest............................ 27,251 (1,900) 25,351
Income tax expense (benefit)........... 7,789 (752)(2) 7,037
-------- ------- ----------
Income before minority interest...... 19,462 (1,148) 18,314
Minority interest in income............ (2,900) -- (2,900)
-------- ------- ----------
Net income........................... $ 16,562 $(1,148) $ 15,414
======== ======= ==========
Pro forma net income per common share.. $ 1.23
==========
Pro forma weighted average number of
common shares outstanding............. 12,517,552(4)
==========
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes.
OVERVIEW
Background. In the first quarter of 1996, Praxair acquired all of the outstanding common stock of Industries, which was then the parent company of Old CBIC. At that time, Praxair announced its intention to divest the businesses of Industries that were not strategic to Praxair, including the Company. The acquisition of Industries by Praxair was reflected in the Company's consolidated financial statements as a purchase effective January 1, 1996 and resulted in changes to the capitalization and historical basis of various assets of the Company. Accordingly, the historical information provided herein, for periods prior to January 1, 1996, is not comparable to subsequent financial information.
Restructuring Program. Following the Praxair acquisition, a new management team was assembled for the Company which has concentrated its initial efforts on redirecting and accelerating the Restructuring Program. The Restructuring Program initially focused on consolidating the Company's organizational structure from six separate, decentralized business units into a single global business operation. On-going enhancements in connection with such consolidation include centralization of procurement, equipment and personnel mobilization, and certain financial functions, as well as streamlining and consolidating administrative and engineering support. As part of the program, seven fabrication plants or warehouses have been closed and three administrative office sites have been downsized or relocated, including the headquarters of the Company's U.S. operations. The Company also has targeted a reduction of approximately 160 salaried positions, of which approximately 147 had been eliminated as of December 31, 1996. The Company believes that the benefits of the Restructuring Program have contributed significantly to the improvement in operating profitability in 1996 relative to 1995.
Management Plan. Praxair and the Company have agreed to compensate certain members of the Company's management for their services in connection with the further development and implementation of the Restructuring Program and the Company's initial public offering. Upon consummation of the Common Share Offering, the Company has agreed to contribute to the Management Plan in the form of Common Shares having a value of approximately $21.9 million (approximately 1,017,552 Common Shares, assuming an initial public offering price of $21.50 per share, representing approximately 8% of the total number of Common Shares outstanding upon consummation of the Common Share Offering). This initial contribution of Management Plan Shares will vest three years (and with respect to one participant, two years) after the date of the Common Share Offering. Accordingly, the Company will record a pretax charge of approximately $21.9 million (assuming an initial public offering price of $21.50 per share) at the time of the contribution to the Management Plan. See "Management--Compensation and Benefits--Special Stock-Based, Long-Term Compensation Related to the Common Share Offering."
Operations. Historically, changing market conditions have dictated that the Company shift product mix and geographic revenue mix in order to maximize operating results. The Company has also reduced its fixed costs from time to time to reflect changes in demand for its products and services. Due to a significant reduction in new business obtained by the Company outside the U.S. and decreases in government and nuclear repair work in the U.S., revenues in 1993 were sharply lower than the level in 1992. While revenues and operating results improved somewhat in 1994, they remained below targeted levels. Actions by the Company to adjust its support infrastructure were generally insufficient to offset the declining revenue trend. During the period of declining performance from 1992 through 1995, the Company became increasingly internally focused. Experienced employees were assigned full-time to the Restructuring Program (during 1996, most of these employees returned to operating duties). In 1995, Industries had also
become involved in defending itself against the ultimately successful takeover by Praxair. These factors along with contract execution issues (such as maintaining costs in line with initial estimates, and equipment and personnel mobilization difficulties) and unabsorbed overhead costs contributed to a significant operating loss in 1995.
Although the Company believes that continued implementation of the Restructuring Program has already resulted in and will continue to result in savings, there can be no assurance that the Company's estimates of results already achieved accurately reflect cost savings associated with the Restructuring Program, that targeted reductions and goals can be achieved or will continue and that part or all of the Restructuring Program can successfully be implemented.
Contracts. The Company obtains contracts primarily through competitive bidding, negotiations or partnering agreements with long-standing customers. Project duration typically lasts from a few weeks to several years. Typically, over 75% of the Company's work is performed on a fixed price or lump sum basis. The balance of projects primarily are performed on variations of cost reimbursable and target fixed or lump sum price approaches.
New Business Taken/Backlog. New business taken represents the value of new project commitments received by the Company during a given period. Such commitments are included in backlog until work is performed and revenue recognized or until cancellation. The variability of the timing of new project commitments, the size of the project and other factors beyond the Company's control can cause significant fluctuation in the new business taken in any given period or backlog outstanding at any given date. Backlog may also fluctuate with currency movements.
Revenue Recognition. Revenues are recognized using the percentage of completion method. Contract revenues are accrued based generally on the percentage that costs to date bear to total estimated costs. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known.
RESULTS OF OPERATIONS
The following table summarizes the consolidated results of operations and the related percentages of revenues for the years ended December 31, 1994, 1995 and 1996:
YEAR ENDED DECEMBER 31,
----------------------------------------------
1994 1995 1996
-------------- -------------- --------------
(DOLLARS IN MILLIONS)
INCOME STATEMENT DATA:
Revenues................ $762.8 100.0% $621.9 100.0% $663.7 100.0%
Cost of revenues........ 692.3 90.8% 614.2 98.8% 590.0 88.9%
------ ------ ------ ------ ------ ------
Gross profit........... 70.5 9.2% 7.7 1.2% 73.7 11.1%
Selling and
administrative
expenses............... 45.5 6.0% 43.0 6.9% 42.9 6.5%
Special charges......... 17.0 2.2% 5.2 0.8% -- --
Gain on sale of assets.. (11.4) (1.5%) (10.0) (1.6%) (0.5) (0.1%)
------ ------ ------ ------ ------ ------
Income (loss) from
operations............ 19.4 2.5% (30.5) (4.9%) 31.3 4.7%
Interest expense........ (0.2) (0.0%) (0.8) (0.1%) (5.0) (0.8%)
Other income............ 1.7 0.2% 1.2 0.2% 1.0 0.2%
------ ------ ------ ------ ------ ------
Income (loss) before
taxes and minority
interest.............. 20.9 2.7% (30.1) (4.8%) 27.3 4.1%
Income tax expense
(benefit).............. 3.1 0.4% (8.1) (1.3%) 7.8 1.2%
------ ------ ------ ------ ------ ------
Income (loss) before
minority interest..... 17.8 2.3% (22.0) (3.5%) 19.5 2.9%
Minority interest in
income................. (1.4) (0.2%) (3.6) (0.6%) (2.9) (0.4%)
------ ------ ------ ------ ------ ------
Net income (loss)...... $ 16.4 2.1% $(25.6) (4.1%) $ 16.6 2.5%
====== ====== ====== ====== ====== ======
Backlog at period end... $323.3 $470.2 $485.7
====== ====== ======
|
The following tables indicate revenues and new business taken by product line for the years ended December 31, 1994, 1995 and 1996:
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
------- ------- -------
(DOLLARS IN MILLIONS)
REVENUES BY PRODUCT LINE
Flat Bottom Tanks...................................... $ 303 $ 253 $ 248
Pressure Vessels....................................... 83 85 82
Low Temperature/Cryogenic Tanks and Systems............ 23 28 60
Elevated Tanks......................................... 55 60 42
Specialty and Other Structures......................... 133 73 117
Repairs and Modifications.............................. 82 68 70
Turnarounds............................................ 84 55 45
------- ------- -------
Total................................................ $ 763 $ 622 $ 664
======= ======= =======
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
------- ------- -------
(DOLLARS IN MILLIONS)
NEW BUSINESS TAKEN BY PRODUCT LINE
Flat Bottom Tanks...................................... $ 207 $ 196 $ 278
Pressure Vessels....................................... 80 86 67
Low Temperature/Cryogenic Tanks and Systems............ 62 204 91
Elevated Tanks......................................... 38 44 46
Specialty and Other Structures......................... 88 122 107
Repairs and Modifications.............................. 76 63 57
Turnarounds............................................ 97 68 41
------- ------- -------
Total................................................ $ 648 $ 783 $ 687
======= ======= =======
|
1996 versus 1995
Revenues. Revenues increased $41.8 million, or 6.7%, to $663.7 million in 1996 from $621.9 million in 1995. This increase reflects improvement in contract activity, primarily in the United States and Central and South America. Revenues for low temperature and specialty product lines increased, reflecting contracts for several liquid natural gas ("LNG") storage facilities and other significant contracts for a wastewater project and a government research facility. To improve profitability of the Company, during 1996 management focused on improving contract execution and cost reductions. As a result, management was more selective in pursuing contract opportunities, which is reflected in the level of new business taken and in the moderate revenue growth in 1996, and is expected to be reflected in the Company's 1997 results. However, the Company expects to more actively pursue new business prospects in its principal markets as its Restructuring Program nears completion.
Backlog at December 31, 1996 increased by approximately $15.5 million to $485.7 million compared to the backlog at December 31, 1995 of $470.2 million. New business taken during 1996 decreased by 12.2% to $687.2 million compared to $782.9 million in 1995 which included approximately $150 million for three LNG storage facility contracts. During 1996, new contract awards increased significantly internationally in Asia, the Middle East and South America while awards decreased in the U.S.
Gross Profit. Gross profit increased $66.0 million to $73.7 million during 1996 from $7.7 million in 1995. Gross profit as a percentage of revenues ("gross margin") increased to 11.1% for 1996 from 1.2% in 1995. The improvement in gross profit and gross margin in 1996 reflects the results of the Restructuring Program initiatives which have achieved cost savings of approximately $10 million, reduced unabsorbed
overhead costs by $11.3 million, improved contract estimation and associated construction performance and reduced benefit costs, as discussed below. Prospectively, the Restructuring Program is expected to result in estimated annual cost savings of approximately $21 million in 1997 and approximately $23 million in 1998, relative to the Company's 1995 cost base. In addition, gross profit increased with higher revenues. Gross profit for 1995 was negatively impacted by approximately $19 million due to the effect of significant losses on a few contracts, as discussed below.
Income from Operations. Income from operations was $31.3 million in 1996, or 4.7% of revenues, versus a loss of $30.5 million in 1995. The improvement in income from operations was primarily attributable to the improvement in gross profit and gross margin described above. Selling and administrative expenses decreased slightly to $42.9 million from $43.0 million in 1995. Selling and administrative expenses included higher expenses relating to the Company's upgrading of its information technology systems and increased incentive compensation due to improved results, offset by a reduction in benefit costs and other cost savings. Benefit cost reductions of approximately $4 million and pension curtailment gains of approximately $1.9 million reduced 1996 cost of revenues sold and selling and administrative expenses by $4.9 million and $1.0 million, respectively. The decrease in the Company's benefit costs during 1996 as compared to 1995 is the result of the transition from the Industries' benefit plans to new benefit plans being established by the Company. The Company's new benefit plans are expected to be in place for 1997, and the level of 1997 benefit costs (excluding one-time costs related to the Management Plan) is expected to be consistent with the 1995 benefit costs. Income from operations in 1995 was also impacted by gains from the sale of assets of $10.0 million and a special charge of $5.2 million.
Interest expense increased $4.2 million, to $5.0 million during 1996 from $0.8 million in 1995. The increase is primarily a result of $55.0 million of long-term debt assumed by the Company on January 1, 1996 as part of the Praxair acquisition.
Income tax expense increased $15.9 million to $7.8 million during 1996 from an income tax benefit of $8.1 million during 1995. This increase results from the return to profitable operations in the U.S. and increased profitability in non-U.S. jurisdictions.
Net income for 1996 was $16.6 million compared to a net loss of $25.6 million in 1995.
1995 versus 1994
Revenues. Revenues decreased $140.9 million, or 18.5%, to $621.9 million in 1995 from $762.8 million in 1994. Decreased revenues reflect the lower level of new business awarded to the Company in 1994 and the relatively low backlog at December 31, 1994. As a result of the completion of a large contract in late 1994, revenues from construction of flat bottom tanks declined by approximately $50 million to $253 million in 1995 from $303 million in 1994. Revenues from specialty contracts also declined during 1995.
Backlog at December 31, 1995 increased by $146.9 million to $470.2 million compared to backlog of $323.3 million at December 31, 1994. New business taken during 1995 increased by 20.8% to $782.9 million compared to 1994. The increase in new business was primarily attributable to the award of three LNG storage facility contracts in the U.S. and a significant contract to supply components to a government research facility.
Gross Profit. Gross profit decreased by $62.8 million to $7.7 million in 1995 from $70.5 million in 1994. Gross margin decreased to 1.2% in 1995 from 9.2% in 1994. Gross profit was reduced by approximately $17 million due to lower revenues and was adversely impacted by $24.0 million of underabsorbed overhead. In addition, gross profit in 1995 was negatively impacted by approximately $19 million due to significant losses on a few contracts. These contract losses were a result of inaccurate estimates related to the scope of work to be performed and contract specifications and unforeseen weather and logistical considerations.
Income from Operations. The Company incurred a loss from operations of $30.5 million in 1995 compared to income from operations of $19.4 million in 1994. The decline was primarily attributable to the significant decrease in gross profit described above. Selling and administrative expenses decreased $2.5 million, or 5.5%, to $43.0 million in 1995 from $45.5 million in 1994. The decrease in selling and administrative expense resulted from cost reductions initiated in early 1995.
In the fourth quarter of 1995, the Company recorded a special charge of $5.2 million comprised of $0.8 million for workforce reduction and $4.4 million for the write-down of an idle facility. The Company recorded a gain on sale of assets in 1995 of $10.0 million, which included gains of $5.9 million from the sale of two facilities and $4.1 million from the sale of other excess property, plant and equipment.
Interest expense increased $0.6 million, to $0.8 million during 1995 from $0.2 million during 1994. The increase resulted from interest on a portion of the litigation settlement which was included in the 1994 special charge described below and higher international debt.
Income tax expense decreased by $11.2 million in 1995 to a net tax benefit of $8.1 million primarily as a result of an operating loss in the U.S., which was utilized in the Industries consolidated return.
The Company reported a net loss of $25.6 million in 1995 compared to $16.4 million of net income in 1994.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1996, the Company generated cash from operations of $25.2 million. The Company's operations used cash of $39.2 million for the year ended December 31, 1995. In 1996, cash generated was primarily the result of increased net income and reduced working capital requirements. Lower working capital requirements were due to decreases in accounts receivable during such period, partly offset by increased cash requirements of contracts in progress resulting from the timing of contract billings. In 1995, cash requirements of the operations were largely attributable to a net loss and increased working capital requirements caused by a major litigation settlement and satisfaction of income tax liabilities. For the year ended December 31, 1994, the Company generated cash from operations of $38.4 million which includes a reduction in accounts receivable due to a large payment received in 1994.
During the period from 1993 through 1995, the Company had annual capital spending of approximately one times annual depreciation expense to maintain its competitive position. Capital expenditures for the year ended December 31, 1996 were $20.4 million. Such capital expenditures were used primarily for field equipment (approximately $11 million), information technology and systems development (approximately $4 million), shop and other equipment (approximately $2 million) and the remainder for environmental and other capital expenditures. The Company anticipates that capital expenditures in the near future will remain at approximately the level of depreciation, except for certain one time incremental additions related to the Restructuring Program, although there can be no assurance that such levels will not increase.
The Company was a subsidiary of Industries when Industries was acquired by Praxair during the first quarter of 1996. On December 19, 1996, Industries merged into Praxair. As a subsidiary of both Industries and Praxair, the Company has participated in corporate cash management systems. Liquidity required for or generated from the business was handled through this system. The resultant cash generated or used by the Company was netted against the advances to parent company account. In 1996, the Company transferred $16.1 million net cash to Praxair. In 1995, the Company received $31.0 million net cash from Industries. Upon consummation of the Common Share Offering, the Company will not participate in Praxair's cash management system.
As part of the Praxair acquisition, $55.0 million of acquisition related indebtedness was assumed by the Company. Since then, Praxair has advanced additional funds to the Company to fund its working
capital and capital expenditure requirements. As of February 27, 1997, the aggregate amount of such indebtedness outstanding to Praxair was approximately $73 million. Such indebtedness bears interest at a rate of 7% per annum, which rate will increase to 7.5% per annum when Praxair ceases to own a majority of the Company's outstanding shares, and is payable on demand by Praxair on or after January 1, 1998. The Company has entered into a revolving credit facility with a syndicate of banks which has a maximum availability of $100.0 million for three years, to be reduced to $50.0 million for two years thereafter (including up to $35.0 million for letters of credit). The Company intends to use a substantial portion of the credit availability of such facility to refinance its long-term debt to Praxair. The terms of the facility include various covenants, including financial covenants that require the Company to maintain minimum levels of tangible net worth, establish interest coverage and debt coverage ratios and limit capital expenditures. See "Description of New Revolving Credit Facility."
Furthermore, in the ordinary course of business, the Company obtains performance bonds and letters of credit from insurance companies and banks, which support the Company's performance obligations under contracts to customers. As of December 31, 1996, approximately $72.7 million of contingent letters of credit or bank guarantees, and $212.3 million of performance bonds were outstanding. Prior to the Common Share Offering these obligations were guaranteed by Industries or Praxair. After the Common Share Offering, it is expected that the Company will obtain such instruments without credit support from Praxair. In addition, approximately $22 million of letters of credit were outstanding on behalf of Praxair at December 31, 1996 relating to the Company's insurance program. It is expected that the Company will replace these letters of credit with new ones issued on its own behalf. To the extent Praxair continues to be obligated to financial institutions under the letters of credit and guarantees of performance bonds, the Company will indemnify Praxair and compensate it in the form of a guarantee fee. See "Certain Transactions; Relationship with Praxair."
In addition to liquidity generated through the New Revolving Credit Facility, the Company intends to focus on improving its working capital position through aggressive management of the individual components of working capital, including programs to reduce excess cash, accounts receivable and unbilled contracts in progress and to maximize available terms from trade suppliers. The Company is also actively marketing the properties which comprise assets held for sale in an amount equal to $10.5 million as of December 31, 1996.
Management anticipates that by utilizing cash generated from operations and funds provided under the New Revolving Credit Facility, the Company will be able to meet its working capital and capital expenditure needs for at least the next 24 months.
The Company is expected to incur additional general and administrative expenses estimated to be $1.9 million annually in connection with the Company's status as an independent publicly traded company. In addition, the Company estimates that its expenses related to employee benefit costs in 1997 will exceed those incurred in 1996 by approximately $4 million (excluding costs relating to the Management Plan). The decrease in the Company's benefit costs during 1996 as compared to 1995 is the result of the transition from the Industries benefit plans to the new benefit plans being established by the Company. The Company's new benefit plans are expected to be in place for 1997 and the level of 1997 benefit costs is expected to be consistent with the 1995 benefit costs.
Other than as disclosed herein, there has been no material adverse change in the financial position or results of operations of the Company since December 31, 1996. Statements in this discussion and analysis contain forward-looking information and involve known and unknown risks and uncertainties which may cause the Company's actual results in future periods to be materially different from any future performance suggested herein.
BUSINESS
GENERAL
CB&I is a global engineering and construction company specializing in the engineering and design, materials procurement, fabrication, erection, repair and modification of steel tanks and other steel plate structures and associated systems such as petroleum terminals, refinery pressure vessels, low temperature and cryogenic storage facilities and elevated water storage tanks. Based on its knowledge of and experience in its industry, the Company believes it is the leading provider of field erected steel tanks and other steel plate structures, associated systems and related services in North America and one of the leading providers of these specialized products and services in the world. CB&I seeks to maintain its leading industry position by focusing on its technological expertise in design, metallurgy and welding, along with its ability to complete logistically and technically complex metal plate projects virtually anywhere in the world. CB&I has been continuously engaged in the engineering and construction industry since its founding in 1889.
RESTRUCTURING PROGRAM
The Restructuring Program is based on initiatives begun in 1994 and was significantly refocused and accelerated in 1996 following the assembly of the Company's new management team. The Restructuring Program was established to clarify the Company's vision, streamline processes and workflow, establish meaningful performance measures and develop a more appropriate infrastructure, including significantly reducing the Company's fixed costs. A central theme of the Restructuring Program is to apply the Company's core competencies across all of the Company's operations, to operate as a single global business and to establish a consistent interface with global customers and improve marketing of product lines across all geographic areas where the Company offers its products and services. In the past, the Company had operated as six separate, decentralized and relatively self-contained business units. The Restructuring Program is aimed at, among other things, significantly reducing the Company's fixed costs from levels incurred in 1995 and 1994 and improving operating results.
During 1996, implementation of the Restructuring Program resulted in several organizational changes, including the centralization of key functions such as procurement, equipment and personnel mobilization, and certain financial functions, while maintaining the ability to perform field construction using the labor approach best suited for each project. Moreover, several of the Company's offices and facilities were closed and the number of employees was reduced. Equipment supply and warehousing costs also have been reduced and administrative and engineering support have been streamlined and consolidated. The Company has set a target to reduce salaried workforce by approximately 160 positions and as of December 31, 1996 approximately 147 positions had been eliminated.
The Restructuring Program has achieved estimated cost savings of approximately $10 million in 1996, and is expected to result in estimated annual cost savings of approximately $21 million in 1997 and approximately $23 million in 1998, relative to the Company's 1995 cost base. The benefits of the Restructuring Program have been an integral component in the Company's recent improvement in operating income.
The following table outlines actions taken in connection with the Restructuring Program with respect to various facilities:
LOCATION FACILITY ACTION TAKEN
-------- -------- ------------
Fort Erie, Canada....... Fabrication plant and warehouse Closed
Kankakee, Illinois...... Fabrication plant and office (1)
Blacktown, Australia.... Fabrication plant Closed
Cordova, Alabama........ Fabrication plant Closed
Fontana, California..... Fabrication plant Closed
New Castle, Delaware.... Warehouse Closed
Fremont, California..... Warehouse Closed
Singapore............... Warehouse Closed
London, England......... Area office Downsized
Singapore............... Area office Downsized
Oak Brook, Illinois..... Old CBIC headquarters Closed and moved
to Plainfield, Illinois
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Although the Company believes that continued implementation of the Restructuring Program has already resulted in and will continue to result in savings, there can be no assurance that the Company's estimates of results already achieved accurately reflect cost savings associated with the Restructuring Program, that targeted reductions and goals can be achieved or will continue and that part or all of the Restructuring Program can successfully be implemented.
BUSINESS STRATEGY
The Company is committed to increasing shareholder value by seeking to build on the success established in 1996 and growing its business in the global marketplace through a combination of strategic initiatives including the following:
Focus on Core Business
The Company seeks to leverage its perceived competitive advantages in design engineering, metallurgy and welding, and its ability to execute projects virtually anywhere in the world, to actively pursue growth opportunities in its core business. Prior management of the Company's parent pursued a diversification strategy during the 1980s and 1990s, which included acquisitions of significant, unrelated businesses. CB&I's new management team is committed to focusing on its core activities of engineering and design, fabrication, erection, repair and modification of steel tanks and other steel plate structures. The Company believes that its ongoing Restructuring Program already has made it more competitive and will allow it to bid successfully on a broader scope of projects.
For more than 65 years, the Company has been able to complete logistically and technically complex metal plate projects in some of the most remote areas of the world. This ability to mobilize a technically capable team of engineers, supervisors and craftsmen and to apply the Company's extensive know-how anywhere in the world differentiates the Company from its competitors and illustrates the depth and quality of the Company's technical resources which support its global operations.
Continue Cost Reductions and Productivity Improvements
CB&I's management believes that the Restructuring Program represents the foundation for a long-term strategy of reducing the costs of its products and services, with the goal of establishing and
maintaining a position as a low cost provider in its markets. All functions of the organization--engineering, procurement, construction, project management, finance and administrative support--will be required to demonstrate improvements in productivity, and will be provided compensation incentives for achieving such goals. The Company is focusing on initiatives such as:
--the reorganization of the Company's multiple procurement departments into a single function, focusing the Company's considerable worldwide expertise in pursuing economies of scale in purchasing raw materials and in leveraging supplier relationships;
--the redesign of the Company's employee compensation and benefit packages to reward productivity improvements and provide incentives which align employee interests with those of shareholders;
--the implementation of interactive computer aided design ("ICAD") technology, aimed at improving design, procurement and fabrication efficiency; and
--the centralized management of the Company's worldwide equipment fleet, aimed at both operating cost reductions and capital savings for the Company.
Target Global Growth Markets
The Company intends to aggressively pursue business opportunities in selected key growth markets, such as China, India, Mexico and the former Soviet Union, on which prior management placed relatively low priority. CB&I intends to leverage its significant international experience and technological strengths to expand into these new geographic areas, where it believes that its ability to rapidly mobilize project management and skilled craft personnel, combined with its global material supply and equipment logistics capabilities, provides a key competitive advantage. The developing world is expected to have growing demand for the type of products and services offered by the Company as energy development, refining and storage become increasingly important to their economic progress. The Company is implementing strategic initiatives to seek to take advantage of these opportunities and aggressively pursue business in both existing and new geographic markets. The Company believes that its ability to provide consistent products and services on a timely basis in a global marketplace will continue to provide it with a competitive advantage.
Improve Financial Controls and Management
Optimizing the Company's resources will require superior controls and systems, including those which support cost estimating, bidding and project execution, all of which are key factors in the financial performance of the Company. The Company believes that implementation of new systems, which are part of the Restructuring Program, will improve the management of project profitability. The new systems will allow for project economics to be evaluated on a centralized basis and under various risk and costing assumptions using global software systems tailored specifically for the Company's operations. Management intends for nearly all fixed costs to be allocated to projects and believes that the new systems provide the capabilities to achieve this goal.
In addition, the Company believes that the development of new financial controls will improve cash management, return on invested capital, and its ability to assess risk and returns on contract opportunities.
Pursue Partnering and Strategic Alliances
The Company intends to expand its use of partnering and strategic alliances with customers and vendors. These relationships can serve as a vehicle for improvements in quality, productivity and profitability for both parties, and the Company believes such relationships enhance the predictability of the Company's revenues. CB&I's existing partnering relationships include several with major international oil companies. The Company believes that such customers select CB&I as a preferred supplier to achieve significant cost savings in building and operating tankage and related systems. The Company seeks to develop those key strategic alliances in the global marketplace where both parties will benefit as a result of the alliance.
INDUSTRY OVERVIEW
The Company competes in the field erected steel plate structures and related services industry. The primary industries served by the Company and its competitors are petroleum, petrochemical, chemical, electric and gas utilities, pulp and paper, and metals and mining, and the major customers include private owners in these industries as well as governmental entities; engineering, materials procurement and construction companies servicing these owners and entities; and other service companies operating in these industries. The Company's level of activity, as well as the industry's as a whole, depends primarily on the capital expenditures of its customers for construction. These capital expenditures are influenced by a variety of factors outside the control of construction industry participants. For example, in the petroleum and petrochemical industry, influential factors include current and projected oil and gas prices; exploration, extraction, production and transportation costs; the discovery rate of new oil and gas reserves; the sale and expiration dates of leases and concessions; and local and international political and economic conditions. The Company believes that the following trends, among others, will influence the industry in the near and long term:
--the continued industrialization of developing countries is creating demand for storage facilities for crude oil, refined products and petrochemicals. Accordingly, many significant terminal and refinery projects, together with ancillary construction and other associated projects, are being undertaken in developing countries or regions with growing energy infrastructure requirements;
--refineries and petrochemical plants built prior to 1985 typically require more frequent maintenance and modification, and certain of them are expected to be replaced; and
--recently, relatively high crude oil prices have resulted in correspondingly strong levels of current and projected capital expenditures by petroleum and petrochemical companies to explore for, produce, transport and refine oil and related products.
The Company believes that certain of these trends will result in projects that meet its bidding criteria and that the Company's global experience places it in an advantageous position to compete for such projects.
CORE COMPETENCIES
The Company's core competencies are technological expertise, project management, global field erection, global procurement relationships and safety performance. The Company believes that these core competencies enable CB&I to compete effectively on a global basis.
Technological Expertise
The Company has a history of leadership in technological development and continues its technology focus in the following areas:
Design Engineering. The Company's design engineers have thorough knowledge of a broad range of technical standards involving the design, forming and joining of metal plate structures and their related systems, including standards established by the American Petroleum Institute, the American National Standards Institute, the American Society of Testing and Materials, the American Water Works Association and British Standards. Senior engineers of the Company serve on numerous code committees where industry standards are developed. Such engineers have extensive knowledge of and expertise in materials evaluation, emissions control from storage tanks, fracture mechanics, buckling and fatigue analysis, product testing and the design of stable structures that can be safely erected. For its low temperature and cryogenic and flat bottom tank turnkey terminal projects, the Company uses sophisticated computerized design packages to optimize plant layouts and process flows. These packages deal with integrated plant modeling, three- dimensional computer-aided design, pipe network flow, interactive piping stress and structural analysis, site works and scheduling.
In 1996, the Company implemented an ICAD rules-based design system which has brought significant cost benefits to the engineering of and procurement for elevated tanks and is also expected to bring significant corresponding cost benefits to flat bottom tanks, the Company's largest product line. The Rules Based Product Definition System is a tool which produces designs and technical documents for the Company's storage tank and elevated water tank products. It is based on industry and Company-established proprietary rules programmed into the system by the Company's senior estimating, product and technical experts.
Construction. Inherent in the Company's competency in field erection is its longtime experience in constructability of steel plate structures. Sequences of erection to maintain structural stability, welding sequences to minimize stresses and distortion and techniques to optimize crew efficiency are all key to safe and quality construction of the Company's product lines. Rigging and heavy lifting are also skill-based activities that enable the Company to perform complex, heavy work in congested work areas.
In many of its projects, the Company utilizes specially designed custom erection equipment, such as the S-70 derrick, for constructing the Company's various products. The Company has extensive knowledge of and expertise in heavy lift planning and rigging, a core skill in performing refinery turnarounds and in the construction of field erected pressure vessels.
Metallurgy. The Company has actively participated in the development of low carbon and alloy steels for metal plate applications throughout its history. Working with steel suppliers and customer technical groups, steel plate specifications have been developed, tested and implemented for specific applications which include: fracture toughness for low temperature storage, hydrogen cracking resistance for refinery pressure vessels, low hardness corrosion resistance for storage of petroleum products with sulfur content and improved weldability under field conditions.
Welding and Quality Assurance. The Company operates an advanced welding laboratory whose mission has been to insure that welding procedures and materials provide the proper fusion and hardness for the structures it constructs. Laboratory studies also enable the Company to design structures using the latest high-strength and corrosion resistant steels that are suitable for use in the Company's product lines. The Company is also involved in welding material evaluation and testing, welding procedure qualification, welding process evaluation and testing, non-destructive examination, post-weld heat treatment of both shop constructed and field erected structures, and welding supervisor training.
A corporate quality assurance group oversees internal and external audits, industry authorizations, ISO 9001 programs, welder certification to the American Society of Mechanical Engineers ("ASME") Section IX, Non-Destructive Examination Inspector Certification to Society Non-Destructive Testing TC-IA Standards, and development of project-specific as well as Company-wide quality assurance and quality control programs.
Project Management
A key factor in the Company's success has been its ability to rapidly mobilize project management and craft personnel, materials, supplies and equipment virtually anywhere in the world. The Company's strategically located subsidiaries and regional offices enable it to effectively manage the logistics of getting equipment, materials, and skilled personnel to a project. Generally, a high percentage of the Company's skilled craft personnel is local to the project. The Company manages its work with advanced scheduling tools and is currently implementing new project management software on a worldwide basis for further improvement of project cost management and controls.
Global Field Erection
Based on its knowledge of and experience in its industry, the Company believes it is a leader in global field erection of steel tanks and other steel plate structures because of its project management and
technological expertise. In addition, the Company believes that its success in this area is enhanced by its experienced field supervision. The Company recruits, develops and maintains ongoing training programs for field supervision personnel of many nationalities around the world. Supervisory personnel generally travel to the Company's project locations around the world and are kept regularly employed, thus aiding the Company in achieving its goal of consistent and high quality performance on all of its projects. Additionally, a high percentage of the Company's skilled craft personnel are local to the project location and the Company seeks to draw its pool of future supervisory personnel from its local pools.
Global Procurement Relationships
The Company has established relationships with suppliers throughout the world. The Company's operating units engage in the global sourcing and management of job site delivery of the key components in its products, including fabricated steel plate, piping and valves, welding materials and rotating equipment.
Safety
The Company's senior management places a high priority on safety, with numerous accident prevention programs designed and managed by its corporate safety group. For each of the last seven years, the Company has improved its total recordable incident rate from the previous year, as measured by standards established by the Occupation Safety and Health Administration. These records have been achieved through prevention based programs, risk evaluation, job specific safety training, employee behavior management, incident investigation and job site safety audits, and supervisory incentive programs which include accident prevention goals.
PRODUCT LINES
The Company offers various product lines within its geographic regions. These product lines are:
Flat Bottom Tanks. The Company has been designing and constructing flat bottom tanks since the late 1890s. During 1996, flat bottom tanks accounted for approximately 37% of the Company's revenues. Some of the Company's first tanks were built of riveted carbon steel ranging in size from 20 feet to 100 feet in diameter. Today, welded tanks have been constructed by the Company up to 410 feet in diameter, with a capacity of 1.5 million barrels. These above- ground storage tanks continue to be sold primarily to customers operating in the petroleum, petrochemical and chemical industries around the world. This industrial customer group includes nearly all the major oil and chemical companies on every continent. In addition, depending on the industry and application, flat bottom tanks can be used for storage of crude oil, refined products such as gasoline, raw water, potable water, chemicals and a large variety of feedstocks for the manufacturing industry.
The international, industrial marketplace for flat bottom tanks provides a continued source of sales opportunities for the Company in areas such as the Middle East, Southeast Asia, the Pacific Rim and Central and South America. The worldwide storage tank market was estimated by the Company, based upon a recent report by Hydrocarbon Processing Magazine (the "Hydrocarbon Report"), to be approximately $1.5 billion per year. The Company believes that additional market opportunities exist for products of such nature in China, India, Mexico and the former Soviet Union and other developing nations throughout the world.
Pressure Vessels. The Company has constructed over 3,500 spheres including the world's largest sphere at 225 feet in diameter. During 1996, pressure vessels accounted for approximately 12% of the Company's revenues. Pressure vessels are built primarily from high strength carbon steel plates which have been shaped and formed in a fabrication shop to be welded together at a job site. Pressure vessels, other than spheres, come in a variety of cylindrical, hemispherical and conical shapes and sizes, some
weighing in excess of 700 tons, with thicknesses in excess of six inches. A number of technological issues such as design, analysis, welding capabilities, metallurgy, complex fabrication and specialty erection methods all figure prominently into the marketing of this product line. Existing customers represent a cross-section of the petroleum, petrochemical and chemical industries, where process applications of high pressure and/or temperature are required. Pressure vessels are used in refineries as storage containers (spheres) as well as process vessels used to transform crude oil and its various components. They are also used in the production of synthetic oil from methane gas. The Company has built and tested vessels in North and South America, Africa, Asia, the Middle East and the Pacific Rim, and the Company believes that opportunity for growth remains in the Middle East, Southeast Asia, Central/South America and the Pacific Rim.
Low Temperature and Cryogenic Structures and Systems. The Company is
recognized as a highly capable designer and contractor of low temperature
cryogenic structures and systems. During 1996, low temperature and cryogenic
structures and systems accounted for approximately 9% of the Company's
revenues. These structures are used primarily for the storage of refrigerated
gas. The Company specializes in providing turnkey tanks and systems built from
alloy steel or aluminum with special characteristics to withstand cold
temperatures. Applications extend from low temperature (+30(degrees) F to -
100(degrees) F) to cryogenic (-100(degrees) F to -423(degrees) F). Customers
in the petroleum, chemical, petrochemical, natural gas, power generation and
agricultural industries use these systems to store and handle liquid petroleum
gas ("LPG"), propane, propylene, butane, butadiene, anhydrous ammonia, LNG,
methane, ethylene, ethane, oxygen, nitrogen and hydrogen.
Although data on the global market is difficult to obtain, the Company believes, based on the Hydrocarbon Report, that projects around the world will provide growth opportunities for sales of low temperature and cryogenic structures and systems and related products in 1997. The report indicates that growth in the chemical, petrochemical and gas processing projects should continue with development especially active in areas such as the Asia/Pacific region.
Elevated Tanks. The Company has been constructing elevated water storage tanks since 1894. During 1996, elevated tanks accounted for approximately 6% of the Company's revenues. Elevated water storage tanks are constructed primarily of bent, formed and shaped carbon steel plates welded together on site. They range in size from 25 thousand gallons to three million gallons in capacity. The Company's estimated share of the U.S. municipal potable water utilities market, over the three-year period ended December 31, 1996, was an aggregate of approximately 33%, and the market size is estimated by the Company to have been approximately $120 million in each of such years.
The Company's improved designs and automatic welding capabilities present additional opportunities for this product line's growth. Shifting population centers throughout the U.S. as well as increases in global population present additional growth opportunities for the Company with this product line. See "--Research and Development."
Specialty and Other Structures. Since the Company's inception, it has been designing and fabricating special plate structures. During 1996, specialty and other structures accounted for approximately 18% of the Company's revenues. Examples of these special plate structures include research and test facilities for testing prototype spacecraft and rocket engines and vacuum testing satellites before launch; hydro-electric structures such as penstocks; spiral cases and draft tubes; ship components; and offshore oil storage structures. These structures are typically made from bent and formed plate materials (carbon steel, stainless and exotic steel and aluminum) and are shipped as fabricated components to their final location for field welding and assembly. The Company has performed design, constructability analysis, complex fabrication, welding and specialized erection in supplying these special projects for industrial, utility and governmental customers throughout the world, including customers in the United States, South Africa and Saudi Arabia.
Repairs and Modifications. Repair, maintenance and modification services are performed primarily on flat bottom tanks and pressure vessels. During 1996, repairs and modifications accounted for approximately 11% of the Company's revenues. Demand for repair, maintenance and modification services is driven primarily by the natural aging of tanks and the need to comply with environmental regulations. Pressure vessels and their associated systems function in conditions and environments where they must be serviced on a more routine basis. This work is often performed as part of a turnaround and is handled as a different product/service line due to its unique requirements. Other product lines occasionally require this type of work as well. The Company has focused on providing these services primarily in the U.S. As other structures throughout the world age and require repair services, the Company believes it will have additional growth opportunities in areas that have a large concentration of steel storage tanks and pressure vessels, such as South America, the Middle East, Australia, and Asia Pacific.
Customers in the petroleum, chemical, petrochemical and water industries generally require these types of services. Since the Company has built a large number of the original structures requiring standard service/repair, the Company believes it has an advantage over its competitors to obtain this service and repair work when it becomes available.
Turnarounds. The Company has provided this service since the early 1950s. During 1996, turnarounds accounted for approximately 7% of the Company's revenues. A turnaround is a logistically planned shut down of a refinery or other process unit for repair and maintenance of its equipment and associated systems. The work is usually scheduled on a multi-shift, seven day per work week basis. Personnel, materials, and equipment must come together at precisely the right time to accomplish this manpower intensive operation. The product line depends upon low cycle time and unique construction procedures. The Company currently offers this service to its customers in the petroleum, petrochemical and chemical industries located in North and South America and the Caribbean.
In the international marketplace, areas of growth for this product line have been identified in South America, Southeast Asia, Africa and the Middle East.
GEOGRAPHIC MARKETS
The Company operates in diverse global markets. Approximately 49% and 53% of its revenues for 1995 and 1996, respectively, and 37% and 63% of new business taken for the same periods, were derived from operations outside of the United States. The Company's operations are conducted through regional sales and operations offices, fabrication facilities, and warehouses. The Company also owns and leases a number of field construction offices and equipment maintenance centers located throughout the world. The Company believes that it is viewed as a local contractor in a number of the regions it services by virtue of its long-term presence and participation in those markets, including Venezuela, Canada, Saudi Arabia, South Africa and Indonesia. Historical revenue contributions from the four major geographic regions where the Company operates have been as follows:
REVENUES 1994 1995 1996
-------- ---- ---- ----
(DOLLARS
IN MILLIONS)
North America................................................... $416 $318 $329
Central and South America....................................... 119 54 91
Europe, Africa, Middle East..................................... 113 111 110
Asia Pacific Area............................................... 115 139 134
---- ---- ----
$763 $622 $664
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For a discussion of certain risks associated with international operations and with currency fluctuations, see "Risk Factors--Risks of International Operations."
CUSTOMERS
The Company serves a wide range of industries where product and service needs match well with the Company's core competencies in metal plate forming and joining. The Company believes that its metallurgy and welding expertise, field erection capability and highly-skilled mobile work force differentiate the Company from its competitors. These industries include petroleum, petrochemical, chemical, electric and gas utilities, pulp and paper, and metals and mining. The Company's customers include private industrial owners as well as governmental entities; engineering, procurement and construction companies servicing these owners and entities; and other service companies operating in these industries. New business taken by industry category for the year ended December 31, 1996 was as follows:
PERCENTAGE OF
INDUSTRY NEW BUSINESS TAKEN TOTAL
-------- --------------------- -------------
(DOLLARS IN MILLIONS)
Petroleum................................... $362.7 52.8%
Petrochemical............................... 108.3 15.8%
Governmental entities....................... 65.1 9.5%
Chemical.................................... 51.1 7.4%
Metals and mining........................... 49.6 7.2%
Electric and gas utilities.................. 9.6 1.4%
Pulp and paper.............................. 3.4 0.5%
Other....................................... 37.4 5.4%
------ -----
Total..................................... $687.2 100.0%
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The Company is not dependent on any single customer on an ongoing basis and the loss of any single customer would not have a material adverse effect on the business; however, from time to time a particular contract or customer may account for a significant portion of the Company's backlog.
CONTRACTING METHODS
The Company generally uses one of three types of contracting approaches depending upon the type of work, the degree of workscope definition and the degree of risk in the project. These methods may be used for competitive situations or negotiated contracts.
Fixed or Lump Sum Pricing. The Company's expertise in performing its design and construction services enables it to typically contract over 75% of its work on a fixed price or lump sum basis, using price adjustment clauses and where appropriate, cost escalation and contingency factors in its pricing.
Cost Reimbursable Pricing. In instances where the degree of definition of the workscope, schedule requirements or the evaluation of risk does not allow for the use of fixed or lump sum pricing, the Company may choose to contract only on a cost reimbursable basis. Contracts of this nature may have cost incentive provisions.
Target Fixed or Lump Sum Pricing. This approach is often used in connection with partnering arrangements. The Company and the customer establish a target, based on the parties' estimate of the total installed cost of a project. Cost savings or overruns are then shared by the Company and the customer, thereby encouraging total alignment of both parties with respect to cost-effective completion of the project.
BACKLOG
New business taken represents the value of new project commitments received by the Company during a given period. Such commitments are included in backlog until work is performed and revenue recognized or until cancellation. Backlog may also fluctuate with currency movements. The Company's backlog was approximately $485.7 million at December 31, 1996, approximately $470.2 million at December 31, 1995 and approximately $323.3 million at December 31, 1994. Approximately 70% of the backlog as of December 31, 1995 was forecasted to be completed during 1996. Approximately 78% of the backlog as of December 31, 1996 currently is forecasted to be completed during 1997.
COMPETITION
Management believes the Company can compete effectively for new construction projects around the world and that it is a leading competitor in its markets. Competition is based primarily on performance and the ability to provide the design, engineering, fabrication, project management and construction capabilities required to complete projects in a timely and cost-efficient manner. Contracts are usually awarded on a competitive bid basis. Price, quality, reputation and timeliness of completion are the principal competitive factors within the industry, with price being one of the most important factors. In addition, the Company believes that it is viewed as a local contractor in a number of the regions it services by virtue of its long-term presence and participation in those markets, including Venezuela, Canada, Saudi Arabia, South Africa and Indonesia. This may translate into a competitive advantage through knowledge of local vendors and suppliers, as well as of local labor markets and supervisory personnel. Several large companies offer metal plate products which compete with some, but not all, of those offered by the Company. Some companies compete with some of the Company's product lines while also offering other product lines. Local and regional companies offer competition in one or more geographical areas but not in other areas where the Company operates. The Company generally does not compete with major providers of general engineering, procurement and construction services, such as Fluor Corporation and Bechtel Corporation. Because reliable market share data are not available, it is difficult to estimate the Company's exact position in the industry, although the Company believes it ranks among the leaders in the field.
RESEARCH AND DEVELOPMENT
Throughout its history, the Company has conducted extensive research programs in a wide variety of areas. The Company has studied stability and buckling of shell structures, emission control methods for aboveground storage tanks, advanced automated techniques for the application of polyurethane foam insulation to storage tanks, and extensive testing of the physical properties of the non-metallic insulating materials used on low temperature and cyrogenic storage tanks. In addition, the Company has studied water and wastewater treatment systems and advanced mixing systems for waste treatment digesters. The Company's physical research activities have led to patented systems for the removal of carbon dioxide during liquefaction of liquefied natural gas and also for unique freeze processes for juice concentration, wastewater treatment, air-conditioning load management, and desalinization.
The Company continues to develop an in-depth knowledge of the many materials it uses. The Company has acquired knowledge and expertise about the effects that manufacturing processes, such as forming, welding, heat treating and machining, have on the properties of metals. This activity has helped to enhance the Company's ability to design, manufacture and provide field construction of steel plate structures and related process facilities. The Company has an ongoing program to develop and improve technically advanced metal plate welding and erection equipment. This specialized equipment and systems improves product quality and construction efficiencies.
Expenditures for research and development activities amounted to approximately $0.7 million, $2.5 million and $3.6 million in 1996, 1995 and 1994, respectively.
RAW MATERIALS
The principal raw materials used by the Company are metal plate and structural steel. These materials are available from numerous U.S. and international suppliers. The Company does not anticipate having difficulty in obtaining adequate amounts of raw materials in the forseeable future.
EMPLOYEES
As of December 31, 1996, the Company employed approximately 5,950 people. Approximately 50% of the Company's employees are not U.S. citizens, reflecting the global nature of the Company's business. The Company believes that as of December 31, 1996, approximately 430 of its employees were union members. The total number of employees of the Company (and the number of union members in such group) varies significantly based on the scope, nature and volume of the work flow at any given time. Included in this group are approximately 1,500 salaried personnel located around the world who are primarily engaged in sales, engineering, construction and administrative activities. Also included are approximately 800 skilled craftsmen in the U.S. who, while engaged on a job by job basis, tend to build a career with CB&I by moving from project to project. The remainder of the Company's workforce consists of hourly personnel, whose number fluctuates directly in relation to the amount of business performed by the Company.
FACILITIES
The Company owns or leases the properties used to conduct its business. The capacities of these facilities depend upon the composition of products being fabricated and constructed. As the product composition is constantly changing, the extent of utilization of these facilities cannot be accurately stated. The Company believes these facilities are adequate to meet its current requirements. The following list summarizes the principal properties:
LOCATION TYPE OF FACILITY INTEREST
-------- ---------------- --------
Houston, Texas................ Fabrication plant, warehouse,
engineering, operations and
administrative office Owned
Plainfield, Illinois.......... Engineering, operations and
administrative office Owned
Kankakee, Illinois (1)........ Fabrication plant, warehouse and
office Owned
Fort Saskatchewan, Canada..... Warehouse and operations and
administrative office Owned
Dubai, United Arab Emirates... Engineering, operations and
administrative office Leased
Puerto Ordaz, Venezuela....... Fabrication facility and warehouse Leased
Kwinana, Australia............ Fabrication facility, warehouse, and
office Leased
Ao Udom, Thailand............. Fabrication facility Leased
Batangas, Philippines......... Fabrication facility and warehouse Leased
Cilegon, Indonesia............ Fabrication plant and warehouse Leased
Al Aujam, Saudi Arabia........ Fabrication plant and warehouse Leased
Jebel Ali, United Arab
Emirates..................... Warehouse Leased
Secunda, South Africa......... Fabrication plant and warehouse Leased
|
The Company also owns or leases a number of sales, administrative and field construction offices, warehouses and equipment maintenance centers strategically located throughout the world.
HISTORY
The Company was founded in 1889 as a midwestern bridge building company. The Company followed the paths of the railroads as new communities required special structures such as elevated steel water storage tanks.
During the early 1920s, the Company quickly established itself as a leading supplier to the petroleum industry, building large storage tanks and special purpose structures. The first floating roof tank, designed to conserve vapors and to eliminate fire hazards, was successfully tested and introduced by the Company to the oil industry in 1923. Since 1923, the Company has constructed over 20,000 floating roof tanks throughout the world. The Company promoted the use of larger tanks, wider plates, and better joint designs. The Company's Hortonspheres, designed for the storage of volatile liquids under high pressure, were first built by the Company during 1923 and were patented in 1924.
By the early 1930s, the Company had begun to focus on the design and engineering of formed, steel plate structures and on innovative construction equipment and procedures. Field welding of large tanks was successfully pioneered by the Company and the Company extended its expertise to other steel plate products such as penstocks, stacks and pressure vessels. In 1930, the Company's first fractionating columns were built. The first all-welded steel penstock in the U.S. was constructed by the Company in 1935.
In the 1940s the Company constructed its first Watersphere, an elevated tank that stored 100,000 gallons of water. Structures for the aluminum and chemical industries, for blast furnaces and for high octane gasoline and synthetic rubber plants were being built by the Company. The Company's welding lab, founded in 1945, has worked closely with Company engineers to ensure that the Company maintains its technical performance levels.
Internationally, the Company began operations shortly after World War I. Contracts were taken in Canada and Japan in 1919; China in 1921; Venezuela, Indonesia and Australia in 1927; and in multiple European locations throughout the 1920s. By the late 1940s, the Company was operating throughout Europe, the Middle East, Asia and Latin America.
By the mid 1950s, the Company had built the world's largest Hortonsphere, a vessel weighing seven million pounds with a diameter of 225 feet. The Company built its first double-walled liquid natural gas tank. The Company also announced a technological breakthrough with its development of the Hortonclad, a composite metal having an integral and continuous bond as a result of research and development in the field of vacuum metallurgy. It was also in the early 1950s that the Company developed its first automatic girth welding equipment.
By 1960, the Company had established a process engineering capability for the design and installation of systems associated with turnkey refrigeration and storage of ammonia, liquid petroleum gas, liquid natural gas, and other products requiring storage at low or cyrogenic temperatures. Techniques developed by the Company in field automatic welding, field stress relieving, field machining and ultrasonic testing, as applied to the onsite assembly of heavy wall petroleum processing vessels and nuclear reactors, allowed the Company's customers to avoid shipping restrictions on size and weight which had limited plant designs in both industries. The Company actively built vacuum and testing chambers for the space industry during this decade.
Fabrication and construction projects for the burgeoning nuclear industry dominated the marketplace of the mid 1970s. Additionally, Saudi Arabia and the Middle East provided growth opportunity for the Company. In the U.S., the Company's first application of horizontal foamed-in-place insulation on a low- temperature tank was completed, and the Company completed a substantial amount of tankage for the Trans-Alaskan Pipeline Project. During the late 1970s, the Company built the two largest oil tanks in the U.S. each with an 800,000 barrel capacity. The Company's largest petroleum storage tank, at 1.5 million barrels and 410 feet in diameter, is in Yanbu, Saudi Arabia, which the Company believes to be the largest such tank in the world.
By 1980, the Company had fabricated and erected its first cryogenic, transonic wind tunnel for a U.S. military facility. In that decade, the Company also built the support tower for the largest (to date) wind powered generator. A roof insulating machine, developed at the Company's research and development facility, was introduced. During this time frame, the Company also erected its first two million gallon Waterspheroid. Internationally, the Company built a 55,000 gallon per-day solar energy water desalination test facility in Saudi Arabia. This project marked the first use of the Company's indirect freeze desalination system.
During the 1990s, the Company has continued to expand its global presence. The Company established formal partnering agreements and closer alliances with many customers. The construction of turnkey low temperature and cryogenic facilities for the liquefaction, storing and sendout of liquid natural gas, ethylene, ammonia, butane, propane and similar products continued to be a source of projects. The Company completed various special structures, including a facility for testing solid fuel rocket motors and a large cavitation channel for testing the propulsor power and acoustics of large ship models.
GOVERNMENTAL REGULATIONS
General
Many aspects of the Company's operations are subject to government regulations in the countries in which the Company operates, including those relating to currency conversion and repatriation, taxation of its earnings and earnings of its personnel, and its use of local employees and suppliers. In recent years demand from the worldwide petroleum and petrochemical industry has been the largest component of the Company's revenues, and the Company is therefore affected by changing taxes, price controls and laws and regulations relating to the petroleum and petrochemical industries generally. The Company's operations are also subject to the risk of changes in national, federal, state and local laws and policies which may impose restrictions on the Company, including trade restrictions, which could have a material adverse effect on the Company's business, financial condition and results of operations. Other types of government regulation which could, if enacted or implemented, materially and adversely affect the Company's operations include expropriation or nationalization decrees, confiscatory tax systems, primary or secondary boycotts directed at specific countries or companies, embargoes, import restrictions or other trade barriers, mandatory sourcing rules and high labor rate and fuel price regulation. The Company cannot determine to what extent future operations and earnings of the Company may be affected by new legislation, new regulations or changes in or new interpretations of existing regulations.
Environmental
The Company's operations and properties are affected by numerous national, federal, state and local environmental protection laws and regulations, such as those governing discharges into air and water, as well as handling and disposal of solid and hazardous wastes. The requirements of these laws and regulations have tended to become increasingly stringent, complex and costly to comply with. This is true for both the Company's United States operations and its non-U.S. facilities, at which operations historically have been conducted generally pursuant to less stringent environmental laws and regulations than exist in the United States. In addition, the Company may be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances. The Company is not aware of any non- compliance with environmental laws that could have a material adverse effect on the Company's business or operations. However, while the Company has an environmental compliance program in place, it cannot guarantee that any non- compliance, if it exists, would not have a material adverse effect on the Company. In addition, there can be no assurance that environmental laws, regulations or their interpretation will not change in the future in a manner that could materially and adversely affect the Company.
Certain environmental laws, such as CERCLA, provide for strict and joint and several liability for investigation and remediation of spills and other releases of hazardous substances. Such laws may apply
to conditions at properties presently or formerly owned or operated by an entity or its predecessors, as well as to conditions at properties at which wastes or other contamination attributable to an entity or its predecessors come to be located. The Company's facilities have operated for many years, and substances which are or might be considered hazardous were used and disposed of at some locations, which will or may require the Company to make expenditures for remediation. In addition, the Company has agreed to indemnify parties to whom it has sold facilities for certain environmental liabilities arising from acts occurring before the dates on which those facilities were transferred. However, the Company does not anticipate incurring material capital expenditures for environmental controls or for investigation or remediation of environmental conditions during the current or succeeding fiscal year. Nevertheless, the Company can give no assurance that it, or entities for which it may be responsible, will not incur liability in connection with the investigation and remediation of facilities it currently owns or operates (or formerly owned or operated) or other locations in a manner that could materially and adversely affect the Company.
Along with multiple other parties, a subsidiary of the Company is currently identified as a potentially responsible party (a "PRP") under CERCLA and analogous state laws at several sites as a generator of wastes disposed of at such sites. While CERCLA imposes joint and several liability on responsible parties, liability for each site is likely to be apportioned among the parties. In addition, a subsidiary of the Company is currently identified as a PRP at several sites in connection with its position as a former corporate shareholder of a wood treating company. The Company believes that an estimate of the possible loss or range of possible loss relating to such matters cannot be made. While it is impossible at this time to determine with certainty the outcome of such matters and although no assurance can be given with respect thereto, based on information currently available to the Company and based on the Company's belief as to the reasonable likelihood of the outcomes of such matters, the Company does not believe that its liability, if any, in connection with these sites, either individually or in the aggregate, will have a material adverse effect on the Company's business, financial condition and results of operations. See "--Legal Proceedings and Insurance."
The Company's business sometimes involves working around and with volatile and hazardous substances, which exposes it to risks of liability for personal injury or property damage caused by any release, spill, or other accident involving such substances that occurs as a result of the conduct of its business. The Company has been and may continue to be unable to obtain adequate environmental damage or pollution insurance at a reasonable cost. Although the Company maintains general liability insurance, this insurance is subject to coverage limitations, deductibles and exclusions and may exclude coverage for losses or liabilities relating to pollution damage. Therefore, there can be no assurance that liabilities that may be incurred by the Company will be covered by its insurance policies, or if covered, that the dollar amount of such liabilities will not exceed the Company's policy limits. Even a partially uninsured claim, if successful and of significant magnitude, could have a material adverse effect on the Company's business, financial condition and results of operations.
It is possible that environmental liabilities in addition to those described above may arise in the future. Although the Company's facilities in the United States and certain other jurisdictions operate under stringent environmental laws, certain of its other operations, including those in the Middle East, South America, and Southeast Asia, have not been so regulated. As a result, the Company could incur significant future liability should the laws of the jurisdictions in which the Company operates change to impose additional environmental remedial obligations. The precise costs associated with these or other future environmental liabilities are difficult to predict at this time.
The Company believes that in recent years it has taken a proactive approach to management of environmental liabilities and minimization of environmental impacts. The Company's program includes, among other things, formal environmental training for employees and an auditing program to assist the Company's facilities in complying with environmental regulations and identifying potential environmental liabilities. Furthermore, the Company has implemented management procedures designed to reduce the generation of hazardous waste and the on-site use and storage of hazardous chemicals and to prevent exposure to such substances. The Company believes the continued development and maintenance of its
environmental program will continue to reduce the potential for unanticipated expenditures for environmental remediation and compliance.
LEGAL PROCEEDINGS AND INSURANCE
A subsidiary of the Company was a minority shareholder from 1934 to 1954 in a company which owned or operated at various times several wood treating facilities at sites in the United States, some of which are currently under investigation, monitoring or remediation under various environmental laws. With respect to some of these sites, the Company has been named a PRP under CERCLA and similar state laws. Without admitting any liability, the Company has entered into a consent decree with the federal government regarding one of these sites and has had an administrative order issued against it that could impose cleanup obligations on the Company with respect to another. There can be no assurance that the Company will not be required to clean up one or more of these sites pursuant to agency directives or court orders. The Company has been involved in litigation concerning environmental liabilities, which are currently undeterminable, in connection with certain of those sites. The Company denies any liability for each site and believes that the successors to the wood treating business are responsible for the costs of remediation of the sites. Without admitting any liability, the Company has reached settlements for environmental clean-up at most of the sites. In July 1996, a judgment in favor of the Company was entered in the suit Aluminum Company of America v. Beazer East, Inc. v. Chicago Bridge & Iron Company, instituted in January 1991 before the U.S. District Court for the Western District of Pennsylvania. In July 1996, Beazer East, Inc. filed an appeal which is currently pending before the United States Court of Appeals for the Third Circuit. The Company believes that an estimate of the possible loss or range of possible loss relating to such matters cannot be made. Although the Company believes that it is reasonably likely that it will be successful in such appeal and that such settlements and any remaining potential liability will not be material, there can be no assurance that the Company will be successful in upholding the judgment in its favor or that such settlements and any remaining potential liability will not have a materially adverse effect on its business, financial condition and results of operations.
In 1991, CBI Na-Con, Inc. ("CBI Na-Con"), a subsidiary of the Company, installed a catalyst cooler bundle at Fina Oil & Chemical Company's ("Fina") Port Arthur, Texas refinery. In July of 1991, Fina determined that the catalyst cooler bundle was defective and had it replaced. Fina is seeking approximately $20 million in damages for loss of use of Fina's catalyst cracking unit and the cost of replacement of the catalyst cooler bundle. On June 28, 1993, Fina filed a complaint against CBI Na-Con before the District Court of Harris County, Texas in Fina Oil & Chemical Company v. CBI Na-Con, Inc. et al. The Company denies that it is liable. The Company believes that an estimate of the possible loss or range of possible loss cannot be made. While the Company believes that the claims are without merit and/or the Company has valid defenses to such claims and that it is reasonably likely to prevail in defending against such claims, there can be no assurance that if the Company is finally determined to be liable for all or a portion of any damages payable, that such liability will not have a materially adverse effect on the Company's business, financial condition and results of operations.
In addition to the above lawsuits, the Company is a defendant in other lawsuits arising in the normal course of its business. The Company believes that an estimate of the possible loss or range of possible loss relating to such matters cannot be made. While it is impossible at this time to determine with certainty the ultimate outcome of these other lawsuits, and although no assurance can be given with respect thereto, based on information currently available to the Company and based on the Company's belief as to the reasonable likelihood of the outcomes of such matters, the Company's management believes that adequate provisions have been made for probable losses with respect thereto as best as can be determined at this time and that the ultimate outcome, after provisions therefor, will not have a material adverse effect, either individually or in the aggregate, on the Company's business, financial condition and results of operations. The adequacy of reserves applicable to the potential costs of being engaged in litigation and potential liabilities resulting from litigation are reviewed as developments in the litigation warrant. See Note 7 to each of the Consolidated Financial Statements included elsewhere in this Prospectus.
Furthermore, construction and heavy equipment involve a high degree of operational risk. Natural disasters, adverse weather conditions and operator error can cause personal injury or loss of life, severe damage to and destruction of property and equipment and suspension of operations. Litigation arising from such an occurrence may result in the Company being named as a defendant in lawsuits asserting substantial claims. The Company maintains risk management, insurance and safety programs that seek to mitigate the effects of loss or damage. Such programs have generally resulted in favorable loss ratios and cost savings. See "Risk Factors--Operating Risks."
CERTAIN TRANSACTIONS; RELATIONSHIP WITH PRAXAIR
In the first quarter of 1996 Praxair acquired all of the outstanding common stock of Industries in order to acquire the business of Liquid Carbonic Industries Corporation. At that time, Praxair announced its intention to divest the businesses of Industries that were not strategic to Praxair, including the Company. Industries merged into Praxair on December 19, 1996.
Under the Issuer's Articles of Association, the Selling Shareholder will have the right to appoint, remove and replace two members of the Supervisory Board so long as the Selling Shareholder owns at least 20% of the outstanding Common Shares, and the right to appoint, remove and replace one member of the Supervisory Board so long as the Selling Shareholder owns at least 10% but less than 20% of the outstanding Common Shares. On the first day on which the Selling Shareholder's ownership of the outstanding Common Shares is less than 10%, the Selling Shareholder will cease to have any special rights regarding the appointment, removal and replacement of the Issuer's supervisory directors. At the time of the Common Share Offering, the designees of Praxair serving on the Supervisory Board, if any, will be John A. Clerico, if the Selling Shareholder is entitled to appoint one member, and Mr. Clerico and Robert F.X. Fusaro, if it is entitled to appoint two members. If the Common Share Offering is consummated as currently contemplated, the Selling Shareholder will have no right to appoint Supervisory Board members pursuant to these provisions.
SEPARATION AGREEMENT
The Company has entered into agreements (collectively, the "Separation Agreement") with Praxair fixing the Company's on-going responsibility for employee benefit matters, goods and services, access and retention of records, technology and intellectual property rights, certain indemnification arrangements and other miscellaneous matters and providing that Praxair may continue to provide certain credit guarantees and letters of credit which benefit the Company and will provide certain pension related services and the Company will provide Praxair with certain environmental and pension related services. Pursuant to the Separation Agreement, subject to certain exceptions, the Company will assume and be solely responsible for all known and unknown past, present and future claims and liabilities of any nature, including without limitation relating to environmental, health, safety, personal injury, contractual and product liability matters (collectively, "Liabilities") arising out of the operations of the Company, its subsidiaries, any other entities in which any of them hold or held any ownership interest and, as to liabilities arising prior to the Reorganization, Old CBIC (the "CBI Companies"), and the Company will indemnify Praxair and its subsidiaries and affiliates from all such Liabilities. Pursuant to the Separation Agreement, subject to certain exceptions, Praxair will assume and be solely responsible for all Liabilities arising out of the operations of Praxair, its subsidiaries and any other entities in which any of them hold or held any ownership interest (other than the CBI Companies), and Praxair will indemnify the Company and its subsidiaries and affiliates from all such Liabilities.
Under the Separation Agreement, the Company will retain certain potential liabilities with respect to the operations of three former subsidiaries, with respect to periods when such entities were subsidiaries of the Company through January 31, 1997, up to the Company's self-retained portion of its insurance policies during such periods. In addition, the Separation Agreement will place financial responsibility with the Company for the engineering and construction businesses of Liquid Carbonic Industries Corporation in Argentina upon its transfer to the Company.
Under the Separation Agreement, the Company has agreed to use its best efforts to eliminate, on or before December 31, 1997, Praxair's obligations under the credit guarantees given by Praxair and letters of credit obtained by Praxair which benefit the Company. Until December 31, 1997, the Company will pay Praxair a fee of 1% per annum of the amount of such guarantees outstanding. Effective January 1, 1998, such fee will equal 2% per annum of such amount.
REVENUES FROM AFFILIATES
The Company has provided in the past and continues to provide services to Praxair and its affiliates and to Industries and its affiliates for the construction and expansion of facilities and for certain repair and
maintenance work. During the year ended December 31, 1996, the Company recorded revenues from affiliates of $13.4 million from such services. Gross profit relating to such revenues, net of overhead costs, was $2.3 million for the year ended December 31, 1996. The Company believes that these revenues and gross profits approximate those of similar services provided to independent third parties.
CORPORATE SERVICES
Industries and Praxair have provided in the past certain support services to the Company including legal, finance, tax, human resources, information services and risk management. Charges for these services were allocated by Industries and Praxair to the Company based on various methods which the Company believes reasonably approximate the actual costs incurred. The allocations recorded by the Company for these corporate services in the accompanying consolidated income statements were $4.7 million for the year ended December 31, 1996. The amounts allocated by Industries or Praxair are not necessarily indicative of the actual costs which may have been incurred had the Company operated as an entity unaffiliated with Industries or Praxair. However, the Company believes that the allocation is reasonable and in accordance with the Securities and Exchange Commission's Staff Accounting Bulletin No. 55. See "Risk Factors--New Status as Independent Entity" and "-- Separation Agreement."
CORPORATE REORGANIZATION
Prior to the consummation of the Common Share Offering, the Selling
Shareholder and certain of its subsidiaries will consummate the Reorganization
whereby (i) the shares of substantially all of Old CBIC's non-U.S.
subsidiaries will be transferred by dividend to its parent corporation, Bridge
Holdings, and contributed to CBICBV in exchange for newly issued common shares
of CBICBV; (ii) the shares of substantially all of Old CBIC's U.S.
subsidiaries will be transferred by dividend to Bridge Holdings and
contributed to New CBIC in exchange for newly issued common stock of New CBIC;
(iii) Bridge Holdings will contribute the shares held by it of each of New
CBIC and CBICBV to the Issuer in exchange for additional Common Shares of the
Issuer; and (iv) New CBIC will assume any remaining assets and liabilities of
Old CBIC. After the Reorganization and prior to the consummation of the Common
Share Offering, Bridge Holdings will be merged into the Selling Shareholder
such that the Selling Shareholder will then directly own all of the then
outstanding Common Shares of the Issuer.
TAX DISAFFILIATION AGREEMENT
The Company and Praxair have entered into a tax disaffiliation agreement (the "Tax Disaffiliation Agreement") relating to various tax matters including the allocation of liabilities and credits relating to periods before the completion of the Reorganization. In particular, the Company will indemnify Praxair for its allocable share of liabilities for non-income taxes arising with respect to periods prior to the Reorganization and income taxes arising with respect to periods prior to the Reorganization based on, among other things, the subsequent disallowance of research and development credits claimed by the Company for past periods or of other tax benefit items of the Company for past periods to the extent that such other tax benefit items are available to reduce the taxes of the Company for any period after the Reorganization.
BENEFITS DISAFFILIATION AGREEMENT
The Company and Praxair have entered into an employee benefits disaffiliation agreement (the "Benefits Agreement") effective upon consummation of the Common Share Offering, relating to various employee benefits matters including the allocation and assumption by the parties of existing liabilities, and cross-indemnifications relating to such allocation and assumption of liabilities. Among other matters, the Benefits Agreement relates to defined benefit pension plan and retiree health care and life insurance obligations. The principal non-contributory tax qualified defined benefit pension plan in which employees of Old CBIC previously participated (the "CBI Pension Plan") covered most U.S. salaried employees. Old
CBIC's portion of the net pension cost for the CBI Pension Plan was $4.4 million in 1996. Regular benefit accruals under the CBI Pension Plan for current Company employees were discontinued as of December 31, 1996, except for certain increases described under "Other Executive Compensation Programs." The Company's obligations with respect to various CBI Pension Plan funding requirements and expenses were fixed at $17.3 million as of December 31, 1996, by agreement between Old CBIC and Praxair. This obligation is payable by the Company ratably to Praxair over a twelve year period beginning December 1, 1997, with interest at 7.5%.
Effective January 1, 1997, Old CBIC terminated its participation in the post retirement health care and life insurance benefit plans sponsored by Praxair. The Company's obligations with respect to existing retirees under these plans was fixed at $21.4 million as of December 31, 1996, by agreement between Old CBIC and Praxair. This obligation is payable ratably to Praxair over a twelve year period beginning December 1, 1997, with interest at 7.5%. The future obligation for active Old CBIC employees under these plans, which amounted to $8.5 million as of December 31, 1996, has been assumed by the Company.
REGISTRATION RIGHTS AGREEMENT
In addition to the Registration Statement of which this Prospectus is a part, Praxair will have the right under a registration rights agreement (the "Registration Rights Agreement") to request an unspecified number of additional registrations under the Securities Act for the sale of all or a portion of the Common Shares held by the Selling Shareholder or its transferees (the "Registrable Securities"), as well as the right to include such shares in all registration statements filed by the Issuer under the Securities Act for the sale of shares solely for cash by the Issuer (other than certain registration statements relating to the registration of shares for employee plans (other than the Management Plan) or for dividend reinvestment plans). In the Registration Rights Agreement, the Issuer has agreed to indemnify Praxair and any transferee in respect of certain liabilities, including liabilities under the federal securities laws. Requests for additional registrations of Registrable Securities must cover Registrable Securities in the amount of 5% of the Common Shares then outstanding which are not Management Plan Shares or any lesser percentage if such percentage represents all outstanding Registrable Securities. The Registration Rights Agreement also provides that for a period of three years from the date the Common Share Offering is consummated, if the number of Registrable Securities which have not yet been registered pursuant to such agreement exceeds 10% of the outstanding Common Shares which are not Management Plan Shares, the Selling Shareholder's consent is required prior to the Issuer's registering additional Common Shares (or similar securities) under the Securities Act. The right to cause the Company to register Registrable Securities pursuant to the Registration Rights Agreement is generally assignable to transferees of Registrable Securities who acquire 10% of the Registrable Securities.
LOANS TO EXECUTIVE OFFICERS AND OTHER TRANSACTIONS WITH MANAGEMENT
On January 7, 1993, an affiliate of the Company made a loan to Thomas L. Aldinger. The loan was fully repaid on February 26, 1996. The loan bore interest at 4.75%. The largest amount outstanding at any time during 1996 (including principal and interest) was $153,310. The loan was a home mortgage loan made in connection with Mr. Aldinger's transfer from the Company's London, England office to Illinois.
Glenn Group LLC, a consulting company in which Gerald M. Glenn is a principal, received fees of $172,500 from Praxair in 1996 for consulting services rendered prior to his employment by the Company.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table furnishes information, as of immediately prior to and immediately following the closing of the Common Share Offering, with respect to the number and percentage of Common Shares expected to be beneficially owned by (i) each current nominee for supervisory director of the Issuer and each executive officer of New CBIC and CBICBV (the Issuer has no executive officers), (ii) the Selling Shareholder (who is the sole person owning more than 5% of the outstanding Common Shares) and (iii) all current nominees for supervisory director of the Issuer and all executive officers of New CBIC and CBICBV as a group. Concurrently with the consummation of the Common Share Offering, all nominees for supervisory director indicated below (other than as set forth in footnote 2 to this table) are expected to be appointed to the Issuer's Supervisory Board.
AFTER THE COMMON
BEFORE THE COMMON SHARE OFFERING SHARE OFFERING
-------------------------------- ---------------------------
SHARES PERCENT OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIALLY SHARES BENEFICIALLY SHARES
BENEFICIAL OWNER OWNED OUTSTANDING OWNED(1) OUTSTANDING(1)
------------------- ------------------- --------------- ------------ --------------
Praxair, Inc............ 11,500,000 100% 1,000,000 8.0%
39 Old Ridgebury Road
Danbury, CT 06810-5113
Gerald M. Glenn......... 0 0% 508,776 4.1%
Nominee for Chairman of
the Supervisory Board
of the Issuer,
President and Chief
Executive Officer of
New CBIC, Managing
Director of CBICBV
Thomas L. Aldinger...... 0 0% 107,872 *
Vice President of New
CBIC
Stephen M. Duffy........ 0 0% 17,979 *
Vice President of New
CBIC
Timothy J. Wiggins...... 0 0% 107,872 *
Vice President of New
CBIC, Managing Director
of CBICBV
Robert H. Wolfe......... 0 0% 35,958 *
Vice President, General
Counsel and Secretary
of New CBIC
Jerry H. Ballengee...... 0 0% 0 0%
Nominee for Supervisory
Director of the Issuer
J. Dennis Bonney........ 0 0% 0 0%
Nominee for Supervisory
Director of the Issuer
John A. Clerico......... 0 0% 0 0%
Nominee for Supervisory
Director of the
Issuer(2)
Robert F.X. Fusaro...... 0 0% 0 0%
Nominee for Supervisory
Director of the
Issuer(2)
J. Charles Jennett...... 0 0% 0 0%
Nominee for Supervisory
Director of the Issuer
Vincent L. Kontny....... 0 0% 0 0%
Nominee for Supervisory
Director of the Issuer
Gary L. Neale........... 0 0% 0 0%
Nominee for Supervisory
Director of the Issuer
L. Donald Simpson....... 0 0% 0 0%
Nominee for Supervisory
Director of the Issuer
Marsha C. Williams...... 0 0% 0 0%
Nominee for Supervisory
Director of the Issuer
All current nominees for
supervisory director
listed above and all
executive officers as a
group (16 persons)..... 0 0% 813,339 6.5%
|
(1) Excludes (i) Common Shares which may be purchased in the Common Share
Offering by the nominees for director and the executive officers from the
shares reserved by the Underwriters for sale to directors, officers and
employees of the Company and certain other persons associated with the
Company, (ii) Common Shares issuable upon exercise of options to be
granted under the Company's stock option plans and (iii) Common Shares
issuable upon exercise of the over-allotment option granted to the
Underwriters. Includes Common Shares allocated to the executive officers'
individual accounts under the Management Plan.
(2) Messrs. Clerico and Fusaro are employees of the Selling Shareholder. Under
the Issuer's Articles of Association, the Selling Shareholder will have
the right to appoint, remove and replace two members of the Supervisory
Board so long as the Selling Shareholder owns at least 20% of the
outstanding Common Shares, and the right to appoint, remove and replace
one member of the Supervisory Board so long as the Selling Shareholder
owns at least 10% but less than 20% of the outstanding Common Shares. If
the Common Share Offering is consummated as currently contemplated, the
Selling Shareholder will have no right to appoint Supervisory Board
members pursuant to these provisions. See "Certain Transactions;
Relationships with Praxair." Each of Messrs. Clerico and Fusaro disclaims
beneficial ownership of the Common Shares held by the Selling Shareholder.
MANAGEMENT
SUPERVISORY BOARD
The general affairs and business of the Issuer and the board which manages the Issuer (the "Management Board") are supervised by a board appointed by the general meeting of shareholders (the "Supervisory Board").
The Issuer's Articles of Association (the "Articles of Association") provide for at least six and no more than 12 directors ("Supervisory Directors") to serve on the Supervisory Board. Under the law of The Netherlands, a Supervisory Director cannot be a member of the Management Board ("Managing Directors") of the Issuer. The members of the Supervisory Board are elected at the general shareholders' meeting by a majority of the votes cast at the meeting. The Supervisory Board is authorized to make binding nominations of two candidates for each position, with the candidate receiving the greater number of votes being elected. The general meeting of shareholders may override the binding nomination of the Supervisory Board by vote of two-thirds of the votes cast at the meeting if such two-thirds vote constitutes more than one-half of the outstanding share capital of the Issuer (a "Two-thirds Majority of Quorum"). Under the Issuer's Articles of Association, the Selling Shareholder will have the right to appoint, remove and replace two members of the Supervisory Board so long as the Selling Shareholder owns at least 20% of the outstanding Common Shares, and the right to appoint, remove and replace one member of the Supervisory Board so long as the Selling Shareholder owns at least 10% but less than 20% of the outstanding Common Shares. On the first day on which the Selling Shareholder's ownership of the outstanding Common Shares is less than 10%, the Selling Shareholder will cease to have any special rights regarding the appointment, removal and replacement of the Issuer's supervisory directors. The members of the Supervisory Board appoint a chairman of the Supervisory Board from among the members of the Supervisory Board. Resolutions of the Supervisory Board generally require the approval of a majority of the votes cast. The Supervisory Board meets upon the request of its Chairman or two or more of its members or upon the request of the Management Board.
Members of the Supervisory Board must retire no later than at the ordinary general meeting of shareholders held after a period of three years following their appointment, but may be re-elected. Members of the Supervisory Board are elected to serve three-year terms, with approximately one-third of such members' terms expiring each year. Pursuant to the Articles of Association, members of the Supervisory Board may be suspended or dismissed by the general meeting of shareholders. The Supervisory Board may make a proposal to the general meeting of shareholders for the suspension or dismissal of one or more of its members. If such a proposal is made by the Supervisory Board, a simple majority vote of the shareholders is required to effect a suspension or dismissal. If no such proposal is made, a Two-thirds Majority of Quorum vote is required to effect a suspension or dismissal. The members of the Supervisory Board may receive such compensation as may be authorized by the general meeting of shareholders.
MANAGEMENT BOARD
The management of the Issuer is entrusted to the Management Board under the supervision of the Supervisory Board. Under the Articles of Association, the Supervisory Board may specify by resolution certain actions by the Management Board that require the prior approval of the Supervisory Board. No such resolution has yet been passed. Under the Articles of Association, both proposals to amend the Articles of Association, and proposals to legally merge or dissolve the Issuer require the prior approval of the Supervisory Board.
The Articles of Association provide that the Management Board shall consist of one or more members. The members of the Management Board are elected for terms of indefinite duration upon a binding nomination of the Supervisory Board and election at the general shareholders' meeting by a majority of the votes cast at the meeting. The shareholders may override the binding nomination of the Supervisory Board by a Two-thirds Majority of Quorum vote.
The general meeting of shareholders may suspend or dismiss one or more members of the Management Board by a Two-thirds Majority of Quorum vote. The Supervisory Board may suspend members of the Management Board. Such suspension may be discontinued by the general meeting of shareholders at any time. If within three months after such suspension no decision has been taken on termination of the suspension or on dismissal of the relevant member, the suspension will cease. The Articles of Association provide that the Supervisory Board shall, in the event of absence or inability to act of all the members of the Management Board, be temporarily responsible for the management of the Issuer. The Supervisory Board determines the compensation and other terms and conditions of employment of the members of the Management Board.
Upon consummation of the Common Share Offering, the sole member of the Issuer's Management Board will be CBICBV, a Netherlands private company. CBICBV is the Company's principal holding company subsidiary for its non-U.S. operations. Under Netherlands law, shareholder action is required in order to appoint or dismiss a management board member. A corporate subsidiary of the Issuer will serve as the sole member of the Issuer's Management Board in order to avoid the necessity of shareholder action on appointment and removal of management personnel and to implement a management structure similar to that of a United States corporation. Pursuant to CBICBV's Articles of Association, the members of its management board or holders of a power of attorney will have the authority to act on behalf of CBICBV. The managing directors of CBICBV, each of whom is an employee or an officer of the Company or its affiliates, have the authority to act on behalf of CBICBV.
The business address of the members of the Supervisory Board and the Management Board of the Issuer is Koningslaan 32-36, 1075 AD, Amsterdam, The Netherlands and the mailing address is P.O. Box 74658, 1070 BR Amsterdam, The Netherlands.
DIRECTORS OF THE ISSUER AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the Issuer's current nominees for supervisory director and the executive officers of New CBIC and CBICBV. At the time of the Common Share Offering, as permitted under the law of The Netherlands, the Issuer will not have executive officers. CBICBV will serve as the Issuer's Management Board.
NAME AGE POSITION
---- --- --------
Gerald M. Glenn................ 54 Nominee for Chairman of the Supervisory
Board of the Issuer; President and Chief
Executive Officer of New CBIC; Managing
Director of CBICBV
Thomas L. Aldinger............. 45 Vice President--Business Development and
Operations of New CBIC; Managing Director
of CBICBV
Stephen M. Duffy............... 47 Vice President--Human Resources and
Administration of New CBIC
Timothy J. Wiggins............. 40 Vice President--Treasurer and Chief
Financial Officer of New CBIC; Managing
Director
of CBICBV
Robert H. Wolfe................ 47 Vice President, General Counsel and
Secretary of New CBIC; Secretary of CBICBV
Jerry H. Ballengee............. 59 Nominee for Supervisory Director of the
Issuer
J. Dennis Bonney............... 66 Nominee for Supervisory Director of the
Issuer
John A. Clerico (1)............ 55 Nominee for Supervisory Director of the
Issuer
|
NAME AGE POSITION
---- --- --------
Robert F.X. Fusaro (1)............. 55 Nominee for Supervisory Director of the
Issuer
J. Charles Jennett................. 56 Nominee for Supervisory Director of the
Issuer
Vincent L. Kontny.................. 59 Nominee for Supervisory Director of the
Issuer
Gary L. Neale...................... 57 Nominee for Supervisory Director of the
Issuer
L. Donald Simpson.................. 61 Nominee for Supervisory Director of the
Issuer
Marsha C. Williams................. 45 Nominee for Supervisory Director of the
Issuer
|
Gerald M. Glenn has been the President and Chief Executive Officer of Old CBIC since May 1996, will hold the same position at New CBIC and has been a Managing Director of CBICBV since its inception. Mr. Glenn has been nominated to serve as Chairman of the Supervisory Board. From April 1994 to present Mr. Glenn has been a principal in The Glenn Group LLC. From November 1986 to April 1994, Mr. Glenn served as Group President--Fluor Daniel, Inc. Mr. Glenn's term as a Supervisory Director will expire in 2000.
Thomas L. Aldinger has been the Vice President--Business Development and Operations of Old CBIC since January 1995, will hold the same position at New CBIC and has been a Managing Director of CBICBV since its inception. Prior to that time from January 1993 to January 1995 Mr. Aldinger served as President of CBI Services, Inc. and from January 1991 to January 1993 Mr. Aldinger served as Vice President and Area General Manager for Europe, Africa and the Middle East of Old CBIC. Mr. Aldinger has been continuously employed by the Company since 1974.
Stephen M. Duffy has been Vice President--Human Resources and Administration of Old CBIC since June 1996 and will hold the same position at New CBIC. Mr. Duffy was Vice President--Human Resources and Administration of Industries from November 1991 through May 1996.
Timothy J. Wiggins has been Vice President--Treasurer and Chief Financial Officer of Old CBIC since September 1996, will hold the same position at New CBIC and has been a Managing Director of CBICBV since its inception. From August 1993 to September 1996, Mr. Wiggins was Executive Vice President-- Finance and Administration, Chief Financial Officer and Secretary and a director of Fruehauf Trailer Corporation ("Fruehauf"), a publicly-held manufacturer of truck trailers. Fruehauf filed a petition under the Federal bankruptcy laws in October 1996. From May 1993 to August 1993, Mr. Wiggins was employed by Glass & Associates, Inc., a turnaround and management consulting firm. From 1988 to March 1993, Mr. Wiggins served Autodie Corporation, a publicly-held manufacturer of large-scale stamping dies and molds primarily for the automotive industry, in various executive positions. Mr. Wiggins was promoted to Chief Executive Officer of Autodie Corporation shortly after Autodie Corporation filed a petition under the Federal bankruptcy laws.
Robert H. Wolfe has been the Vice President, General Counsel and Secretary of Old CBIC since November 1996 and will hold the same position at New CBIC. Before that time, from June 1996 to November 1996, Mr. Wolfe served as a private consultant to Rust Engineering & Construction Inc. ("Rust"). He served as Vice President, General Counsel and Secretary to Rust from November 1993 to June 1996 and as Associate General Counsel for that company from July 1988 to November 1993.
Jerry H. Ballengee is a nominee to the Supervisory Board of the Issuer. He has served as President and Chief Operating Officer of Union Camp Corporation since July 1994 and has served in various other executive capacities and as a member of the Board of Directors of Union Camp Corporation since 1988. He is also a member of the Boards of Directors of Goulds Pumps, Inc. and United Cities Gas Company. Mr. Ballengee's term as a Supervisory Director will expire in 1998.
J. Dennis Bonney is a nominee to the Supervisory Board of the Issuer. He served as Vice Chairman of the Board of Chevron Corporation from 1987 to 1995. He currently serves as Chairman of the Board of Aeromovel USA, and has also been a Director since 1996 of Alumax Inc. and United Meridian Corporation. Mr. Bonney's term as a Supervisory Director will expire in 2000.
John A. Clerico is a nominee for Supervisory Director of the Issuer. Mr. Clerico has served as Vice President and Chief Financial Officer of Praxair, Inc. since January 1992, and has also served as a Director of Praxair, Inc. since January 1992. If Mr. Clerico serves as a Supervisory Director, his term will expire in 1998.
Robert F.X. Fusaro is a nominee for Supervisory Director of the Issuer. Mr. Fusaro has served as Director of Acquisitions & Divestitures at Praxair, Inc. since March 1996. Prior to that time, from October 1993 to March 1996, Mr. Fusaro was Associate General Counsel of Union Carbide Corporation, and from January 1988 to October 1993, Mr. Fusaro served as the Director of Acquisitions & Divestitures and Assistant General Counsel of Union Carbide Corporation. Mr. Fusaro served as a Managing Director of the Issuer from November 1996 to the time of the Reorganization. If Mr. Fusaro serves as a Supervisory Director, his term will expire in 1998.
J. Charles Jennett is a nominee to the Supervisory Board of the Issuer. He has served as President of Texas A&M International University since 1996. He was Provost and Vice President of Academic Affairs at Clemson University from 1992 through 1996. Mr. Jennett's term as Supervisory Director will expire in 1999.
Vincent L. Kontny is a nominee to the Supervisory Board of the Issuer. Mr. Kontny was President and Chief Operating Officer of Fluor Corporation from 1992 until September 1994. Mr. Kontny is currently the owner and CEO of the Double Shoe Cattle Company. He has held this position at Double Shoe Cattle Company since 1992. Mr. Kontny's term as a Supervisory Director will expire in 2000.
Gary L. Neale is a nominee to the Supervisory Board of the Issuer. He is currently President, CEO and Chairman of the Board of NIPSCO Industries, Inc., whose primary business is the operation of Northern Indiana Public Service Company, a gas and electric utility company. Mr. Neale has served as a director of NIPSCO Industries, Inc. since 1991, a director of Northern Indiana Public Service Company since 1989, and a director of Modine Manufacturing Company since 1977. Mr. Neale's term as a Supervisory Director will expire in 1999.
L. Donald Simpson is a nominee to the Supervisory Board of the Issuer. Since December 1996 Mr. Simpson has served as Executive Vice President of Great Lakes Chemical Corporation. Prior thereto, beginning in 1992, Mr. Simpson served in various executive capacities at Great Lakes Chemical Corporation. Mr. Simpson's term as a Supervisory Director will expire in 1998.
Marsha C. Williams is a nominee to the Supervisory Board of the Issuer. Since October 1993, she has served as Treasurer of Amoco Corporation, where she was in the Mergers, Acquisitions and Negotiations Department from December 1992 through September 1993 and was a Senior Financial Manager in the Treasurer's Department from November 1989 through December 1992. Ms. Williams' term as Supervisory Director will expire in 1999.
1996 EXECUTIVE OFFICER COMPENSATION
The following table sets forth certain information regarding compensation paid to Old CBIC's Chief Executive Officer and to each of the four other most highly compensated executive officers of Old CBIC (the "named executive officers"). Neither the Issuer nor CBICBV paid compensation to executive officers in 1996.
SUMMARY COMPENSATION TABLE
PRINCIPAL ALL OTHER
POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3)
--------- ---- --------- -------- ---------------
Gerald M. Glenn....................... 1996 $230,770 $469,500 $ 26,094
President and Chief Executive Officer
Lewis E. Akin......................... 1996 $ 43,750 -- $957,635(4)
Former President and Chief Executive
Officer
Thomas L. Aldinger.................... 1996 $166,200 $315,075 $261,258(4)
Vice President--Business Development
and Operations
Timothy J. Wiggins.................... 1996 $ 59,230 $ 50,000 $ 55,026
Vice President--Treasurer and Chief
Financial Officer
Stephen M. Duffy...................... 1996 $ 89,230 $219,129 $ 10,362(4)
Vice President--Human Resources
and Administration
Robert H. Wolfe....................... 1996 $ 16,827 $ 25,000 --
Vice President, General Counsel
and Secretary
|
(4) The compensation reported includes payments under various compensation plans and other employment arrangements in effect at the time Industries was acquired by Praxair which became payable because of such acquisition totalling $954,816, $240,619 and $7,586 for Messrs. Akin, Aldinger and Duffy, respectively.
COMPENSATION AND BENEFITS
The Company's overall compensation and benefit strategy is to provide programs which are competitive within its industry. The Company believes that this strategy will give the Company the opportunity to attract and retain the highly-skilled managerial, supervisory, technical, sales and marketing personnel that are key to the Company's success. The overall compensation and benefit packages offered
by the Company are intended to link the interests of executive officers and employees with those of shareholders through the use of equity-based plans with a long-term perspective, as well as short-term programs which allow employees and executive officers to share in the rewards of improved performance. The following is a brief description of the components of the Company's compensation and benefits program. Plans sponsored by Old CBIC, upon consummation of the Reorganization, will be sponsored by New CBIC.
Executive Compensation
The Company's executive compensation program is designed to support the achievement of corporate performance goals; to attract, retain and motivate key executives; and to enhance shareholder value. The program utilizes a combination of competitive base salaries, short term cash incentives (annual bonuses), long-term stock-based incentives and other competitive benefit plans.
Annual Incentive Compensation. The Company has adopted an Annual Incentive Compensation Plan (the "Bonus Plan"), to take effect in fiscal 1997. The Bonus Plan is an annual short-term incentive plan covering a group consisting of the executive officers of the Company and its principal operating subsidiaries and other designated key management employees. The Bonus Plan is based on the annual operating plan of the Company, arrived at as a result of discussion and analysis of the business plans within the major divisions of the Company. Payment of bonuses is based on attaining a specific goal of operating income, and is payable following the end of the fiscal year. The operating income goal would be set from year to year, at the beginning of each year (subject to modifications relating to extraordinary events), upon management's recommendation and approval by the Issuer's Supervisory Board.
A target bonus will be established for each participating employee at the beginning of each year based on position, responsibilities and grade level. The bonus may be earned from two sources--achievement of the corporate operating income goal and a discretionary portion. A percentage of target bonus opportunity is allocated to each bonus source. The discretionary bonus is determined by the management's evaluation of individual performance and in the case of the CEO, the Compensation Committee of the Supervisory Board of the Issuer.
Long-Term Compensation. Old CBIC adopted a long-term incentive compensation plan (the "Incentive Plan") for its executive officers, other management employees and Supervisory Directors which is a so-called "omnibus" plan. The Company believes that through the use of long-term, stock-based incentive compensation plans it is possible to create alignment between executive compensation and long-term improvements in shareholder value. The objective of the Incentive Plan is to provide an opportunity and incentive to a group of management employees and non-employee directors to achieve above market levels of compensation based on long-term growth in the value of the Company, which at the same time is aligned with the financial interests of shareholders.
The Incentive Plan offers the flexibility to the Company to provide the incentive of such long-term compensation in any of the following forms: non- qualified options to purchase Common Shares; qualified "incentive" options to purchase Common Shares; restricted Common Shares; "performance shares," paying out a variable number of Common Shares depending on goal achievement, and "performance units," which would be cash payments based on either the value of the Common Shares or appreciation in the price of the Common Shares upon achievement of specific financial goals. In addition, the Incentive Plan will specifically provide that only non-qualified options will be granted from it during the Incentive Plan's first year. Selection of participating employees and the number of options to be granted are subject to the approval of the Compensation Committee of the Issuer's Supervisory Board.
The exercise price of all options granted under the Incentive Plan shall not be less than one hundred percent (100%) of the fair market value (as defined in the Incentive Plan) of the stock subject to the option on the date the option is granted. An option shall be exercisable in accordance with the terms set forth in
the individual award agreement, provided that, no option shall be exercisable prior to the third anniversary of the date of the grant. The expiration date of each option shall be established by the Compensation Committee, but shall not exceed 10 years from the date of the grant.
Awards of restricted stock shall be subject to a period of restriction during which the transfer of such shares of restricted stock shall be limited. Such restrictions shall lapse based on the passage of time, the achievement of performance goals, or the occurrence of other events as determined by the Compensation Committee, in accordance with the terms of each restricted stock award agreement.
Each performance unit shall have an initial value that is established by the Compensation Committee at the time of grant, and each performance share shall have an initial value equal to the fair market value (as defined in the Incentive Plan) of a share of Company Common Stock on the date the award is granted. Holders of performance units and shares shall be entitled to receive a payout on the number and value of performance units and shares, based on the achievement during the performance period of specified performance goals.
In the event of a change in control (as defined in the Incentive Plan), unless otherwise prohibited under applicable law, all options shall become immediately exercisable, the restriction period imposed on any restricted stock award shall lapse and the payout opportunities attainable under all outstanding awards of restricted stock, performance units and performance shares shall be deemed to have been fully earned for the entire performance period.
The number of options granted to participants would be targeted to an appropriate percentage of such participant's compensation by his or her position or grade level, as determined by comparative market data.
The Issuer intends to reserve Common Shares of the Company for the Incentive Plan equal to 10% of the number of Common Shares issued and outstanding at the time of the Common Share Offering. The Issuer expects that options exercisable for approximately 4% of the number of Common Shares outstanding will be granted at or immediately prior to the date of the Common Share Offering. It is expected that the initial options granted would be exercisable after 1999 subject to achievement of a cumulative earnings per share for the three year period from 1997 through 1999 of at least $6.25 per Common Share (excluding the pretax charge of approximately $21.9 million (assuming an initial public offering price of $21.50) relating to the implementation of the Management Plan). The Issuer expects that all of such options which have not previously vested would vest automatically nine years from their date of grant. The Incentive Plan would have a life of five years for the purpose of making grants or awards, unless the number of shares reserved for such plan are used up before the expiration of that period, in which case shareholder approval would be required in order to reserve additional Common Shares for the Incentive Plan. The vesting and exercise periods for options granted would be in addition to such five year period.
Special Stock-Based, Long-Term Compensation Related to the Common Share Offering
The Company intends to establish the Management Plan prior to the consummation of the Common Share Offering. The Management Plan is not qualified under Section 401(a) of the Code and each participant's account shall be treated as a separate account under Section 404(a)(5) of the Code. The designation of the Management Plan's participants, the amount of Company contributions to the Management Plan and the amount allocated to the individual participants will be determined by the Issuer's Supervisory Board. The allocation to the participant's individual accounts will occur concurrently with the Company's contributions. Management Plan Shares will vest as determined by the Issuer's Supervisory Board. Upon vesting, the distribution of the balance held in the individual participant's account can be distributed at the election of the participant. Forfeitures of Management Plan Shares under the provisions of the Management Plan will be reallocated to the other Management Plan participants. The number of initial participants is expected to be 40 to 60.
As an incentive to increasing the long-term value of the Company, Mr. Glenn has an agreement with Praxair, and Messrs. Wiggins, Aldinger, Wolfe and Duffy have agreements with CB&I, whereby each will
respectively receive special compensation related to the sale of the Common Shares pursuant to the Common Share Offering, in the amounts of approximately 508,776, 107,872, 107,872, 35,958 and 17,979 Common Shares, respectively (assuming an initial public offering price of $21.50 per share). Each of such officers, along with a group of approximately 35 to 55 other key management employees, will be participants in the Management Plan. In fulfillment of Praxair's commitment, upon consummation of the Common Share Offering, the Company has agreed to make a contribution to the Management Plan in the form of Common Shares having a value of approximately $21.9 million (approximately 1,017,552 Common Shares, assuming an initial public offering price of $21.50 per share (the mid-point of the price range as set forth on the cover page of this Prospectus)). Accordingly, the Company will record a pretax charge of approximately $21.9 million (assuming an initial public offering price of $21.50 per share) at the time of the contribution to the Management Plan. This initial contribution of Management Plan Shares will vest three years (and with respect to one participant, two years) after the date of the Common Share Offering.
Other Executive Compensation Programs
In addition to the annual short-term incentive compensation programs and long-term incentive compensation programs described above, Old CBIC sponsors and New CBIC will sponsor, the following additional compensation programs in which management employees, including all of the named executive officers are eligible to participate.
Old CBIC adopted, effective January 1, 1997, a restated tax-qualified defined contribution pension plan for eligible employees (the "New 401(k) Plan"), including, but not limited to, the named executive officers. Such plan consists of a typical voluntary pretax salary deferral feature under Section 401(k) of the Code; a dollar-for-dollar Company matching contribution applicable to such employee deferrals, up to 3% of a participating employee's considered earnings; a basic additional Company contribution of 5% of each participating employee's considered earnings; and an additional discretionary Company profit-sharing contribution.
The New 401(k) Plan substantially replaces the former 401(k) plan (the "CBI
401(k) Pay Deferral Plan") and the CBI Pension Plan. The New 401(k) Plan
provides that the Company may, at the discretion of management, make certain
of its matching contributions or additional discretionary profit sharing
contributions in a uniform manner in the form of either cash or Common Shares.
Since December 31, 1996, no employees of the Company participate in the CBI Pension Plan who were not already participants as of December 31, 1996. No further benefits will accrue under the provisions of the CBI Pension Plan's normal benefit formulas for employees participating as of December 31, 1996. Instead, benefits accrued as of that date will be computed and increased at a rate of 5% per year (not compounded) or fraction thereof of continuing service, to a maximum of three additional years. The number of years of credited service, as of December 31, 1996, for the following named executive officers, who are the only such officers who have or will have benefits accrued under the CBI Pension Plan, are: Thomas L. Aldinger, 22.9 years; and Stephen M. Duffy, 5.1 years.
The following table shows approximate annual pensions payable to salaried employees, including participating executive officers, assuming normal retirement at age 65 and that the current social security tax base remains unchanged:
PENSION PLAN TABLE(1)
AVERAGE YEARS OF SERVICE AT RETIREMENT ANNUAL ---------------------------------------------------------------- EARNINGS 15 20 25 30 35 40 - ---------- -------- -------- -------- -------- -------- -------- $ 100,000 $ 21,540 $ 28,720 $ 35,900 $ 43,080 $ 50,260 $ 57,440 200,000 42,540 56,720 70,900 85,080 99,260 113,440 300,000 63,540 84,720 105,900 127,080 148,260 169,440 400,000 84,540 112,720 140,900 169,080 197,260 225,440 500,000 105,540 140,720 175,900 211,080 246,260 281,440 600,000 126,540 168,720 210,900 253,080 295,260 337,440 700,000 147,540 196,720 245,900 295,080 344,260 393,440 800,000 168,540 224,720 280,900 337,080 393,260 449,440 900,000 189,540 252,720 315,900 379,080 442,260 505,440 1,000,000 210,540 280,720 350,900 421,080 491,260 561,440 |
In conjunction with the adoption of the New 401(k) Plan, Old CBIC adopted an "excess" benefit plan. Under such a plan, the Company will determine the amount of matching and discretionary contributions which it would have contributed to the New 401(k) Plan on behalf of designated management employees, except as limited by the Code. Under the excess benefit plan, retirement benefits in excess of the amounts permitted under the limitations on contributions under the Code will be paid. It also allows affected participants to elect to voluntarily defer more than the $9,500 limitation on employee contributions under the New 401(k) Plan. Such benefits are payable to a participant upon retirement, other specified terminations of employment, or upon other specified events. The amount of such benefits payable will be determined by attributing an imputed rate of interest or earnings on the equivalent amount of excess plan contributions not made to the qualified plan. The obligations to provide such benefits will constitute general obligations of New CBIC.
Supplemental Executive Death Benefits Plan. Old CBIC adopted a plan for selected management employees to provide additional benefits upon pre- or post-retirement death to a participant's named beneficiary. Such plan is in addition to any group life insurance plan provided generally to all employees, and may be provided through New CBIC's general assets, New CBIC-owned insurance policies, or "split-dollar" life insurance policies. The amount of such benefits provided is significantly greater than that provided under such group life insurance plan. The taxability of such benefits, or payments on premiums therefor, to a participant or his or her beneficiaries, and the tax deductibility of such amounts by the Company, will be determined by the selection of the actual means by which the Company pays such benefits, which has not been determined at this time.
EMPLOYEE SHARE PURCHASE PLAN
The Issuer believes that a key element of its future success will be broad- based stock ownership by all its employees, and providing incentives to become and remain shareholders. The Issuer intends to adopt a broad-based employee share purchase plan (the "Share Purchase Plan"), in which certain employees of the Company, including the named executive officers, would be eligible to participate. Pursuant to the Share Purchase Plan, each employee electing to participate would be granted an option to purchase
common shares of the Issuer upon a specified future date at 85% of the fair market value of such shares on the date of purchase. During specified periods preceding such purchase date, a percentage of the participating employees' after-tax pay, as such employee elects, would be withheld and placed in an account to apply to the purchase of as many shares as such funds allow at the discounted purchase price. Common Shares so purchased would be registered in the name of the employee participant.
Pursuant to the Code, the Share Purchase Plan would not permit any participant to purchase Common Shares under the proposed plan and all other share purchase plans (if any) in excess of $25,000 of market value per year, determined at the time each option to purchase is granted. The Share Purchase Plan is intended to qualify under Section 423 of the Code.
The Company anticipates that it will reserve a total of 250,000 Common Shares for purchase pursuant to the Share Purchase Plan, with such plan to expire no later than the date that is on or about five years from the date of this Prospectus.
TERMINATION AND EMPLOYMENT AGREEMENTS
Old CBIC and Messrs. Wiggins, Wolfe, Aldinger and Duffy have entered into
change of control severance agreements each providing that, in the event of a
termination of their respective employment with the Company (other than by
reason of the employee's willful misconduct or gross negligence) or a
significant reduction in their respective responsibilities, salary or benefits
or a substantive change in the respective location of their employment, within
the two-year period following a change of control of the Company, each will
receive a special lump-sum payment following separation equal to $1,000,000,
$750,000, $1,500,000, and $240,000, respectively. In addition, upon a
termination for any reason (other than by reason of the employee's willful
misconduct or gross negligence) during the six month period prior to a change
of control, each employee will be entitled to receive a special lump-sum
payment (in the amount previously set forth) minus the gross amount of any
severance payments otherwise paid to such employee, within ten days following
a change of control. Each employee who receives a special lump-sum payment is
also entitled to receive outplacement services at the expense of the Company.
The agreements provide that the Company will pay an amount necessary to
reimburse each employee, on an after-tax basis, for any excise tax due under
Section 4999 of the Code, as a result of any such payment being treated as a
"parachute payment" under Section 280G of the Code. The receipt by each
employee of any of the amounts payable pursuant to the agreements is
contingent upon the employee's execution of a release of claims in favor of
the Company. A change of control for purposes of such agreements is deemed to
occur if, other than in connection with the Common Share Offering, (i) any
person or group of persons other than Praxair, Inc. or one of its subsidiaries
becomes the beneficial owner of 25% or more of the total voting power of the
Company's or any such subsidiary's outstanding securities, (ii) upon
consummation of any merger or other business combination of the Company or any
such subsidiary with or into another person pursuant to which the shareholders
of the Company or such subsidiary do not own, upon consummation of such
combination, more than 50% of the voting power and value of the stock of the
surviving person or (iii) if, during any period of two years or less, a
majority of the members of the Issuer's Supervisory Board changes and new
members were not nominated by at least 75% of the directors then still in
office who were directors at the beginning of such period.
In addition, the Company has entered into employment arrangements with Messrs. Glenn, Wiggins and Wolfe to serve the Company as President and Chief Executive Officer, Vice President--Treasurer and Chief Financial Officer, and Vice President--General Counsel and Secretary, respectively. Pursuant to these arrangements, Mr. Glenn's base salary is $400,000 per year, Mr. Wiggins' base salary is $220,000 per year, and Mr. Wolfe's base salary is $175,000 per year. Such arrangements do not establish any required term of employment. The arrangements provide for, among other things, participation in Company bonus and incentive compensation programs, lump sum payments in the event of termination (or a significant reduction in levels of responsibility) within two years of a sale of the Company and for a special stock-based compensation award relating to an initial public offering of Common Shares. See "-- Compensation and Benefits--Special Stock-Based, Long-Term Compensation Related to the Common
Share Offering." Each such employee is also entitled to participate in the Company's relocation program and to receive either an automobile allowance of $500 per month or the use of a Company-owned vehicle.
COMPENSATION OF DIRECTORS
The Issuer intends to compensate Supervisory Directors who are not officers of the Company or designees of the Selling Shareholder by an annual retainer of $20,000 per year, paid in quarterly installments, and $1,500 for attendance at each Board meeting as well as an annual grant of options to purchase 500 Common Shares at an exercise price equal to the fair market value of the Common Shares at the time of grant. Directors who are chairpersons of committees shall receive an additional retainer of $3,000. Those who serve on Board Committees shall receive $1,000 for each committee meeting attended. Supervisory Directors may elect to receive their compensation in Common Shares and may elect to defer their compensation. Selling Shareholder designees who tender resignations which are not accepted by the Chairman of the Supervisory Board will be entitled to the same compensation as Supervisory Directors who are not officers of the Company or designees of the Selling Shareholder.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For 1996, compensation decisions were made by or in accordance with the entire Board of Directors of Old CBIC, the members of which were E.G. Hotard, G.M. Glenn, T.J. Wiggins, R.F.X. Fusaro, J.S. Sawyer, B.A. Harris, J.R. Vipond, S.C. Cunningham and W.F. McClure, Jr. For 1997, compensation decisions for employees of New CBIC will be made by the Board of Directors of New CBIC and for employees of CBICBV by its management board.
DESCRIPTION OF NEW REVOLVING CREDIT FACILITY
The Company, The Chase Manhattan Bank ("Chase") and a syndicate of other banks have entered into a five year senior, unsecured competitive advance and revolving credit facility (the "New Revolving Credit Facility"). Maximum availability under the New Revolving Credit Facility is $100.0 million for the first three years and $50.0 million thereafter. The borrowers include the Issuer and certain wholly owned subsidiaries, and substantially all material subsidiaries will unconditionally guarantee (to the extent not prohibited by applicable law) the borrowers' obligations thereunder. The Company expects, concurrently with the consummation of the Common Share Offering, to borrow all funds necessary thereunder to repay indebtedness owed to Praxair on the date the Common Share Offering is consummated. As of February 27, 1997, the amount of such indebtedness outstanding was approximately $73 million.
The unused available committed amounts under the New Revolving Credit Facility will be available for general corporate purposes, including working capital, letter of credit and other requirements of the Company. Amounts may be borrowed, repaid and reborrowed, subject to availability and applicable conditions to borrowing. Revolving credit loans would be available at interest rates based upon the lenders' alternate base rate or a spread ranging from 0.325% to 0.875% (based on the Company's debt coverage ratio) over LIBOR or on a competitive bid basis. Letters of credit may be issued, subject to a $35.0 million sublimit, on either a committed or competitive bid basis and expire one year after issuance unless otherwise provided. The New Revolving Credit Facility will terminate on the fifth anniversary of the date of its execution unless terminated sooner.
The New Revolving Credit Facility contains various covenants, including
financial covenants (the terms of which are set out in the credit agreement
governing such facility) that, among other things, (1) require the Company to
maintain a minimum level of consolidated tangible net worth equal to its
consolidated net worth as of December 31, 1996 minus $10.0 million plus 50% of
its consolidated net income for each fiscal year during which its consolidated
net income is positive, a consolidated EBITDA to interest expense ratio of at
least 5.00 to 1 for any period of four consecutive fiscal quarters and a
consolidated leverage ratio (a) for any period of four consecutive fiscal
quarters ending on or prior to March 31, 1998 not greater than 2.75 to 1 and
(b) for any period of four consecutive fiscal quarters ending thereafter not
greater than 2.50 to 1 and (2) restrict the Company's capital expenditures to
$22.5 million in 1997 and $20.0 million (plus the lesser of (x) the difference
between the amount permitted to be expended in the prior year and the amount
actually expended and (y) $5.0 million), in each fiscal year thereafter, and
other covenants that limit mergers, certain asset sales, the incurrence of
indebtedness by subsidiaries (excluding letters of credit and performance
bonds), the granting of liens, dividends and other payments in respect of
capital stock and indebtedness, the making of investments, the issuance of
stock by subsidiaries and future transactions with affiliates. The restriction
on dividends permits, so long as no default is continuing at the time thereof
or giving effect thereto, the payment of cash dividends in an aggregate amount
not to exceed (a) prior to December 31, 1997, $5.0 million and (b) during any
fiscal year of the Company thereafter, $5.0 million plus 10% of the Company's
consolidated net income for the immediately preceding fiscal year.
The New Revolving Credit Facility contains customary events of default, including failure to pay principal or interest, any breach of representations when made, any default under covenants (subject to grace periods), bankruptcy events, cross defaults to other indebtedness exceeding a specified amount, a change of control of the Issuer, New CBIC or CBICBV, unsatisfied judgments, ERISA events or the invalidity of the subsidiary guarantees.
The Company's ability to initially borrow under the New Revolving Credit Facility is subject to, among other conditions, consummation of the Reorganization and the Common Share Offering, the repayment simultaneously with the initial borrowing of all indebtedness owed to Praxair and the absence of outstanding indebtedness of the Company and its subsidiaries (other than indebtedness existing on the date the New Revolving Credit Facility was executed and performance bonds and letters of credit securing ordinary course performance obligations).
DESCRIPTION OF SHARE CAPITAL
The Issuer was organized under the law of The Netherlands as a public company with limited liability ("naamloze vennootschap") by Deed of Incorporation dated November 22, 1996. The Issuer is registered in the trade register of Amsterdam under No. 286.441. Set forth below is a summary of certain provisions, including all material provisions relating to the Common Shares, contained in the Articles of Association and the law of The Netherlands. Such summary does not purport to be a complete statement of the Articles of Association and the law of The Netherlands and is qualified in its entirety by reference to the Articles of Association which are filed as an exhibit to the Registration Statement of which this Prospectus forms a part.
The authorized share capital of the Issuer is NLG 500,000 consisting of 50,000,000 Common Shares, each with a par value of NLG .01. As of November 22, 1996, 10,000,000 Common Shares were outstanding, all of which were owned by Bridge Holdings. In connection with the Reorganization, additional Common Shares will be issued by the Issuer to Bridge Holdings. Upon consummation of the Common Share Offering 12,517,552 Common Shares will be outstanding. Common Shares may be issued either in registered or bearer form, except that New York Shares may only be issued in registered form.
Harris Trust and Savings Bank will maintain the New York Registry and act as transfer agent and registrar for the New York Shares (the "New York Transfer Agent and Registrar"). Kas-Associatie N.V. will act as transfer agent and paying agent for the Bearer Shares and the Common Shares in the Amsterdam Register (as defined below) and as registrar for the Common Shares in the Amsterdam Register (the "Dutch Transfer and Paying Agent").
All of the New York Shares sold in the Common Share Offering will initially be represented by a single global certificate held through the Depository Trust Company ("DTC") and registered in the name of Cede & Co., the nominee of DTC. Beneficial interests in the New York Shares represented by the global certificate or otherwise held through DTC will be represented, and transfers of such beneficial interests will be effected, through accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC. Investors may hold beneficial interests in New York Shares directly through DTC if they are a participant in such system, or indirectly through organizations that are participants in such system.
The Bearer Shares, at the discretion of the Management Board, subject to the approval of the Supervisory Board, may be represented either by share certificates issued in the form of a main part with a dividend sheet consisting of a set of dividend coupons ("K-certificates") or by share certificates in the form of a main part with a simplified dividend sheet ("CF- certificates"). The CF-certificates may only be transferred through the book- entry transfer system maintained by NECIGEF (Nederlands Centraal Instituut voor Giraal Effectenverkeer, the Netherlands Central Institute for Giro Securities). For the time being, the Issuer intends only to issue CF- certificates. Investors may hold interests in the Bearer Shares through NECIGEF, Euroclear and Cedel, if they are participants in such systems, or indirectly through organizations that are participants in such systems. Common Shares may also be registered in the shareholders' register kept in Amsterdam, The Netherlands ("Amsterdam Register") for any number of Common Shares.
COMMON SHARES
After the consummation of the Common Share Offering, there will be 12,517,552 Common Shares outstanding. Each shareholder of record (or if applicable, a beneficiary of a life interest to whom the voting rights have been transferred) is entitled to one vote for each Common Share held on every matter submitted to a vote of shareholders. In the event of the dissolution and liquidation of the Issuer, holders of
Common Shares are entitled to receive, on a pro rata basis, all assets of the Issuer remaining available for distribution to the holders of Common Shares. The Articles of Association make no provision for cumulative voting and, as a result, the holders of a majority of the Issuer's voting power will have the power, subject to the Supervisory Board's right to make binding nominations, to elect all members of the Supervisory Board and the Management Board. See "--Summary of Certain Provisions of the Articles of Association and Other Matters--Election and Tenure of Managing Directors and Supervising Directors; Power to Represent and Bind the Issuer."
SUMMARY OF CERTAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION AND OTHER MATTERS
Dividends
Pursuant to the Articles of Association, the Management Board, with the approval of the Supervisory Board, may establish reserves out of the Issuer's annual profits. The portion of the Issuer's annual profits that remains after the establishment of reserves is at the disposal of the general meeting of shareholders. Out of the Issuer's share premium reserve and other reserves available for shareholder distributions under the law of The Netherlands, the general meeting of shareholders may declare distributions upon the proposal of the Management Board (after approval by the Supervisory Board). Pursuant to a resolution of the Supervisory Board (provided that the Supervisory Board is authorized to issue such shares), distributions approved by the general meeting of shareholders may be fully or partially made in the form of Common Shares. The Issuer may not pay dividends if the payment would reduce shareholders' equity below the aggregate par value of the Common Shares outstanding, plus the reserves statutorily required to be maintained. Although under Dutch law, dividends are generally paid annually, the Management Board, with the approval of the Supervisory Board, may, subject to certain statutory provisions, distribute one or more interim dividends before the accounts for any year have been approved and adopted at a general meeting of shareholders in anticipation of the final dividend. Rights to cash dividends and distributions that have not been collected within five years after the date on which they became due and payable shall revert to the Issuer.
At the date of its inception on November 22, 1996, the Issuer had no retained earnings available to pay dividends under the law of The Netherlands.
Since its inception in 1996, the Issuer has not paid dividends on Common Shares. The Issuer currently anticipates that it will declare a $0.06 quarterly cash dividend on each outstanding Common Share, payable initially for the first quarter commencing subsequent to the date of this Prospectus. The Issuer currently intends to declare regular quarterly cash dividends; however, there can be no assurance that any such dividends will be declared or paid. The payment of dividends in the future will be subject to the discretion of the Issuer's shareholders (in the case of annual dividends), its Management Board and its Supervisory Board and will depend upon general business conditions, legal restrictions on the payment of dividends and other factors. The Issuer expects that it would pay any such dividends in U.S. dollars. Cash dividends to holders of New York Shares will be paid to the New York Transfer Agent and Registrar, who will, if necessary, convert such dividends into U.S. dollars at the rate of exchange on the date such dividends are paid, for disbursement to such holders. Cash dividends payable to holders of Bearer Shares will be paid to the Dutch Transfer and Paying Agent, who will, if necessary, convert such dividends into Dutch guilders, for disbursement to such holders. See "Dividend Policy." In certain cases, however, cash dividends may be paid directly to the holders of K-certificates.
Shareholder Meetings and Voting Rights
Each holder of Bearer Shares and each other shareholder has the right to attend general meetings of shareholders, either in person or represented by a person holding a written proxy, to address shareholder meetings, and to exercise voting rights, subject to the provisions of the Articles of Association. Ordinary general meetings of shareholders of the Issuer will be held in The Netherlands at least annually, within six
months after the close of each financial year. Extraordinary general meetings of shareholders may be held as often as the Management Board or the Supervisory Board deem necessary, or as otherwise provided for pursuant to the law of The Netherlands.
Unless otherwise required by the Articles of Association or the law of The Netherlands, resolutions of general meetings of shareholders occurring in The Netherlands require the approval of a majority of the votes cast at a meeting. Resolutions of general meetings of shareholders occurring outside The Netherlands are valid if the entire share capital is present or represented (unless voting rights have been transferred to holders of life interests). There are no laws currently in effect in The Netherlands or provisions in the Articles of Association of the Issuer limiting the rights of nonresident investors to hold or vote Common Shares.
The Issuer will give notice by mail to registered holders of Common Shares of each meeting of shareholders. Such notice will be given no later than the fifteenth day prior to the day of the meeting and will include a statement of the business to be considered. The New York Transfer Agent and Registrar will provide notice of general meetings of shareholders to, and compile voting instructions from, holders of Common Shares held directly or indirectly through the New York Transfer Agent and Registrar. The Issuer also will give notice of each meeting of shareholders by notice published by advertisement, which shall be published in at least one national daily newspaper distributed throughout The Netherlands and in the Officiele Prijscourant of the Amsterdam Stock Exchange (the official newspaper of the Amsterdam Stock Exchange), and, if required, elsewhere.
Election and Tenure of Managing Directors and Supervising Directors; Power to Represent and Bind the Issuer
The Management Board is entrusted with the management of the Issuer. The Supervisory Board supervises the Management Board. The Management Board will have one or more members and the Supervisory Board will have at least six and no more than 12 members. Supervisory Board and Management Board vacancies will be filled by a vote of shareholders at the first general meeting after such vacancy occurs or is created. The Supervisory Board and the Management Board members are elected from binding nominations made by the Supervisory Board. At least two persons must be nominated for each vacancy. Under the law of The Netherlands and the Articles of Association, the shareholders may deprive the nominations of their binding effect by a resolution passed by Two-thirds Majority of Quorum vote.
Under the Issuer's Articles of Association, the Selling Shareholder will have the right to appoint, remove and replace two members of the Supervisory Board so long as the Selling Shareholder owns at least 20% of the outstanding Common Shares, and the right to appoint, remove and replace one member of the Supervisory Board so long as the Selling Shareholder owns at least 10% but less than 20% of the outstanding Common Shares. On the first day on which the Selling Shareholder's ownership of the outstanding Common Shares is less than 10%, the Selling Shareholder will cease to have any special rights regarding the appointment, removal and replacement of the Issuer's supervisory directors.
Supervisory Directors and Managing Directors serve until the expiration of their respective terms of office or their resignation, death or removal, with or without cause, by the shareholders or, in the case of Supervisory Directors, upon reaching the mandatory retirement age of 72.
The executive power of the Issuer resides in the members of the Management Board acting together and in each member acting individually. Each managing director, acting alone, is authorized to represent the Issuer. The Issuer may execute (i) a power of attorney granting certain officers of the Issuer the power to bind the Issuer individually on certain administrative day-to-day matters and (ii) a power of attorney to the Issuer's transfer agent and registrar to acknowledge transfers of the Common Shares.
Approval of Annual Accounts and Discharge of Management Liability
Each year, the Management Board is responsible for the preparation of annual accounts. The annual accounts must be approved and signed by the Supervisory Board and then submitted to a general meeting of shareholders for adoption within five months after the end of the Issuer's financial year, unless the general meeting of shareholders has extended this period due to special circumstances.
Adoption of the Issuer's annual accounts by the general meeting of shareholders discharges the members of the Management Board and the Supervisory Board from liability in respect of the exercise of their duties during the financial year concerned, unless an explicit reservation is made by the general meeting of shareholders and without prejudice to the provisions of the law of The Netherlands relating to liability of members of supervisory boards and management boards upon bankruptcy of a company pursuant to Articles 138 and 149 of Book 2 of the Civil Code of The Netherlands. Under the law of The Netherlands, this discharge from liability does not extend to matters not disclosed to shareholders.
Liquidation Rights
In the event of the dissolution and liquidation of the Issuer, the assets remaining after payment of all debts and liquidation expenses will be distributed among holders of Common Shares on a pro rata basis.
Issue of Shares; Preemptive Rights
Prior to the Common Share Offering, the Issuer's shareholders have approved the issuance of up to an aggregate of 1,501,755 authorized but unissued Common Shares upon exercise of options or otherwise in connection with the Company's benefit plans. The Issuer's shareholders are also expected to authorize, prior to the Common Share Offering, the Supervisory Board to issue such additional authorized but unissued Common Shares as the Supervisory Board shall determine. Under the law of The Netherlands, such authorization can only be granted for a maximum period of five years and the above-mentioned authorization is expected to expire on or about five years from the date of this Prospectus, subject to future extension(s). Under the Articles of Association, each holder of Common Shares shall generally have a preemptive right to subscribe with regard to any issue of Common Shares pro rata to the shareholder's existing holdings of Common Shares, except for certain issuances to employees, issuances for noncash consideration, issuances to persons who exercise a previously acquired right to subscribe for Common Shares and issuances exempted from such requirement by the Supervisory Board when the Supervisory Board is so empowered by shareholders. A resolution expected to be adopted by shareholders on or about the date of this Prospectus provides the Supervisory Board with an irrevocable five-year authorization to limit or exclude preemptive rights.
Repurchase of Common Shares
The shareholders, prior to the consummation of the Common Share Offering, are expected to have delegated to the Management Board the authority, subject to certain restrictions contained in the law of The Netherlands and the Articles of Association, to cause the Issuer to acquire its own fully paid Common Shares in an amount not to exceed 10% of the outstanding shares at any time in open market purchases. Such authorization, which may not be granted for more than 18 months, is expected to be adopted through the date on or about 18 months from the date of this Prospectus.
Capital Reduction
Upon proposal by the Management Board (after approval by the Supervisory Board) the general meeting of shareholders may reduce the issued share capital by cancellation of Common Shares held by the Issuer, subject to certain statutory provisions.
AMENDMENT OF THE ARTICLES OF ASSOCIATION
The Articles of Association may be amended at a general meeting of shareholders if the proposal is stated in the convocation notice for the general meeting and a complete copy of the proposed amendment
is filed at the Issuer's office so that it may be inspected prior to the meeting and the amendment is approved by a majority of the votes cast at a general meeting of shareholders. Proposals to amend the Articles of Association, to legally merge the Issuer, or to dissolve the Issuer require prior approval by the Supervisory Board. Notwithstanding the foregoing, no such amendment shall become effective until approved by the Ministry of Justice of The Netherlands.
DISCLOSURE OF HOLDINGS
Under the law of The Netherlands, if Common Shares are admitted to official quotation or listing on the Amsterdam Stock Exchange or on any other stock exchange in the European Economic Area, holders and certain beneficial owners of Common Shares must promptly notify the Issuer and the Securities Board of The Netherlands if their shareholding in the Company reaches, exceeds or falls below 5%, 10%, 25%, 50% or 66 2/3% of the outstanding Common Shares. For this purpose shareholding includes either or both of economic interests or voting rights. Failure to comply constitutes a criminal offense and could result in civil sanctions, including suspension of voting rights.
TRANSFER AGENT, REGISTRAR AND PAYING AGENT
The New York Transfer Agent and Registrar for the Common Shares is Harris Trust and Savings Bank. The Dutch Transfer and Paying Agent for the Common Shares is Kas-Associatie N.V.
LIABILITY OF DIRECTORS AND OFFICERS
Prior to completion of the Common Share Offering, certain of the Issuer's directors and executive officers will enter into an indemnity agreement with the Issuer. The agreements provide, to the fullest extent permitted by the law of The Netherlands, that the Issuer will indemnify the directors and executive officers against any costs and expenses, judgments, settlements and fines incurred in connection with any claim involving a director or an executive officer by reason of his or her position as director or officer. A form of indemnity agreement containing such standards of conduct is included as an exhibit to the Company's Registration Statement on Form S-1 (the "Registration Statement") of which this Prospectus is a part.
The Articles of Association provide that the Issuer will, to the fullest extent permitted by the law of The Netherlands, as amended from time to time, indemnify, and may advance expenses to, each of its now acting and former board members, officers, employees and agents, whenever any such person is made a party, or threatened to be made a party, in any action, suit or proceeding by reason of his or her service with the Issuer. The Articles of Association also provide that the Issuer may purchase and maintain directors' and officers' liability insurance.
SHARE CERTIFICATES AND TRANSFER
GENERAL
The Common Shares are available in either registered or bearer form except that the New York Shares are available in registered form only. Share Registers are maintained in New York, New York (the "New York Registry") by the New York Transfer Agent and Registrar and in The Netherlands by or on behalf of the Issuer. All of the New York Shares to be sold in the Offering will be initially represented by a single global certificate held through DTC and registered with the New York Transfer Agent and Registrar in the name of Cede & Co., the nominee of DTC. The Common Shares will trade on the New York Stock Exchange; however, only the New York Shares may be traded on such exchange. The Common Shares will also trade on the Amsterdam Stock Exchange but only in the form of Bearer Shares.
Persons who are not DTC participants may beneficially own New York Shares held by DTC only through direct or indirect participants in DTC. So long as Cede & Co., as the nominee of DTC, is the registered owner of New York Shares, Cede & Co. for all purposes will be considered the shareholder of such New York Shares. Accordingly, any person owning a beneficial interest in New York Shares must rely on the procedures of DTC and, if such person is not a participant, on the procedures of the participant through which such person owns its interest, to exercise any rights of a shareholder. The Issuer understands that, under existing industry practice, in the event that an owner of a beneficial interest in New York Shares desires to take any action that Cede & Co., as the shareholder, is entitled to take, Cede & Co. would authorize the participants to take such action, and the participants would authorize beneficial owners holding interests through such participants to take such action or would otherwise act upon the instructions of beneficial owners holding interests through them. New York Shares may be transferred on the books of the Issuer at the office of the New York Transfer Agent and Registrar. Certificates representing New York Shares may be exchanged at such office for certificates representing New York Shares of other authorized denominations. Under Dutch law, the transfer of registered shares requires a written instrument of transfer and written acknowledgment by the Issuer of such transfer.
Common Shares registered in The Netherlands are booked in the Amsterdam Register for any number of Common Shares. Bearer Shares, at the discretion of the Management Board, subject to the approval of the Supervisory Board, will be represented by K-certificates or CF-certificates. CF-certificates must remain deposited with an authorized custodian and may only be transferred through the book-entry transfer system maintained by NECIGEF. For the time being, the Issuer intends only to issue CF-certificates. The Common Shares trade on the Amsterdam Stock Exchange under the symbol "CBI". Only Bearer Shares may be traded on the Amsterdam Stock Exchange. Common Shares booked in the Amsterdam Register may be converted into Bearer Shares or into New York Shares in accordance with the procedures more fully described below.
GLOBAL CLEARANCE AND SETTLEMENT
Although DTC, Euroclear and Cedel have agreed to the procedures provided below in order to facilitate transfers of Common Shares among participants of DTC, Euroclear and Cedel, they are under no obligation to perform or continue to perform such procedures and such procedures may be modified or discontinued at any time. The Issuer will not have any responsibility for the performance by DTC, Euroclear or Cedel or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.
DTC, Euroclear and Cedel have advised the Issuer as follows:
DTC
DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act.
DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. DTC participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations such as the Underwriters. Indirect access to the DTC system also is available to indirect DTC participants such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly.
Because DTC can only act on behalf of DTC participants, who in turn act on behalf of indirect DTC participants and certain banks, the ability of an owner of a beneficial interest in the New York Shares to pledge such interest to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest, may be limited by the lack of a definitive certificate for such interest. The laws of some jurisdictions require that certain persons take physical delivery of securities in definitive form. Consequently, the ability to transfer beneficial interests in the New York Shares to such persons may be limited. In addition, beneficial owners of New York Shares through the DTC system will receive dividend payments only through DTC participants.
NECIGEF
NECIGEF is an independent central institution whose objects are the safekeeping and administration of securities and the operation of a security giro on behalf of its participants. NECIGEF was established following the Wet Giraal Effectenverkeer (Securities Giro Administration and Transfer Act) published in The Netherlands in 1977, and is under the supervision of the Dutch Minister of Finance. Participants in NECIGEF are banks and brokers registered as credit institutions. Under the operation of the Securities Giro Administration and Transfer Act, book-entry transfers are made between the collective securities deposits held by NECIGEF (immobilized).
EUROCLEAR AND CEDEL
Euroclear and Cedel hold securities for participating organizations and facilitate the clearance and settlement of securities transactions between their respective participants through electronic book-entry changes in accounts of such participants. Euroclear and Cedel provide to their participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Cedel interface with United States domestic securities markets. Euroclear and Cedel participants are financial institutions such as underwriters, securities brokers and dealers, banks, trust companies and certain other organizations and include certain of the Underwriters. Indirect access to Euroclear or Cedel is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Euroclear or Cedel participant either directly or indirectly.
INITIAL SETTLEMENT
Investors electing to hold their New York Shares through DTC will follow the settlement practices applicable to U.S. corporate common shares. The securities custody accounts of investors will be credited with their holdings against payment of U.S. dollars in same-day funds on the settlement date.
Investors electing to hold their Bearer Shares through an account with NECIGEF ("NECIGEF Holders"), Euroclear accounts ("Euroclear Holders") or Cedel accounts ("Cedel Holders") will follow the settlement procedures applicable to settlement of common shares in the respective clearing system. Such Bearer Shares will be credited to the securities custody accounts of NECIGEF Holders on the settlement date against payment in same-day funds, of Euroclear Holders on the business day following the settlement date against payment for value on the settlement date and of Cedel Holders on the settlement date against payment in same-day funds. All such payments will be made in Dutch guilders.
SECONDARY MARKET TRADING
For purposes of secondary market trading, the Common Shares will be priced in dollars on the New York Stock Exchange and in guilders on the Amsterdam Stock Exchange.
Because the purchaser determines the place of delivery, it is important to establish at the time of trading of any New York Shares where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date.
Trading between DTC participants. Secondary market trading between DTC participants is settled using the procedures applicable to U.S. corporate common shares in same-day funds.
Trading between Euroclear and/or Cedel participants. Secondary market trading between Euroclear participants and/or Cedel participants is settled using the procedures applicable to common shares in same-day funds.
Trading between NECIGEF Participants. Secondary market trading between NECIGEF participants is settled using the procedures applicable to Bearer Shares in same-day funds.
Transfers of Shares from DTC to NECIGEF (including Euroclear and Cedel). Upon a request to the New York Transfer Agent and Registrar to transfer or exchange New York Shares for Bearer Shares or Common Shares booked on the Amsterdam Register, the New York Transfer Agent and Registrar will cancel certificates representing the appropriate number of New York Shares (including New York Shares registered in the name of Cede & Co. if such New York Shares are held in DTC) and appropriately adjust its register. The New York Transfer Agent and Registrar will then instruct the Dutch Transfer and Paying Agent to deliver a Bearer Share certificate representing the same number of Common Shares or to cause the Common Shares to be booked in the Amsterdam Register. Bearer Share certificates in the form of CF-certificates must remain deposited with an authorized custodian and may only be transferred through the book-entry system of NECIGEF. If the transferee/owner elects to hold directly through NECIGEF or indirectly through Euroclear and Cedel, the Dutch Transfer and Paying Agent will notify the respective custodians of NECIGEF, Euroclear or Cedel, as the case may be. Participants of NECIGEF, Euroclear and Cedel should submit instructions accordingly to receive delivery of Bearer Shares in accordance with the respective systems' procedures.
Transfers from NECIGEF (including Euroclear and Cedel) to DTC. Upon a request to the Dutch Transfer and Paying Agent to transfer or exchange Bearer Shares for New York Shares, the Dutch Transfer and Paying Agent will cancel certificates representing the appropriate number of Bearer Shares (including shares held by the custodian through NECIGEF and indirectly Euroclear or Cedel if such shares are held in the clearing systems). Holders should instruct their custodian in NECIGEF to deliver Bearer Shares to the Dutch Transfer and Paying Agent. If the transferor or exchanging holder holds directly through a participant in NECIGEF or through Euroclear and Cedel, as the case may be, such participant should submit instructions to effect transfer of the shares in accordance with their procedures and the Dutch Transfer and Paying Agent will instruct the New York Transfer Agent and Registrar to issue a certificate representing New York Shares to the appropriate transferee/registered owner. The New York Transfer Agent and Registrar will then issue a new certificate registered in the name of the transferee/registered owner or Cede & Co., if the transferee/registered owner elects to hold through DTC and to appropriately adjust its register. If the transferee/registered owner elects to hold through DTC, the New York Transfer Agent will also notify DTC of the increase of the number of New York Shares held through DTC and instruct DTC to have the exchanged or transferred Common Shares credited to the appropriate account.
Under Dutch law, the transfer of registered Common Shares requires a written instrument of transfer and written acknowledgment by the Issuer of such transfer. In order to facilitate such transfers, the Issuer has provided the New York Transfer Agent and Registrar and the Dutch Transfer and Paying Agent with powers of attorney to enable execution and acknowledgment of the appropriate documents to comply with Dutch law.
Because of time-zone differences, the mechanics of registering exchanges and transfers between the New York Transfer Agent and Registrar and the Dutch Transfer Agent described above as well as the need for DTC, NECIGEF and Euroclear and Cedel accountholders to comply with the respective systems' rules and procedures, including their established deadlines, exchanges and transfers of Common Shares between the New York Transfer Agent and Registrar and the Dutch Transfer and Paying Agent may not be credited to the relevant account at DTC, NECIGEF or Euroclear and Cedel, as the case may be, until two business days following delivery of the instructions to transfer the Common Shares to the respective system. Settlement between a holder of New York Shares transferred to a transferee who will hold Bearer Shares or Common Shares booked on the Amsterdam Register or a holder of Bearer Shares or Common Shares booked on the Amsterdam Register transferred to a transferee who will hold New York Shares cannot be made on a delivery versus payments basis. The arrangements for transfer of payments must be established separately from the arrangements for transfer of securities, the latter being effected on a free delivery basis. The customary arrangements for delivery versus payments between DTC participants, NECIGEF participants and Euroclear and Cedel accountholders are not affected.
Persons wishing to obtain physical delivery of share certificates in respect of their Common Shares must make arrangements with the NECIGEF, Euroclear or Cedel participant through which Bearer Shares are held or with NECIGEF, Euroclear or Cedel, as the case may be, and pay all related costs and taxes incurred. Similar arrangements will also need to be made with DTC or DTC participants through which New York Shares are held and all related costs and taxes incurred paid to obtain physical delivery of share certificates for New York Shares. Delivery of share certificates in either case normally takes between 30 and 45 days after the settlement date.
A fee of $.05 per share will be charged by the New York Transfer Agent and Registrar for the exchange of New York Shares for Bearer Shares or for Common Shares booked on the Amsterdam Register (and for the reverse).
Bearer Shares have been accepted for clearance through Euroclear and Cedel under common code number . The International Securities Identification Number for the Common Shares is . The CUSIP number for New York Shares is .
TAXATION
The following is a summary of certain tax consequences in the United States
and in The Netherlands of the acquisition, ownership and disposition of Common
Shares under current law. It does not, however, discuss every aspect of such
taxation that may be relevant to a particular taxpayer under special
circumstances or who is subject to special treatment under applicable law, nor
does it address the income taxes imposed by any political subdivision of the
United States or The Netherlands or any tax imposed by any other jurisdiction.
Such discussion assumes that the Company is organized and its business is
conducted in the manner outlined in this Prospectus. The laws upon which such
discussion is based are subject to change, perhaps with retroactive effect.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE TAX
CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF THE COMMON SHARES.
NETHERLANDS TAXES
The following is a summary of the material Netherlands tax consequences to an owner of Common Shares who is not, or is not deemed to be, a resident of The Netherlands for purposes of the relevant tax codes (a "nonresident shareholder"). This discussion is based upon the advice of Loeff Claeys Verbeke, Netherlands tax advisors of the Company. No assurance can be given that tax authorities or courts in The Netherlands will agree with the conclusions expressed herein.
Netherlands Dividend Withholding Tax
Dividend distributions by the Issuer are generally subject to dividend withholding tax at a rate of 25%. These dividend distributions include dividends in cash or in kind, constructive dividends, certain repayments of capital qualified as dividends and liquidation proceeds in excess of, according to Netherlands tax law, recognized paid-in capital. Stock dividends are also subject to Netherlands dividend withholding tax unless they are distributed out of the Issuer's paid-in capital as recognized for Netherlands tax purposes.
A nonresident shareholder may be eligible, however, for a reduction or a refund of Netherlands dividend withholding tax under a tax convention, which is in effect between the country of residence of the shareholder and The Netherlands or based upon international conventions or regulations (e.g., European Community directives), provided certain conditions are met. The Netherlands has concluded such tax conventions with, among others, most European countries (including the United Kingdom), the United States, Canada and Japan.
Under most of these conventions (including the tax convention with the United States) the recipient nonresident shareholder may benefit from a reduced dividend withholding rate of 15% or less, unless the recipient nonresident shareholder has a permanent establishment or a permanent representative or a fixed base in The Netherlands to which or to whom the Common Shares are attributable (in which case varying rates may apply).
Under the Tax Convention of December 18, 1992, concluded between The Netherlands and the United States (the "U.S. Tax Treaty"), dividends paid by the Issuer to a resident of the United States (other than an exempt organization or exempt pension trust, as discussed below, or an individual who performs independent personal services from a fixed base situated in The Netherlands if the holding in respect of which the dividends are paid pertains to such fixed base) are generally eligible for a reduction of the 25% Netherlands dividend withholding tax to 15% or, in the case of certain U.S. corporate shareholders beneficially owning the dividends and directly owning at least 10% of the voting power of the Issuer, 5%, provided that such shareholder does not have an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a permanent establishment or permanent representative in The Netherlands and to which enterprise or part of an enterprise the Common Shares are attributable. The U.S. Tax Treaty provides for a complete exemption for dividends received by exempt pension trusts and exempt organizations, as defined therein. Except in the case of exempt organizations, such reduced dividend withholding rate (or exemption from withholding) can be applied at the source upon payment of the dividends, provided that the proper forms have been filed in advance of the payment. Exempt organizations remain subject to the statutory withholding rate of 25% and are required to file for a refund of such withholding.
A person may not claim the benefits of the U.S. Tax Treaty unless (i) it is a resident of the United States, as defined therein and (ii) such person's entitlement to such benefits is not limited by the provisions of article 26 ("limitation on benefits") of the U.S. Tax Treaty.
No Netherlands dividend withholding tax applies on the sale or other disposition of Common Shares to persons other than the Company or its direct and indirect subsidiaries.
Netherlands Income Tax and Corporate Income Tax
In general, a nonresident shareholder will not be subject to Netherlands income tax (other than the dividend withholding tax described above) with respect to dividends distributed by the Issuer on the Common Shares or with respect to any gain derived from the sale or other disposition of Common Shares, provided that:
(i) such shareholder is neither resident nor deemed to be resident in The Netherlands;
(ii) such shareholder does not carry on a business in The Netherlands through a permanent establishment or a permanent representative or a fixed base to which or to whom the Common Shares are attributable; and
(iii) such shareholder does not have a substantial interest or a deemed substantial interest, as defined under the laws of The Netherlands, in the Issuer, or if such shareholder does have such an interest, it forms part of the assets of a business.
In general, a nonresident shareholder has a substantial interest in the
Issuer if such shareholder, alone or together with his or her spouse, owns,
directly or indirectly, at least 5% of the issued capital of any class of
shares in the capital of the Issuer. There are various situations in which a
nonresident shareholder may have a deemed substantial interest in the Issuer,
e.g., a deemed substantial interest may exist if the nonresident person has
option rights over at least 5% of the issued capital of any class of shares in
the capital of the Issuer. The above does not cover all possible situations
where a substantial interest or a deemed substantial interest may exist. If
there is any doubt whether the "substantial interest" regulations may apply,
each prospective investor should consult his or her tax advisor regarding the
tax consequences.
As a general rule, under a tax convention which is in effect between the country of residence of the nonresident shareholder and The Netherlands, such nonresident shareholder may benefit from treaty protection against Netherlands income tax under the "substantial interest" regulations on any gains from the alienation of Common Shares, depending on the contents of the specific tax convention and provided that certain conditions are met.
Netherlands Net Wealth Tax
A nonresident shareholder who is an individual is not subject to Netherlands net wealth tax with respect to the Common Shares, provided that the nonresident shareholder does not carry on a business in The Netherlands through a permanent establishment or a permanent representative to which or to whom the shares are attributable. Corporations are not subject to Netherlands net wealth tax.
Netherlands Gift and Inheritance Tax
No Netherlands gift or inheritance tax arises as a result of a gift of the Common Shares by, or the transfer of the Common Shares at the death of, a shareholder who is neither resident nor deemed to be resident of The Netherlands, unless the Common Shares are attributable to a permanent establishment or a permanent representative of the shareholder in The Netherlands. An individual of Netherlands nationality is deemed to be a resident of The Netherlands, for the purposes of Netherlands gift and inheritance tax, if he or she has been a Netherlands resident at any time during the ten years preceding the time of the gift or death. A person not possessing Netherlands nationality is deemed to be a resident of The Netherlands, only for the purposes of Netherlands gift tax, if he or she has been residing in The Netherlands at any time during the 12 months preceding the time of the gift.
UNITED STATES FEDERAL INCOME TAXES
The following is a summary of the material United States federal income tax consequences of the acquisition, ownership and disposition of Common Shares under present United States law which is expected to be generally applicable. It does not, however, discuss every aspect of United States federal income taxation that may be relevant to a particular taxpayer under special circumstances or who is subject to special treatment under United States federal income tax laws. Except as noted to the contrary, statements of legal conclusion regarding tax effects in this section are based upon an opinion which the Company has received from Cahill Gordon & Reindel, United States counsel to the Company. No assurance can be given that the Internal Revenue Service or the courts in the United States will agree with the conclusions expressed herein.
Dividends
The gross amount of distributions (including any Netherlands withholding tax thereon) received with respect to one or more Common Shares by a citizen or resident of the United States, by a corporation which is organized in the United States or by a person who is otherwise subject to United States federal income tax on a net income basis with respect to such Common Shares (a "U.S. Holder") are dividends taxable in the United States as ordinary income to the extent of the current and accumulated earnings and profits of the Issuer, as determined under U.S. federal income tax principles. These dividends are not eligible for the dividends received deduction which is generally allowed to United States corporate shareholders on dividends which are received from a U.S. corporation.
Distributions in excess of the current and accumulated earnings and profits of the Issuer will be treated first as nontaxable returns of capital to the extent of such U.S. Holder's adjusted tax basis in the Common Shares, and any such distribution in excess of such basis will constitute gain, which gain will be capital gain if the Common Shares are held as capital assets.
The amount of income recognized upon the receipt of guilders as a dividend will be the U.S. dollar value of the guilders on the date of distribution, regardless of whether the U.S. Holder converts the payment into U.S. dollars. Gain or loss, if any, recognized by a U.S. Holder on the sale or disposition of guilders will be ordinary income or loss.
Subject to certain conditions and limitations, Netherlands taxes withheld in accordance with the U.S. Tax Treaty will be treated as a foreign tax that U.S. Holders may elect to deduct in computing their U.S. federal taxable income or credit against their U.S. federal income tax liability. Additional withholding tax, if any, in excess of the rate applicable under the U.S. Tax Treaty generally will not be eligible for credit against the U.S. Holder's U.S. federal income tax liability. For foreign tax credit purposes, dividends paid by the Issuer (except in very limited situations) will be foreign source "passive income" or, in the case of certain U.S. Holders, "financial services income."
For foreign tax credit purposes, it is likely that, following the Offering, 50% or more of the Common Shares will be treated as directly or indirectly owned by U.S. persons. If so and if ten percent or more of the Issuer's earnings and profits, as calculated under U.S. federal income tax principles, for any taxable year were attributable to sources within the United States, a portion of any dividends paid by the Issuer could be recharacterized as U.S. source income for foreign tax credit purposes. In such a case, it may not be possible for U.S. Holders to claim the full amount of any Netherlands withholding tax as a credit against their U.S. federal income tax liability.
Sale or Other Disposition of Common Shares
A U.S. Holder will generally recognize gain or loss for United States federal income tax purposes upon the sale or other disposition of Common Shares in an amount equal to the difference between the amount realized from such sale or other disposition and the U.S. Holder's tax basis for such Common Shares. Such gain or loss will be a capital gain or loss if the Common Shares are held as a capital asset and will be long-term capital gain or loss if such U.S. Holder's holding period for the Common Shares is more than one year. Under most circumstances, any gain from the sale or other disposition of the Common Shares will be treated as U.S. source income for foreign tax credit purposes.
Gain that is recognized upon a sale or other disposition of Common Shares by a person who is not a U.S. Holder with respect to such Common Shares will not be subject to income tax in the United States unless such person is an individual who is present in the United States for 183 days or more during his or her taxable year in which such sale or other disposition occurred and either the income from the disposition is attributable to an office or other fixed place of business maintained by such individual in the United States or such individual has a tax home, as defined in Section 911(d)(3) of the Code, in the United States during such taxable year.
Foreign Personal Holding Company Classification
The Issuer or any of its non-U.S. subsidiaries could be classified as a foreign personal holding company ("FPHC") if in any taxable year five or fewer individuals who are U.S. citizens or residents own (directly or constructively through certain attribution rules) more than 50% of the voting power or the value of the outstanding Common Shares. Classification as an FPHC would generally result in each U.S. shareholder who held Common Shares on the last day of the taxable year of the Issuer having to include in gross income as a dividend such shareholder's pro rata portion of undistributed income of the Issuer and of any non-U.S. subsidiaries that are also FPHCs. The Issuer has been advised by an officer of Praxair that Praxair's shares are held primarily by large institutional investors, such as banks, insurance companies, pension funds and corporate investors, and that, to the best of his knowledge and belief, five or fewer United States citizens or residents do not own more than 50% of the vote or value of the shares of Praxair. Based upon such information, the Issuer believes that at the time of the Common Share Offering, it will not be an FPHC.
Controlled Foreign Corporation Classification
The Company would be classified as a controlled foreign corporation if any
United States person acquires 10% or more of the shares of the Issuer
(including ownership through the attribution rules of Section 958 of the Code)
and the sum of the percentage ownership by all such persons exceeds 50%
(by voting power or value) of the Issuer's stock. In that event, all U.S.
Holders of 10% or more of the Common Shares will be subject to taxation under
Subpart F of the Code, including possible taxation of such U.S. Holders based
on certain income of the Issuer even in the absence of distributions of such
income by the Issuer.
Back-up Withholding and Information Reporting
Information reporting may apply to certain dividends on the Common Shares and to the proceeds of sale of the Common Shares paid to U.S. Holders other than certain exempt recipients (such as corporations). A 31% back-up withholding tax (which is a refundable credit against the otherwise applicable tax) may apply to such payments if the U.S. Holder fails to provide an accurate taxpayer identification number or certification of exempt status.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Common Share Offering and the contribution to the
Management Plan, the Issuer will have 12,517,552 outstanding Common Shares,
including 1,000,000 Common Shares owned by the Selling Shareholder (none if
the Underwriters' over-allotment option is exercised in full) and 500,702
shares reserved for issuance upon exercise of outstanding stock options. Of
these shares, the 10,500,000 Common Shares sold in the Common Share Offering
(11,500,000 if the Underwriters' over-allotment option is exercised in full)
will be freely tradeable without restrictions or further registration under
the Securities Act, except for any shares purchased by an "affiliate" (as that
term is defined in Rule 144 under the Securities Act ("Rule 144")) of the
Company, which will be subject to the resale limitations of Rule 144 under the
Securities Act.
The 1,000,000 Common Shares that the Selling Shareholder will hold upon completion of the Common Share Offering (none if the Underwriters' over- allotment option is exercised in full), up to 1,251,755 Common Shares that may be issuable to directors of the Issuer or employees of the Company under the Incentive Plan, the 1,017,552 Management Plan Shares as described under "Management--Compensation and Benefits--Special Stock-Based, Long-Term Compensation Related to the Common Share Offering" and any Common Shares purchased by affiliates may be sold by the respective holders thereof only pursuant to an effective registration statement under the Securities Act, pursuant to Rule 144 under the Securities Act or in accordance with an exemption under the Securities Act.
In general, under Rule 144 as currently in effect, a person (including the "affiliate") who beneficially owns shares that are "restricted securities" as to which at least two years have elapsed since the later of the date of acquisition of such securities from the issuer or the acquisition from an affiliate of the issuer, and any affiliate who owns shares that are not "restricted securities," is entitled to sell, within any three- month period, a number of shares that does not exceed (together with sale by other persons required to be aggregated) the greater of 1% of the then outstanding Common Shares (approximately 125,176 shares following completion of the Common Share Offering) or the average weekly trading volume in the Common Shares in composite trading on all exchanges during the four calendar weeks preceding such sale. A person (or persons whose shares are aggregated) who is not deemed an "affiliate" of the Company and who has beneficially owned restricted securities as to which at least three years have elapsed since the later of the date of the acquisition of such securities from the issuer or the acquisition from an affiliate of the issuer is entitled to sell such shares under Rule 144 without regard to the volume limitations described above. The foregoing summary of Rule 144 is not intended to be a complete description thereof.
The Issuer has granted registration rights to Praxair pursuant to which Praxair has certain rights to demand registrations of the Common Shares held by the Selling Shareholder (or its transferee) at the Issuer's expense as well as the right to include such shares in registration statements filed by the Issuer.
Prior to the Common Share Offering, there has been no public market for the Common Shares, and no prediction can be made as to the effect, if any, that market sales of Common Shares, or the availability of such shares for sale, will have on the market price of the Common Shares prevailing from time to time. Nevertheless, sales of substantial amounts of Common Shares in the public market, or the perception that such sales could occur, could adversely affect prevailing market prices for the Common Shares. In connection with the Common Share Offering, subject to certain exceptions, the Issuer, the Selling Shareholder and each of its directors and executive officers have agreed not to sell, grant any option to sell or otherwise dispose of, directly or indirectly, any Common Shares or securities convertible into or exercisable for Common Shares or warrants or other rights to purchase Common Shares or permit the registration of Common Shares for a period of 180 days after the date of this Prospectus without the prior consent of Credit Suisse First Boston Corporation.
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting Agreement dated , 1997 (the "U.S. Underwriting Agreement"), the underwriters named below (the "U.S. Underwriters"), for whom Credit Suisse First Boston Corporation, Goldman, Sachs & Co., Smith Barney Inc. and UBS Securities LLC are acting as representatives (the "Representatives"), have severally but not jointly agreed to purchase from the Selling Shareholder the following respective numbers of U.S. Shares:
NUMBER OF
UNDERWRITER U.S. SHARES
----------- -----------
Credit Suisse First Boston Corporation...........................
Goldman, Sachs & Co. ............................................
Smith Barney Inc. ...............................................
UBS Securities LLC...............................................
---------
Total........................................................ 8,400,000
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The U.S. Underwriting Agreement provides that the obligations of the U.S.
Underwriters are subject to certain conditions precedent and that the U.S.
Underwriters will be obligated to purchase all the U.S. Shares offered hereby
(other than those shares covered by the over-allotment option described below)
if any are purchased. The U.S. Underwriting Agreement provides that, in the
event of a default by a U.S. Underwriter, in certain circumstances the
purchase commitments of non-defaulting U.S. Underwriters may be increased or
the U.S. Underwriting Agreement may be terminated.
The Issuer and the Selling Shareholder have entered into a Subscription Agreement (the "Subscription Agreement") with the Managers of the International Offering (the "Managers") providing for the concurrent offer and sale of the International Shares outside the United States and Canada. The closing of the U.S. Offering is a condition to the closing of the International Offering and vice versa.
The Selling Shareholder has granted to the U.S. Underwriters and the Managers an option, exercisable by Credit Suisse First Boston Corporation, expiring at the close of business on the 30th day after the date of this Prospectus, to purchase up to 1,000,000 additional shares at the initial public offering price, less the underwriting discounts and commissions, all as set forth on the cover page of this Prospectus. Such option may be exercised only to cover over-allotments, if any, in the sale of the Common Shares offered hereby. To the extent that this option to purchase is exercised, each U.S. Underwriter and each Manager will become obligated, subject to certain conditions, to purchase approximately the same percentage of shares being sold to the U.S. Underwriters and the Managers as the number of U.S. Shares set forth next to such U.S. Underwriter's name in the preceding table and as the number set forth next to such Manager's name in the corresponding table in the prospectus relating to the International Offering bears to the sum of the total number of Common Shares in such tables.
The Company and the Selling Shareholder have been advised by the Representatives that the U.S. Underwriters propose to offer the U.S. Shares in the United States and Canada to the public initially at the offering price set forth in the cover page of this Prospectus and, through the Representatives, to certain dealers at such price less a concession of $ per share, and the U.S. Underwriters and such dealers may allow a discount of $ per share on sales to certain other dealers. After the initial public offering, the public offering price and concession and discount to dealers may be changed by the Representatives.
The public offering price, the aggregate underwriting discounts and commissions per share and per share concession and discount to dealers for the U.S. Offering and the concurrent International Offering will be identical. Pursuant to an Agreement between the U.S. Underwriters and Managers (the
"Intersyndicate Agreement") relating to the Common Share Offering, changes in the public offering price, concession and discount to dealers will be made only upon the mutual agreement of Credit Suisse First Boston Corporation, as representative of the U.S. Underwriters, and Credit Suisse First Boston (Europe) Limited ("CSFBL"), on behalf of the Managers.
Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters has agreed that, as part of the distribution of the U.S. Shares and subject to certain exceptions, it has not offered or sold, and will not offer or sell, directly or indirectly, any Common Shares or distribute any prospectus relating to the Common Shares to any person outside the United States or Canada or to any other dealer who does not so agree. Each of the Managers has agreed or will agree that, as part of the distribution of the International Shares and subject to certain exceptions, it has not offered or sold, and will not offer or sell, directly or indirectly, any Common Shares or distribute any prospectus relating to the Common Shares in the United States or Canada or to any other dealer who does not so agree. The foregoing limitations do not apply to stabilization transactions or to transactions between the U.S. Underwriters and the Managers pursuant to the Intersyndicate Agreement. As used herein, "United States" means the United States of America (including the States and the District of Columbia), its territories, possessions and other areas subject to its jurisdiction, "Canada" means Canada, its provinces, territories, possessions and other areas subject to its jurisdiction, and an offer or sale shall be in the United States or Canada if it is made to (i) any individual resident in the United States or Canada or (ii) any corporation, partnership, pension, profit sharing or other trust or other entity (including any such entity acting as an investment adviser with discretionary authority) whose office most directly involved with the purchase is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the U.S. Underwriters and the Managers of such number of Common Shares as may be mutually agreed upon. The price of any shares so sold will be the public offering price, less such amount as may be mutually agreed upon by Credit Suisse First Boston Corporation, as representative of the U.S. Underwriters, and CSFBL, on behalf of the Managers, but not exceeding the selling concession applicable to such shares. To the extent there are sales between the U.S. Underwriters and the Managers pursuant to the Intersyndicate Agreement, the number of Common Shares initially available for sale by the U.S. Underwriters or by the Managers may be more or less than the amount appearing on the cover page of this Prospectus. Neither the U.S. Underwriters nor the Managers are obligated to purchase from the other any unsold Common Shares.
The Company, certain of its officers and directors, the Selling Shareholder and certain other shareholders have agreed (subject to certain exceptions) that they will not offer, sell, contract to sell, announce an intention to sell, pledge or otherwise dispose of, directly or indirectly, or file or cause to be filed with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any Common Shares or securities or other rights convertible into or exchangeable or exercisable for any Common Shares, without the prior written consent of Credit Suisse First Boston Corporation, for a period of 180 days after the date of this Prospectus.
The Company and the Selling Shareholder have agreed to indemnify the U.S. Underwriters and the Managers against certain liabilities, including civil liabilities under the Securities Act, or to contribute to payments that the U.S. Underwriters and the Managers may be required to make in respect thereof.
At the request of the Company, the U.S. Underwriters and the Managers have reserved up to 525,000 Common Shares for sale at the initial offering price to certain directors, officers and employees (current or former) of the Company and its subsidiaries. The number of Common Shares available to the general public will be reduced to the extent these persons purchase the reserved shares. Any reserved shares that are not so purchased by such persons at the closing of the Common Share Offerings will be offered by the U.S. Underwriters and the Managers to the general public on the same terms as the other shares offered by this Prospectus.
The Representatives and the Managers have informed the Company and the Selling Shareholder that they do not expect discretionary sales by the U.S. Underwriters and the Managers to exceed 5% of the number of Common Shares offered hereby.
The Common Shares have been approved for listing on the New York Stock Exchange subject to notice of issuance. The Issuer has applied to list the Common Shares in bearer form on the Official Market of the Amsterdam Stock Exchange. To satisfy one of the requirements for listing of the Common Shares on the New York Stock Exchange, the Underwriters have undertaken to sell lots of 100 or more Common Shares to a sufficient number of persons to establish a minimum of 2,000 round lot beneficial holders after the Common Share Offering.
Prior to the Common Share Offering, there has been no public market for the Common Shares. The initial public offering price for the Shares will be determined by negotiations among the Company, the Selling Shareholder and the Representatives. In determining such price, consideration will be given to various factors, including market conditions for initial public offerings, the history of and prospects for the Company's business, the Company's past and present operations, its past and present earnings and current financial position, an assessment of the Company's management, the market of securities of companies in businesses similar to those of the Company, the general condition of the securities markets and other relevant factors. There can be no assurance that the initial public offering price will correspond to the price at which the Common Shares will trade in the public market subsequent to the Common Share Offering or that an active trading market for the Common Shares will develop and continue after the Common Share Offering.
The Representatives, on behalf of the U.S. Underwriters and Managers, may engage in over-allotment, stabilizing transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Securities Act of 1934 (the "Exchange Act"). Over-allotment involves syndicate sales in excess of the offering size, which creates a syndicate short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Syndicate covering transactions involve purchases of the Common Shares in the open market after the distribution has been completed in order to cover syndicate short positions. Penalty bids permit the Representatives to reclaim a selling concession from a syndicate member when the Common Shares originally sold by such syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. Such stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the Common Shares to be higher than it would otherwise be in the absence of such transactions. These transactions may be effected on The New York Stock Exchange, the Amsterdam Stock Exchange or otherwise and, if commenced, may be discontinued at any time.
Certain of the U.S. Underwriters and Managers have from time to time performed, and continue to perform, financial advisory, investment banking and commercial banking services for the Company or Praxair, for which customary compensation has been received.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Common Shares in Canada is being made only on a private placement basis exempt from the requirement that the Issuer and the Selling Shareholder prepare and file a prospectus with the securities regulatory authorities in each province where trades of the Common Shares are effected. Accordingly, any resale of the Common Shares in Canada must be made in accordance with applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with available statutory exemptions or pursuant to a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the Common Shares.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Common Shares in Canada who receives a purchase confirmation will be deemed to represent to the Issuer, the Selling Shareholder and the dealer from whom such purchase confirmation is received that (i) such purchaser is entitled under applicable provincial securities laws to purchase such Common Shares without the benefit of a prospectus qualified under such securities laws, (ii) where required by law, that such purchaser is purchasing as principal and not as agent, and (iii) such purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario purchasers will not receive the contractual right of action prescribed by section 32 of the Regulation under the Securities Act (Ontario). As a result, Ontario purchasers must rely on other remedies that may be available, including common law rights of action for damages or rescission or rights of action under the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named herein and the Selling Shareholder may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon the issuer or such persons. All or a substantial portion of the assets of the issuer and such persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against the issuer or such persons in Canada or to enforce a judgment obtained in Canadian courts against such issuer or persons outside of Canada.
NOTICE OF BRITISH COLUMBIA RESIDENTS
A purchaser of Common Shares to whom the Securities Act (British Columbia) applies is advised that such purchaser is required to file with the British Columbia Securities Commission a report within ten days of the sale of any Common Shares acquired by such purchaser pursuant to this offering. Such report must be in the form attached to British Columbia Securities Commission Blanket Order BOR #95/17, a copy of which may be obtained from the Issuer. Only one such report must be filed in respect of Common Shares acquired on the same date and under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Common Shares should consult their own legal and tax advisors with respect to the tax consequences of an investment in the Common Shares in their particular circumstances and with respect to the eligibility of the Common Shares for investment by the purchaser under relevant Canadian legislation.
LEGAL MATTERS
Certain legal matters in connection with the offering made hereby will be passed upon for the Issuer by Cahill Gordon & Reindel, a partnership including a professional corporation, New York, New York. The validity of the Common Shares offered hereby is being passed upon for the Issuer by Loeff Claeys Verbeke, Amsterdam, The Netherlands. Certain legal matters in connection with the Common Shares being offered hereby will be passed upon for the Underwriters by Dewey Ballantine, New York, New York. Both Cahill Gordon & Reindel and Loeff Claeys Verbeke have also provided certain legal services to Praxair and its affiliates in connection with the Common Share Offering and have represented and will continue to represent Praxair and its affiliates in various other matters.
EXPERTS
The financial statements of the Company, as of December 31, 1996, 1995 and 1994 and for each of the three fiscal years in the period ended December 31, 1996, and the balance sheet of Chicago Bridge & Iron Company N.V. as of December 31, 1996, included in this Prospectus and elsewhere in the Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports.
Arthur Andersen LLP's address is 33 West Monroe Street, Chicago, IL 60603 in the United States and Arthur Andersen & Co.'s address is P.O. Box 75381, 1070 AJ Amsterdam, The Netherlands.
AVAILABLE INFORMATION
The Issuer has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-1 under the Securities Act, with respect to the Common Shares offered hereby. This Prospectus, which constitutes a part of the Registration Statement, does not contain all the information set forth in the Registration Statement and the exhibits and schedules thereto, to which reference is hereby made. Statements made in this Prospectus as to the contents of any contract, agreement or other document are not necessarily complete; with respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved.
After consummation of the Common Share Offering, the Issuer will be subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, will file reports, proxy and information statements and other information with the Commission. Such reports, proxy and information statements and other information and the Registration Statement and exhibits and schedules thereto filed by the Issuer with the Commission can be inspected and copied at the Public Reference section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at 7 World Trade Center, 15th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the Public Reference section of the Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission (http://www.sec.gov).
The Issuer will also comply with its obligations under the law of The Netherlands to prepare annual financial statements complying with Netherlands corporate law and deposit the same at the Commercial Register of the Chamber of Commerce and Industry in Amsterdam, The Netherlands.
SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES
The Issuer is a Netherlands company and a substantial portion of its assets are located outside the United States. In addition, certain members of the Management and Supervisory Boards of the Issuer are residents of countries other than the United States. The Company has been advised by its Netherlands counsel, Loeff Claeys Verbeke, that as a result, it may not be possible for investors to effect service of process within the United States upon such persons or to enforce against such persons or the Issuer judgments of courts of the United States predicated upon civil liabilities under the United States federal securities laws. Since there is no treaty between the United States and The Netherlands providing for the reciprocal recognition and enforcement of judgments, United States judgments are not enforceable in The Netherlands. However, a final judgment for the payment of money obtained in a United States court, which is not subject to appeal or any other means of contestation and is enforceable in the United States, would in principle be upheld and be regarded by a Netherlands court of competent jurisdiction as conclusive evidence when asked to render a judgment in accordance with such final judgment by a United States court, without substantive re-examination or relitigation on the merits of the subject matter thereof, provided that such judgment has been rendered by a court of competent jurisdiction, in accordance with rules of proper procedure, that it has not been rendered in proceedings of a penal or revenue nature and that its content and possible enforcement are not contrary to public policy or public order of The Netherlands. Notwithstanding the foregoing, there can be no assurance that United States investors will be able to enforce against the Issuer, or members of the Management or Supervisory Boards, or certain experts named herein who are residents of The Netherlands or other countries outside the United States, any judgments in civil and commercial matters, including judgments under the federal securities laws. In addition, there is doubt as to whether a Netherlands court would impose civil liability on the Issuer or on the members of the Management or Supervisory Boards in an original action predicated solely upon the federal securities laws of the United States brought in a court of competent jurisdiction in The Netherlands against the Issuer or such members.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
----
CONSOLIDATED FINANCIAL STATEMENTS (POST-PRAXAIR ACQUISITION):
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheet as of December 31, 1996....................... F-3
Consolidated Income Statement for the Year Ended December 31, 1996....... F-4
Consolidated Statement of Changes in Shareholder's Equity for the Year
Ended December 31, 1996................................................. F-5
Consolidated Statement of Cash Flows for the Year Ended December 31,
1996.................................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
CONSOLIDATED FINANCIAL STATEMENTS (PRE-PRAXAIR ACQUISITION):
Report of Independent Public Accountants................................. F-22
Consolidated Balance Sheets as of December 31, 1995 and 1994............. F-23
Consolidated Income Statements for the Years Ended December 31, 1995 and
1994.................................................................... F-24
Consolidated Statements of Changes in Shareholder's Equity for the Years
Ended December 31, 1995 and 1994........................................ F-25
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995 and 1994........................................................... F-26
Notes to Consolidated Financial Statements............................... F-27
|
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of
Chicago Bridge & Iron Company:
We have audited the accompanying consolidated balance sheet of CHICAGO BRIDGE & IRON COMPANY (a Delaware corporation) AND SUBSIDIARIES as of December 31, 1996 and the related consolidated statements of income, changes in shareholder's equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Chicago Bridge & Iron Company and Subsidiaries as of December 31, 1996 and the results of its operations and cash flows for the year then ended in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
February 7, 1997
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31,
1996
------------
ASSETS
Current Assets:
Cash and cash equivalents....................................... $ 11,864
Accounts receivable............................................. 96,782
Receivable from Affiliates...................................... 4,893
Contracts in progress with earned revenues exceeding related
progress billings.............................................. 79,782
Assets held for sale............................................ 5,374
Other current assets............................................ 7,364
--------
Total current assets.......................................... 206,059
--------
Assets held for sale.............................................. 5,118
Property and equipment............................................ 107,875
Goodwill.......................................................... 19,027
Other non-current assets.......................................... 13,417
--------
Total assets.................................................. $351,496
========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Notes payable................................................... $ 3,114
Accounts payable................................................ 24,804
Accrued liabilities............................................. 44,513
Contracts in progress with progress billings exceeding related
earned revenues................................................ 34,727
Payable to Parent Company....................................... 6,008
Income taxes payable............................................ 4,440
--------
Total current liabilities..................................... 117,606
--------
Debt to Parent Company............................................ 53,907
Minority interest in subsidiaries................................. 7,428
Other non-current liabilities..................................... 81,809
--------
Total liabilities............................................. 260,750
--------
SHAREHOLDER'S EQUITY:
Common stock, $1 par value, 1,000 authorized shares; 1,000 is-
sued and outstanding in 1996................................... 1
Additional paid-in capital...................................... 79,958
Retained earnings............................................... 11,562
Cumulative translation adjustment............................... (775)
--------
Total shareholder's equity.................................... 90,746
--------
Total liabilities and shareholder's equity.................... $351,496
========
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(IN THOUSANDS)
YEAR ENDED
DECEMBER 31,
1996
------------
Revenues
Third party customers............................................. $650,337
Affiliates of Praxair............................................. 13,384
--------
Total revenues................................................... 663,721
Cost of revenues
Third party customers............................................. $578,933
Affiliates of Praxair............................................. 11,097
--------
Total cost of revenues........................................... 590,030
--------
Gross profit..................................................... 73,691
Selling and administrative expenses................................ 42,921
Gain on sale of assets............................................. (493)
--------
Income from operations........................................... 31,263
Interest expense................................................... (5,002)
Other income....................................................... 990
--------
Income before taxes and minority interest........................ 27,251
Income tax expense................................................. 7,789
--------
Income before minority interest.................................. 19,462
Minority interest in income........................................ (2,900)
--------
Net income....................................................... $ 16,562
========
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
(IN THOUSANDS)
ADDITIONAL ADVANCES CUMULATIVE TOTAL
COMMON PAID-IN RETAINED TO PARENT TRANSLATION SHAREHOLDER'S
STOCK CAPITAL EARNINGS COMPANY ADJUSTMENT EQUITY
------ ---------- --------- --------- ----------- -------------
BALANCE AT DECEMBER 31,
1995................... $ 1 $ 185,493 $ 159,672 $(142,786) $(15,873) $186,507
Praxair acquisition ad-
justments.............. -- 52,292 (159,672) -- 15,873 (91,507)
---- --------- --------- --------- -------- --------
BALANCE AT JANUARY 1,
1996................... 1 237,785 -- (142,786) -- 95,000
Net income.............. -- -- 16,562 -- -- 16,562
Advances to Parent
Company................ -- -- -- (15,041) -- (15,041)
Return of capital
dividend to Parent
Company................ -- (157,827) -- 157,827 -- --
Cash dividend payable to
Parent Company......... -- -- (5,000) -- -- (5,000)
Translation adjustment.. -- -- -- -- (775) (775)
---- --------- --------- --------- -------- --------
BALANCE AT DECEMBER 31,
1996................... $ 1 $ 79,958 $ 11,562 $ -- $ (775) $ 90,746
==== ========= ========= ========= ======== ========
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED
DECEMBER 31, 1996
-----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income................................................. $ 16,562
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................ 17,281
Decrease in deferred income taxes........................ 4,251
Gain on sale of fixed assets............................. (493)
Change in operating assets and liabilities (see below)..... (12,442)
--------
Net Cash Provided by Operating Activities................ 25,159
--------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of fixed assets and investments......... 9,077
Capital expenditures....................................... (20,425)
--------
Net Cash Used in Investing Activities.................... (11,348)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Advance to Parent Company.................................. (15,041)
Increase in notes payable.................................. 1,337
Repayment of Debt to Parent Company........................ (1,093)
--------
Net Cash Used in Financing Activities.................... (14,797)
--------
Decrease in cash & cash equivalents.......................... (986)
Cash and cash equivalents, beginning of the year............. 12,850
--------
Cash and cash equivalents, end of the year................... $ 11,864
========
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Decrease in receivables, net............................... $ 9,213
Increase in contracts in progress, net..................... (24,950)
Decrease in other current assets........................... 8,689
Decrease in accounts payable & accrued liabilities......... (5,740)
Increase in payable to Parent Company...................... 1,088
Increase in income tax payable............................. 404
Increase other............................................. (1,146)
--------
Total.................................................... $(12,442)
========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest................................... $ 3,902
Cash paid for income taxes............................... $ 3,536
SUPPLEMENTAL NON-CASH DISCLOSURE:
Return of capital dividend to Parent Company............. $157,827
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(IN THOUSANDS)
1. ORGANIZATION AND NATURE OF OPERATIONS:
Chicago Bridge & Iron Company and Subsidiaries ("the Company") is a global engineering and construction company specializing in the engineering and design, materials procurement, fabrication, erection, repair and modification of steel tanks, other steel plate structures and associated systems such as petroleum terminals, refinery pressure vessels, low temperature and cryogenic storage facilities and elevated water storage tanks. Based on its knowledge of and experience in its industry, the Company believes it is the leading provider of field erected steel tanks and other steel plate structures, associated systems and related services in North America and one of the leading providers of these specialized products and services in the world. The Company seeks to maintain its leading industry position by focusing on using its technological expertise in design, metallurgy and welding, along with its ability to complete logistically and technically complex metal plate projects virtually anywhere in the world. The Company has been continuously engaged in the engineering and construction industry since its founding in 1889.
The worldwide petroleum and petrochemical industry has been the largest sector of the Company's revenues, accounting for approximately 60% of revenues in 1996. Numerous factors influence capital expenditure decisions in this industry which are beyond the control of the Company. Therefore, no assurance can be given that the Company's business, financial condition and results of operations will not be adversely effected because of reduced activity or changing taxes, price controls and laws and regulations related to the petroleum and petrochemical industry.
During the periods and as of the dates for which the financial statements are presented, the Company was a wholly owned subsidiary of Chi Bridge Holdings, Inc., which in turn was a wholly owned subsidiary of CBI Industries, Inc. ("Industries"). On January 12, 1996, pursuant to the merger agreement dated December 22, 1995, Industries became a subsidiary of Praxair, Inc. ("Praxair"). This merger transaction was reflected in the Company's consolidated financial statements as a purchase effective to January 1, 1996 ("Merger Date"). Accordingly, the historical information provided for the periods prior to January 1, 1996 ("Pre- Praxair Acquisition") will not be comparable to subsequent financial information ("Post-Praxair Acquisition"). Effective December 19, 1996, Industries was merged with and into Praxair, with no consequences to the Company's financial statements.
The fair value assigned to the Company as of the Merger Date was $150,000, excluding any bank or assumed debt ("Merger Value"). This Merger Value approximates the portion of the total Industries purchase price that relates to the Company. The allocation of this Merger Value to the fair value of individual assets and liabilities is based on the respective fair values. The allocation of this fair value resulted in the following opening balance sheet:
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
PURCHASE
HISTORICAL ACCOUNTING OPENING
BALANCE SHEET ADJUSTMENTS BALANCE SHEET
DECEMBER 31, 1995 INCREASE/ JANUARY 1, 1996
(PRE-PRAXAIR) (DECREASE) (POST-PRAXAIR)
----------------- ----------- ---------------
ASSETS
Cash and cash equivalents.... $ 12,850 $ -- $ 12,850
Accounts receivable.......... 106,634 4,095 (A) 110,729
Contracts in progress........ 70,918 -- 70,918
Assets held for sale......... 5,157 4,374 (B) 9,531
Deferred income taxes........ 7,369 (5,507)(C) 1,862
Other current assets......... 14,617 (192)(A) 14,425
--------- --------- ---------
Total current assets....... 217,545 2,770 220,315
Property and equipment....... 100,496 4,307 (B) 104,803
Assets held for sale......... 2,235 7,527 (B) 9,762
Deferred income taxes........ 28,405 (28,405)(C) --
Goodwill..................... -- 19,515 (D) 19,515
Other non-current assets..... 7,444 3,238 (A) 10,682
--------- --------- ---------
Total Assets............... $ 356,125 $ 8,952 $ 365,077
--------- --------- ---------
LIABILITIES & SHAREHOLDER'S
EQUITY LIABILITIES
Contracts in progress........ $ 47,660 $ 3,153 (A) $ 50,813
Other current liabilities.... 59,545 5,048 (E) 64,593
--------- --------- ---------
Total current liabilities.. 107,205 8,201 115,406
Long-Term debt to Parent
Company..................... -- 55,000 (F) 55,000
Other non-current
liabilities................. 62,413 37,258 (E) 99,671
--------- --------- ---------
Total liabilities.......... 169,618 100,459 270,077
SHAREHOLDER'S EQUITY
Common stock................. 1 -- 1
Additional paid-in capital... 185,493 52,292 (A) 237,785
Retained earnings............ 159,672 (159,672)(G) --
Advances to Parent Company... (142,786) -- (142,786)
Cumulative translation
adjustment.................. (15,873) 15,873 (G) --
--------- --------- ---------
Total shareholder's
equity.................... 186,507 (91,507) 95,000
Total liabilities &
shareholder's equity........ $ 356,125 $ 8,952 $ 365,077
========= ========= =========
|
(A) To record other estimated fair value and purchase accounting adjustments.
(B) To record estimated fair value of property, equipment and assets held for
sale and to reclassify certain assets from property to assets held for
sale.
(C) To write-off $36,231 of U.S. deferred tax assets which may not be
realizable on a stand-alone company basis and to reclassify $2,319 of
foreign deferred tax liabilities.
(D) To record goodwill which will be amortized over 40 years.
(E) Relates primarily to recognition of the unamortized portion of actuarial
gains and losses and other adjustments relating to the Company's defined
benefit and postretirement plans, and the recognition of severance for
personnel reductions.
(F) To record the assumption of Praxair acquisition related debt in the
Company's financial statements.
(G) To eliminate historical retained earnings and cumulative translation
adjustment.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES:
Basis of Consolidation
The consolidated financial statements include all significant subsidiaries where control exists and are attributable to the Company's continuing operations. Significant intercompany balances and transactions are eliminated in consolidation. Investments in non-majority owned affiliates are accounted for by the equity method.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Management is also required to make judgments regarding the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenues are recognized using the percentage of completion method. Contract revenues are accrued based generally on the percentage that costs-to-date bear to total estimated costs. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known. Contract revenue reflects the original contract price adjusted for agreed upon claim and change order revenue, if any. Losses expected to be incurred on jobs in process, after consideration of estimated minimum recoveries from claims and change orders, are charged to income as soon as such losses are known. A significant portion of the Company's work is performed on a fixed price or lump sum basis. The balance of projects primarily are performed on variations of cost reimbursable and target, fixed or lump sum price approaches. Progress billings in accounts receivable are currently due and exclude retentions until such amounts are due in accordance with contract terms. Cost of revenues include direct contract costs such as material and construction labor, and indirect costs which are attributable to contract activity.
Foreign Currency Translation and Exchange
The primary effects of foreign currency translation adjustments are recognized in shareholder's equity as cumulative translation adjustment. Charges for foreign currency exchange losses are included in the determination of income, and were $587 in 1996.
Cash Equivalents
Cash equivalents are considered to be all highly liquid securities with original maturities of three months or less.
Property and Equipment
Property and equipment are recorded at cost and depreciated on a straight- line basis over their estimated useful lives: buildings and improvements, 10 to 40 years; plant and field equipment, 3 to 20 years. Renewals and betterments which substantially extend the useful life of an asset are capitalized and depreciated. Depreciation expense was $16,793 for the year ended December 31, 1996.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." This adoption did not cause a material effect on the company's financial position or results of operations.
Goodwill
The excess of cost over the fair value of tangible net assets of the Company is recorded as goodwill on the balance sheet and is amortized on a straight- line basis over 40 years. Amortization expense and accumulated amortization was $488 in 1996. The carrying value of goodwill is reviewed periodically based on the undiscounted cash flows of the entity acquired over the remaining amortization period. If this review indicates that goodwill is not recoverable, the Company's carrying value of the goodwill is reduced by the estimated shortfall of undiscounted cash flows.
Assets Held for Sale
The Company separately classified several assets held for sale as of December 31, 1996. These assets are valued at estimated realizable value and were classified as current and non-current based on their expected selling date.
Financial Instruments
The Company uses various methods and assumptions to estimate the fair value of each class of financial instrument. Due to their nature, the carrying value of cash and temporary cash investments, accounts receivable and accounts payable approximates fair value. The Company's other financial instruments are not significant. For the year ended December 31, 1996, the Company recorded interest expense on the Debt to Parent Company, notes payable and certain other interest bearing obligations.
Forward Contracts
The Company periodically uses forward contracts to hedge foreign currency assets and foreign currency payments that the Company is committed to make in connection with the normal course of its business. Gains or losses on forward contracts designated to hedge a foreign currency transaction are included in the measurement of income. At December 31, 1996, the Company had a forward contract, which will mature in 1997, for foreign currencies totaling $4,005. The fair value of the forward contract approximated its carrying value in the financial statements at December 31, 1996. The counterparties to the Company's forward contracts are major financial institutions, which the Company continually evaluates as to their creditworthiness. The Company has never experienced, nor does it anticipate, nonperformance by any of its counterparties.
Research and Development
Expenditures for research and development activities, which are charged to income as incurred, amounted to $730 in 1996.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
3. TRANSACTIONS WITH PARENT COMPANY:
Related-party transactions with Industries or Praxair (the "Parent Company") not disclosed elsewhere in the financial statements are as follows:
Revenues from Affiliates
The Company provides services to affiliates of the Parent Company for the construction and expansion of facilities and for certain repair and maintenance work. The balance due for these services is reflected as Receivable from Affiliates. During the year ended December 31, 1996, the Company recorded revenues from affiliates of $13,384. Gross profit, net of overhead costs, was $2,287 for the year ended December 31, 1996. The Company believes these revenues and gross profits approximate those of similar services provided to independent third parties.
Advances to Parent Company
Advances to Parent Company represent advances to the Parent Company and its affiliates from operating cash flows generated by the Company, net of cash received from the Parent Company and its affiliates to fund operating and investing activities. On December 31, 1996, the Company declared a dividend to Praxair for the September 30, 1996 balance of the Advance to Parent Company. Advance activity subsequent to September 30, 1996 was included in the Debt to Parent Company account.
Debt to Parent Company
In conjunction with Praxair's acquisition of Industries effective January 1, 1996, the Company assumed $55,000 of acquisition related debt payable to Praxair. Subsequent to September 30, 1996, the Company's long-term debt balance increases when the Company requires cash and decreases when a cash surplus is available to reduce the long-term debt balance. The debt matures no earlier than January 1, 1998 and the Company pays interest at 7% per annum on a quarterly basis. Interest expense for the year ended December 31, 1996 was $3,850. In addition, approximately $22,000 of letters of credit were outstanding on behalf of Praxair at December 31, 1996 relating to the Company's insurance program.
In contemplation of the public equity offering, the Company expects to enter into a long-term credit agreement with a financial institution (or group of financial institutions) in order to repay the Debt to Parent Company and to provide liquidity to support letters of credit and working capital requirements.
Payable to Parent Company
Payable to Parent Company includes a $5,000 dividend to Praxair payable in the first quarter of 1997 and interest accrued on the Debt to Parent Company, net of an income tax receivable from the Parent Company.
Corporate Services
The Parent Company provided certain support services to the Company through June 30, 1996, including legal, finance, tax, human resources, information services and risk management. Charges for these services were allocated by the Parent Company to the Company based on various methods which reasonably approximate the actual costs incurred. The allocations recorded by the Company for these
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
corporate services in the accompanying consolidated income statements were approximately $4,732 for the year ended December 31, 1996. Subsequent to June 30, 1996, the Company performed substantially all of these support services internally. The amounts allocated by the Parent Company are not necessarily indicative of the actual costs which may have been incurred had the Company operated as an entity unaffiliated with the Parent Company. However, the Company believes that the allocation is reasonable and in accordance with the Securities and Exchange Commission's Staff Accounting Bulletin No. 55.
4. UNCOMPLETED CONTRACTS:
Contract terms generally provide for progress billings based on completion of certain phases of the work. The excess of revenues recognized for construction contracts over progress billings on uncompleted contracts is reported as a current asset and the excess of progress billings over revenues recognized on uncompleted contracts is reported as a current liability as follows:
1996
--------
Revenues recognized on uncompleted contracts..................... $680,223
Billings on uncompleted contracts................................ 635,168
--------
$ 45,055
========
Shown on balance sheet as:
Contracts in progress with earned revenues exceeding related
progress billings............................................... $ 79,782
Contracts in progress with progress billings exceeding related
earned revenues................................................. (34,727)
--------
$ 45,055
========
|
5. LEASES:
Certain facilities and equipment are rented under operating leases that expire at various dates through 2006. Rental expense on operating leases was $3,372 in 1996. Future rental commitments during the years ending in 1997 through 2001 and thereafter are $3,731, $1,817, $1,554, $1,209, $937, and $2,578, respectively.
6. SUPPLEMENTAL BALANCE SHEET DETAIL:
The activity recorded in the allowance for doubtful accounts was as follows:
DEDUCTIONS-
WRITE-OFF OF
BALANCE, PURCHASE BALANCE AT CHARGES TRADE BALANCE,
BEGINNING ACCOUNTING JANUARY 1, TO RECEIVABLES, END OF
OF THE YEAR ADJUSTMENTS 1996 EXPENSE NET OF RECOVERIES THE YEAR
----------- ----------- ---------- ------- ----------------- --------
For the year ended
December 31, 1996...... $6,343 $(2,000) $4,343 $2,313 $(3,609) $3,047
|
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
The components of property and equipment are:
1996
--------
Land and improvements.............................................. $ 11,954
Buildings and improvements......................................... 30,460
Plant and field equipment.......................................... 81,159
--------
Total property and equipment..................................... 123,573
Accumulated depreciation........................................... (15,698)
--------
Net property and equipment....................................... $107,875
========
The components of accrued liabilities are:
1996
--------
Payroll, vacation and bonuses...................................... $ 11,533
Self-insurance reserves............................................ 10,000
Postretirement benefit obligation.................................. 1,783
Pension obligation................................................. 1,439
Other.............................................................. 19,758
--------
$ 44,513
========
The components of non-current liabilities are:
1996
--------
Self-insurance reserves............................................ $ 27,608
Postretirement benefit obligation.................................. 28,148
Pension obligation................................................. 15,831
Other.............................................................. 10,222
--------
$ 81,809
========
|
7. COMMITMENTS AND CONTINGENT LIABILITIES:
Environmental Matters
A subsidiary of the Company was a minority shareholder from 1934 to 1954 in a company which owned or operated at various times several wood treating facilities at sites in the United States, some of which are currently under investigation, monitoring or remediation under various environmental laws. With respect to some of these sites, the Company has been named a potentially responsible party ("PRP") under CERCLA and similar state laws. Without admitting any liability, the Company has entered into a consent decree with the federal government regarding one of these sites and has had an administrative order issued against it with respect to another. There can be no assurance that the Company will not be required to clean up one or more of these sites pursuant to agency directives or court orders. The Company has been involved in litigation concerning environmental liabilities, which are currently indeterminable, in connection with certain of those sites. The Company denies any liability for each site and believes that the successors to the wood treating business are responsible for the costs of remediation of the sites. Without admitting any liability, the Company has reached settlements for environmental clean-up at most of the sites. In July 1996, a judgment in favor of the Company was entered in the suit Aluminum
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
Company of America v. Beazer East, Inc. v. Chicago Bridge & Iron Company, instituted in January 1991, before the U.S. District Court for the Western District of Pennsylvania. In July 1996, Beazer East, Inc. filed an appeal which is currently pending before the United States Court of Appeals for the Third Circuit. The Company believes that an estimate of the possible loss or range of possible loss relating to such matters cannot be made. Although the Company believes that it is reasonably likely that it will be successful in such appeal and that such settlements and any remaining potential liability will not be material, there can be no assurance that the Company will be successful in upholding the judgment in its favor or that such settlements and any remaining potential liability will not have a materially adverse effect on its business, financial condition or results of operations.
The Company's facilities have operated for many years and substances which currently are or might be considered hazardous were used and disposed of at some locations, which will or may require the Company to make expenditures for remediation. In addition, the Company has agreed to indemnify parties to whom it has sold facilities for certain environmental liabilities arising from acts occurring before the dates those facilities were transferred. The Company is aware of no manifestation by a potential claimant of awareness by such claimant of a possible claim or assessment and does not consider it to be probable that a claim will be asserted which claim is reasonably possible to have an unfavorable outcome, in each case, which would be material to the Company with respect to the matters addressed in this paragraph. The Company believes that any potential liability for these matters will not have a materially adverse effect on its business, financial condition or results of operations.
Along with multiple other parties, a subsidiary of the Company is currently a PRP under CERCLA and analogous state laws at several sites as a generator of wastes disposed of at such sites. While CERCLA imposes joint and several liability on responsible parties, liability for each site is likely to be apportioned among the parties. The Company believes that an estimate of the possible loss or range of possible loss relating to such matters cannot be made. While it is impossible at this time to determine with certainty the outcome of such matters and although no assurance can be given with respect thereto, based on information currently available to the Company and based on the Company's belief as to the reasonable likelihood of the outcomes of such matters, the Company does not believe that its potential liability in connection with these sites, either individually or in the aggregate, will have a material adverse effect on its business, financial condition or results of operations.
The Company does not anticipate incurring material capital expenditures for environmental controls or for investigation or remediation of environmental conditions during the current or succeeding fiscal year. Nevertheless, the Company can give no assurance that it, or entities for which it may be responsible, will not incur liability in connection with the investigation and remediation of facilities it currently (or formerly) owns or operates or other locations in a manner that could materially and adversely affect the Company.
Other Contingencies
In 1991, CBI Na-Con, Inc. ("CBI Na-Con"), a subsidiary of the Company, installed a catalyst cooler bundle at Fina Oil & Chemical Company's ("Fina") Port Arthur, Texas Refinery. In July 1991, Fina determined that the catalyst cooler bundle was defective and had it replaced. Fina is seeking approximately $20,000 in damages for loss of use of Fina's catalyst cracking unit and the cost of replacement of the catalyst cooler bundle. On June 28, 1993, Fina filed a complaint against CBI Na-Con before the District Court of Harris County, Texas in Fina Oil & Chemical Company v. CBI Na-Con, Inc. et al. The Company denies that it is liable. The Company believes that an estimate of the possible loss or range of possible
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
loss cannot be made. While the Company believes that the claims are without merit and/or the Company has valid defenses to such claims and that it is reasonably likely to prevail in defending against such claims, there can be no assurance that if the Company is finally determined to be liable for all or a portion of any damages payable, that such liability will not have a materially adverse effect on the Company's business, financial condition and results of operations.
The Company is a defendant in a number of other lawsuits arising in the normal course of its business. The Company believes that an estimate of the possible loss or range of possible loss relating to such matters cannot be made. While it is impossible at this time to determine with certainty the ultimate outcome of these lawsuits and although no assurance can be given with respect thereto, based on information currently available to the Company and based on the Company's belief as to the reasonable likelihood of the outcomes of such matters, the Company's management believes that adequate provision has been made for probable losses with respect thereto as best as can be determined at this time and that the ultimate outcome, after provisions therefore, will not have a material adverse effect, either individually or in the aggregate, on the Company's business, financial condition and results of operations. The adequacy of reserves applicable to the potential costs of being engaged in litigation and potential liabilities resulting from litigation are reviewed as developments in the litigation warrant.
The Company is jointly and severally liable for certain liabilities of partnerships and joint ventures. The Company has also given certain performance guarantees arising in the ordinary course of business for its subsidiaries and unconsolidated affiliates.
The Company has elected to retain portions of anticipated losses through the use of deductibles and self-insured retentions for its exposures related to third party liability and workers' compensation. Liabilities in excess of these amounts are the responsibilities of an insurance carrier. To the extent the Company self- insures for these exposures, reserves have been provided for based on management's best estimates with input from the Company's legal and insurance advisors. Changes in assumptions, as well as changes in actual experience, could cause these estimates to change in the near term. The Company's management believes that the reasonably possible losses, if any, for these matters, to the extent not otherwise disclosed and net of recorded reserves, will not be material to its financial position or its results of operations.
8. EMPLOYEE BENEFIT PROGRAMS:
Health and Welfare Programs
The Company participated in various health and welfare programs for active employees that were sponsored by the Parent Company. These programs include medical, life insurance and disability. The Company reimbursed the Parent Company for its proportionate cost of these programs based on historical experience and relative headcount. The Company recorded expense related to the reimbursement of these costs of approximately $8,349 for the year ended December 31, 1996. The costs were charged to cost of revenues and selling and administrative expense based on the number of employees in each of these categories. The Company believes its allocation of the proportionate cost is reasonable. Subsequent to December 31, 1996, the Company terminated its participation in the Parent Company-sponsored plans and initiated its own plans.
Pension and Defined Contribution Plans
The Company participates in a defined benefit plan sponsored by the Parent Company (the "CBI Pension Plan"), three defined benefit plans sponsored by the Company's Canadian subsidiary, and makes contributions to union sponsored multi-employer pension plans.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
The CBI Pension Plan, which is the principal non-contributory tax qualified defined benefit plan, covered most U.S. salaried employees. The Company's portion of the net pension cost for the CBI Pension Plan was $4,414 in 1996. Benefit accruals under the CBI Pension Plan for current Company employees were discontinued as of December 31, 1996. The Company's obligation to fund its portion of the accumulated benefit obligation for its participants in excess of plan assets was fixed at $17,270 as of December 31, 1996, as agreed to by the Company and Praxair. This obligation is payable ratably to Praxair over a twelve-year period beginning December 1, 1997 with interest at 7.5%.
The Company's three Canadian pension plans cover field, hourly, and salaried employees. The following tables reflect the components of net pension cost and the funded status of the Company's Canadian pension plans:
1996
--------
Net Pension Cost
Service cost..................................................... $ 301
Interest cost.................................................... 1,287
Actual return on assets.......................................... (1,840)
Net amortization and deferral.................................... 0
Curtailment gain................................................. (1,899)
--------
Net defined benefit pension plans income......................... $ (2,151)
========
1996
--------
Funded Status
Accumulated benefit obligation (including vested benefits of
$14,056)........................................................ $(14,172)
Additional benefits based on projected salary levels............. (2,563)
--------
Projected benefit obligation..................................... (16,735)
Market value of plan assets...................................... 28,091
--------
Plan assets over projected benefit obligation.................... 11,356
Unrecognized gains............................................... (1,075)
--------
Pension asset.................................................... $ 10,281
========
|
The principal defined benefit plan assets consist of long-term investments, including equity and fixed income securities and cash. The significant assumptions used in determining the 1996 pension expense and the related pension obligations were: discount rate of 7.5%; increase in compensation levels of 6.0%; and long-term rate of return on plan assets of 7.5%. Of these three Canadian plans, one was terminated in December, 1994. Since that time, all members who elected to transfer their balance have been paid out, while the remaining members continue to have benefits under the plan. The second plan is in the process of being terminated. The Company recorded $1,899 in curtailment gains related to the termination of these plans.
The Company made contributions of $2,467 in the year ended December 31, 1996 to the union sponsored multi-employer pension plans. Benefits under these defined benefit plans are based on years of service and compensation levels.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
The Company is the sponsor for several defined contribution plans which cover salaried and hourly employees for which the Company does not provide matching contributions. The cost of these plans to the Company was insignificant in 1996.
Effective January 1, 1997, the Company adopted a new tax-qualified defined contribution plan ("New 401(k) Plan") for eligible employees. The New 401(k) Plan consists of a voluntary pre- tax salary deferral feature under Sections 401(k) of the Internal Revenue Code, a Company matching contribution, and an additional Company profit-sharing contribution to be determined annually by the Company. The New 401(k) Plan substantially replaces the current Parent Company-sponsored pension and 401(k) plans.
Postretirement Health Care and Life Insurance Benefits
The Company participates in a health care and life insurance benefit program sponsored by the Parent Company. This program provides certain separate health care and life insurance benefits for employees retiring under the principal non-contributory defined benefit pension plan of the Parent Company. Retiree health care benefits are provided under an established formula which limits costs based on prior years of service of retired employees. This plan may be changed or terminated by the Parent Company at any time.
The Company reimbursed the Parent Company for its proportionate cost of this program. The following table reflects the components of the net cost of postretirement benefits allocated to the Company:
1996 1996
ACTIVES RETIREES
------- --------
Net Periodic Postretirement Benefit Cost
Service cost.............................................. $375 $ --
Interest cost............................................. 582 1,318
Actual return on assets................................... -- --
---- ------
Postretirement health care and life insurance benefits
cost..................................................... $957 $1,318
==== ======
|
The significant assumption used in determining the 1996 other postretirement benefit expense was a discount rate of 7.0%.
Effective January 1, 1997, the Company terminated its participation in the program sponsored by the Parent Company. The Company's obligation with respect to existing retirees under the program was fixed at $21,400 as of December 31, 1996, as agreed to by the Company and Praxair. This obligation is payable ratably to Praxair over a twelve-year period beginning December 1, 1997 with interest at 7.5%. The future obligation for the Company's active employees under this program, which amounted to $8,531 as of December 31, 1996, has been assumed by the Company. The following table reflects the funded status allocated to the Company for active employees:
1996
-------
Net Postretirement Liability
Accumulated postretirement benefit obligation--Active employees... $(7,781)
Unrecognized gain................................................. (750)
-------
Postretirement health care and life insurance benefits
(liability)...................................................... $(8,531)
=======
|
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
9. INCOME TAXES:
The consolidated amount of current and deferred tax expense was allocated among the members of the Parent Company group using the pro-rata method, which assumed the Company's taxes would be filed as a part of Parent Company's consolidated return.
The sources of income before income taxes and minority interest are:
U.S. ............................................................... $ 2,919
Non-U.S. ........................................................... 24,332
-------
$27,251
=======
The provision for income taxes consisted of:
Current income taxes--
U.S. ............................................................. $(1,295)
Non-U.S. ......................................................... 4,833
-------
3,538
-------
Deferred income taxes--
U.S. ............................................................. 3,087
Non-U.S. ......................................................... 1,164
-------
4,251
-------
Total provision..................................................... $ 7,789
=======
A reconciliation of income taxes at the U.S. statutory rate and the
provision for income taxes follows:
Tax provision at U.S. statutory rate................................ $ 9,538
State income taxes.................................................. 50
Non-U.S. tax rate differential...................................... (2,519)
Other, net.......................................................... 720
-------
Provision for income taxes.......................................... $ 7,789
-------
Effective tax rates............................................... 28.6%
=======
|
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
The principal temporary differences included in deferred income taxes reported on the December 31, 1996 balance sheet are:
Current Deferred Taxes
Insurance....................................................... $ 4,070
Employee Benefits............................................... 2,162
Contracts....................................................... 1,378
Other........................................................... 865
--------
8,475
Valuation Allowance............................................. (8,475)
Non-current Deferred Taxes
Employee Benefits............................................... 8,722
Insurance....................................................... 11,417
Other........................................................... 2,342
--------
22,481
Valuation Allowance............................................. (18,680)
Depreciation.................................................... (8,749)
--------
Net Deferred Tax Liabilities...................................... $ (4,948)
========
|
The Company has established a valuation allowance of $27,155 for its domestic deferred tax assets as realization is dependent on sustained U.S. taxable income. The Company has not recorded any additional U.S. deferred income taxes on indefinitely reinvested undistributed earnings of non-U.S. subsidiaries and affiliates at December 31, 1996. If any such undistributed earnings were distributed, foreign tax credits should become available under current law to significantly reduce or eliminate any resulting U.S. income tax liability
10. OPERATIONS BY GEOGRAPHIC SEGMENT:
The Company operates in four major geographic business segments: North America; Central and South America; Europe, Africa, the Middle East; and the Asia Pacific Area. No customer accounted for more than 10% of revenues. Export sales, to unrelated customers outside of the United States, were less than 10% of revenues. Transfers between geographic areas are not material. Corporate costs were allocated to the segments based on their relative revenues, assets or work force.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
Revenues, income from operations and assets by geographic area are:
1996
--------
Revenues
North America...................................................... $328,836
Central and South America.......................................... 90,877
Europe, Africa, Middle East........................................ 109,522
Asia Pacific Area.................................................. 134,486
--------
$663,721
========
Income from operations
North America...................................................... $ 9,469
Central and South America.......................................... 6,530
Europe, Africa, Middle East........................................ 4,298
Asia Pacific Area.................................................. 10,966
--------
$ 31,263
========
Assets
North America...................................................... $165,651
Central and South America.......................................... 31,756
Europe, Africa, Middle East........................................ 90,389
Asia Pacific Area.................................................. 63,700
--------
$351,496
========
|
11. SUBSEQUENT EVENTS:
In November 1996, Chi Bridge Holdings, Inc. ("Bridge Holdings"), a subsidiary of Praxair, formed its wholly owned subsidiary, Chicago Bridge & Iron Company N.V. (the "Issuer"), a corporation organized under the laws of the Netherlands. In December 1996, the Issuer filed a registration statement with the Securities and Exchange Commission for an initial public offering of a majority of the Issuer's common shares (the "Offering"). Praxair and its affiliates will own the balance of the Issuer's shares. The net proceeds of the Offering will remain with Praxair or its affiliates and the Issuer will not receive any of the proceeds from the sale of its common shares.
Prior to the consummation of the Offering, Bridge Holdings and certain of its subsidiaries will consummate a reorganization. Pursuant to the reorganization, (i) the shares of substantially all of Chicago Bridge & Iron Company's ("Old CBIC") non-U.S. subsidiaries will be transferred by dividend to its parent corporation, Bridge Holdings, and contributed to Chicago Bridge & Iron Company B.V. ("CBICBV") in exchange for newly issued common shares of CBICBV; (ii) the shares of substantially all of Old CBIC's U.S. subsidiaries will be transferred by dividend to Bridge Holdings and contributed to a wholly owned subsidiary of Bridge Holdings ("New CBIC"), which will become a wholly owned subsidiary of the Issuer after the reorganization, in exchange for newly issued common stock of New CBIC; (iii) Bridge Holdings will contribute the shares held by it of each of New CBIC and CBICBV to the Issuer in exchange for additional Common Shares of the Issuer; and (iv) New CBIC will assume any remaining assets and liabilities of Old CBIC. After the reorganization and prior to the consummation of the Common Share Offering, Bridge Holdings will be merged into Praxair such that Praxair will then directly own all of the then outstanding Common Shares of the Issuer. This Reorganization will not affect the carrying amounts of the Company's assets and liabilities, nor result in any distribution of the Company's cash or other assets to Praxair.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
CB&I Management Plan
The Company intends to establish the CB&I Management Plan ("the Management Plan") in early 1997. The Management Plan is not qualified under Section 401(a) of the Internal Revenue Code ("the Code") and each participant's account shall be treated as a separate account under Section 404(a)(5) of the Code. The designation of the Management Plan's participants, the amount of Company contributions to the Management Plan and the amount allocated to the individual participants will be determined by the Issuer's Supervisory Board. The allocation to the participant's individual accounts will occur concurrently with the Company's contributions. Management Plan shares will vest as determined by the Issuer's Supervisory Board. Upon vesting, the distribution of the balance held in the individual participant's account can be distributed at the election of the participant. Forfeitures of Management Plan shares under the provisions of the Management Plan will be reallocated to the other Management Plan participants. The number of initial participants is expected to be 40 to 60.
Upon consummation of the Offering, the Company will make a contribution to the Management Plan in the form of common shares having a value of approximately $21,900 (assuming an initial public offering price of $21.50 per share.) Accordingly, the Company will record a pretax charge of approximately $21,900 at the time of the contribution to the Management Plan.
Impact of Operating as a Stand-Alone Entity
The accompanying financial statements reflect the Company's costs of doing business, including expenses incurred by the Parent Company on the Company's behalf in accordance with SEC Staff Accounting Bulletin No. 55. However, the Company estimates it would have incurred increased expenses as a stand-alone company as well as other incremental public company expenses. These additional costs would have decreased pretax income by approximately $1,900 for the year ended December 31, 1996.
12. QUARTERLY OPERATING RESULTS (UNAUDITED):
The following table sets forth selected unaudited consolidated income statement information for the Company on a quarterly basis for the year ended December 31, 1996:
THREE MONTHS ENDED
-----------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
-------- -------- -------- --------
Revenues................................ $139,721 $160,789 $183,021 $180,190
Gross profit............................ 15,733 17,690 19,585 20,683
Income from operations.................. 5,647 6,955 8,539 10,122
Net income.............................. 2,370 3,187 5,373 5,632
|
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of
Chicago Bridge & Iron Company:
We have audited the accompanying consolidated balance sheets of CHICAGO BRIDGE & IRON COMPANY (a Delaware corporation) AND SUBSIDIARIES as of December 31, 1995 and 1994, and the related consolidated statements of income, changes in shareholder's equity and cash flows for each of the two years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Chicago Bridge & Iron Company and Subsidiaries as of December 31, 1995 and 1994, and the results of its operations and cash flows for each of the two years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
December 16, 1996
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31,
--------------------
1995 1994
--------- ---------
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 12,850 $ 16,090
Accounts receivable.................................... 106,634 101,966
Contracts in progress with earned revenues exceeding
related progress billings............................. 70,918 64,624
Assets held for sale................................... 5,157 --
Deferred income taxes.................................. 7,369 14,003
Other current assets................................... 14,617 13,300
--------- ---------
Total current assets................................. 217,545 209,983
--------- ---------
Property and equipment................................... 100,496 116,676
Assets held for sale..................................... 2,235 2,103
Deferred income taxes.................................... 28,405 22,903
Other non-current assets................................. 7,444 8,247
--------- ---------
Total assets......................................... $ 356,125 $ 359,912
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Notes payable.......................................... $ 1,777 $ 776
Accounts payable....................................... 20,389 23,948
Accrued liabilities.................................... 37,379 37,595
Contracts in progress with progress billings exceeding
related earned revenues .............................. 47,660 41,579
Income taxes payable................................... -- 7,272
--------- ---------
Total current liabilities............................ 107,205 111,170
--------- ---------
Non-current liabilities.................................. 56,811 59,346
Minority interest in subsidiaries........................ 5,602 6,295
--------- ---------
Total liabilities.................................... 169,618 176,811
--------- ---------
SHAREHOLDER'S EQUITY:
Common stock, $1 par value, 1,000 authorized shares;
1,000 issued and outstanding in 1995 and 1994......... 1 1
Additional paid-in capital............................. 185,493 185,493
Retained earnings...................................... 159,672 185,278
Advances to Parent Company............................. (142,786) (173,797)
Cumulative translation adjustment...................... (15,873) (13,874)
--------- ---------
Total shareholder's equity........................... 186,507 183,101
--------- ---------
Total liabilities and shareholder's equity........... $ 356,125 $ 359,912
========= =========
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS)
YEAR ENDED
DECEMBER 31,
------------------
1995 1994
-------- --------
Revenues
Third party customers...................................... $581,564 $658,758
Affiliates of Praxair...................................... 40,374 104,045
-------- --------
Total revenues............................................ 621,938 762,803
Cost of revenues
Third party customers...................................... $579,372 $597,643
Affiliates of Praxair...................................... 34,858 94,623
-------- --------
Total cost of revenues.................................... 614,230 692,266
-------- --------
Gross profit.............................................. 7,708 70,537
Selling and administrative expenses......................... 43,023 45,503
Special charges............................................. 5,230 16,990
Gain on sale of assets...................................... (10,030) (11,360)
-------- --------
Income (loss) from operations............................. (30,515) 19,404
Interest expense............................................ (799) (180)
Other income................................................ 1,191 1,652
-------- --------
Income (loss) before taxes and minority interest.......... (30,123) 20,876
Income tax expense (benefit)................................ (8,093) 3,074
-------- --------
Income (loss) before minority interest.................... (22,030) 17,802
Minority interest in income................................. (3,576) (1,359)
-------- --------
Net income (loss)......................................... $(25,606) $ 16,443
======== ========
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(IN THOUSANDS)
ADDITIONAL ADVANCES CUMULATIVE TOTAL
COMMON PAID-IN RETAINED TO PARENT TRANSLATION SHAREHOLDER'S
STOCK CAPITAL EARNINGS COMPANY ADJUSTMENT EQUITY
------ ---------- -------- --------- ----------- -------------
Balance at December 31,
1993................... $ 1 $185,493 $168,845 $(124,293) $(12,805) $217,241
Net income.............. -- -- 16,433 -- -- 16,433
Translation adjustment.. -- -- -- -- (1,069) (1,069)
Advances to Parent
Company................ -- -- -- (49,504) -- (49,504)
---- -------- -------- --------- -------- --------
Balance at December 31,
1994................... 1 185,493 185,278 (173,797) (13,874) 183,101
Net loss................ -- -- (25,606) -- -- (25,606)
Translation adjustment.. -- -- -- -- (1,999) (1,999)
Advances from Parent
Company................ -- -- -- 31,011 -- 31,011
---- -------- -------- --------- -------- --------
Balance at December 31,
1995................... $ 1 $185,493 $159,672 $(142,786) $(15,873) $186,507
==== ======== ======== ========= ======== ========
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED
DECEMBER 31,
-----------------
1995 1994
-------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income................................................ $(25,606) $16,443
Adjustments to reconcile net income to net cash provided
by operating activities:
Special Charge.......................................... 1,850 --
Depreciation............................................ 16,077 15,569
Decrease in deferred income taxes....................... 1,132 1,079
Gain on sale of fixed assets............................ (10,030) (4,360)
Change in operating assets and liabilities (see below).... (22,574) 9,716
-------- -------
Net Cash Provided by/(Used in) Operating Activities..... (39,151) 38,447
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of fixed assets and investments........ 16,434 29,889
Capital expenditures...................................... (14,880) (18,772)
Increase/(decrease) in equity in unconsolidated
affiliates............................................... 1,352 (2,720)
Increase in other......................................... 993 5,654
-------- -------
Net Cash Provided by Investing Activities............... 3,899 14,051
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Advance (to)/from Parent Company.......................... 31,011 (49,504)
Increase/(decrease) in notes payable...................... 1,001 (238)
-------- -------
Net Cash Provided by/(Used in) Financing Activities..... 32,012 (49,742)
-------- -------
Increase/(decrease) in cash & cash equivalents.............. (3,240) 2,756
Cash and cash equivalents, beginning of the year............ 16,090 13,334
-------- -------
Cash and cash equivalents, end of the year.................. $ 12,850 $16,090
======== =======
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Increase in receivables, net.............................. $ (4,770) $27,628
Increase in contracts in progress, net.................... (213) (10,416)
(Increase)/decrease in other current assets............... 1,731 (2,259)
Decrease in accounts payable & accrued liabilities........ (6,310) (1,753)
Increase/(decrease) in income tax payable/prepaid income
taxes.................................................... (10,320) 2,535
Decrease other............................................ (2,692) (6,019)
-------- -------
Total................................................... $(22,574) $ 9,716
======== =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest.................................... $ 829 $ 30
Cash paid for income taxes................................ $ 2,936 $ 7,137
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
1. ORGANIZATION AND NATURE OF OPERATIONS:
Chicago Bridge & Iron Company and Subsidiaries ("the Company") is a global engineering and construction company specializing in the engineering and design, materials procurement, fabrication, erection, repair and modification of steel tanks, other steel plate structures and associated systems such as petroleum terminals, refinery pressure vessels, low temperature and cryogenic storage facilities and elevated water storage tanks. Based on its knowledge of and experience in its industry, the Company believes it is the leading provider of field erected steel tanks and other steel plate structures, associated systems and related services in North America and one of the leading providers of these specialized products and services in the world. The Company seeks to maintain its leading industry position by focusing on using its technological expertise in design, metallurgy and welding, along with its ability to complete logistically and technically complex metal plate projects virtually anywhere in the world. The Company has been continuously engaged in the engineering and construction industry since its founding in 1889.
The worldwide petroleum and petrochemical industry has been the largest sector of the Company's revenues. Numerous factors influence capital expenditure decisions in this industry which are beyond the control of the Company. Therefore, no assurance can be given that the Company's business, financial condition and results of operations will not be adversely effected because of reduced activity or changing taxes, price controls and laws and regulations related to the petroleum and petrochemical industry.
During the periods and as of the dates for which the financial statements are presented, the Company was a wholly owned subsidiary of Chi Bridge Holdings, Inc., which in turn was a wholly owned subsidiary of CBI Industries, Inc. ("Industries"). On January 12, 1996, pursuant to the merger agreement dated December 22, 1995, Industries became a subsidiary of Praxair, Inc. ("Praxair"). This merger transaction was reflected in the Company's consolidated financial statements as a purchase effective to January 1, 1996 ("Merger Date"). Accordingly, the historical information provided for the periods prior to January 1, 1996 ("Pre-Praxair Acquisition") will not be comparable to subsequent financial information ("Post-Praxair Acquisition"). In December 1996, Praxair intends to merge Industries into and with Praxair, with no consequences to the Company's financial statements.
The accompanying financial statements include selected entities which are involved in the engineering and construction specialties of the Company and do not include certain service related subsidiaries which are involved in unrelated businesses. The assets, liabilities, revenues and expenses attributable to these entities are recorded net in the Advance to Parent Company caption of shareholder's equity. These service related subsidiaries are being held for sale by Praxair.
2. SIGNIFICANT ACCOUNTING POLICIES:
Basis of Consolidation
The consolidated financial statements include all significant subsidiaries where control exists and are attributable to the Company's continuing operations. Significant intercompany balances and transactions are eliminated in consolidation. Investments in non-majority owned affiliates are accounted for by the equity method.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Management is also required to make judgments regarding the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenues are recognized using the percentage of completion method. Contract revenues are accrued based generally on the percentage that costs-to-date bear to total estimated costs. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known. Contract revenue reflects the original contract price adjusted for agreed upon claim and change order revenue, if any. Losses expected to be incurred on jobs in process, after consideration of estimated minimum recoveries from claims and change orders, are charged to income as soon as such losses are known. A significant portion of the Company's work is performed on a lump sum or fixed price basis. The balance of projects primarily are performed on variations of cost reimbursable and target, fixed or lump sum price approaches. Progress billings in accounts receivable are currently due and exclude retentions until such amounts are due in accordance with contract terms. Cost of revenues include direct contract costs such as material and construction labor, and indirect costs which are attributable to contract activity.
Foreign Currency Translation and Exchange
The primary effects of foreign currency translation adjustments are recognized in shareholder's equity as cumulative translation adjustment. Charges for foreign currency exchange losses are included in the determination of income, and were $974 and $674 in 1995 and 1994, respectively.
Cash Equivalents
Cash equivalents are considered to be all highly liquid securities with original maturities of three months or less.
Property and Equipment
Property and equipment are recorded at cost and depreciated on a straight- line basis over their estimated useful lives: buildings and improvements, 10 to 40 years; plant and field equipment, 3 to 20 years. Renewals and betterments which substantially extend the useful life of an asset are capitalized and depreciated. Depreciation expense was $16,077 and $15,569 for the years ended December 31, 1995 and 1994, respectively.
The Company expects that there will be no material effect on its financial position or results of operations resulting from the January 1, 1996 adoption of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
Assets Held for Sale
The Company separately classified several assets held for sale as of December 31, 1995 and 1994. These assets are valued at estimated realizable value and were classified as current and non-current based on their expected selling date.
Financial Instruments
The Company uses various methods and assumptions to estimate the fair value of each class of financial instrument. Due to their nature, the carrying value of cash and temporary cash investments, accounts receivable and accounts payable approximates fair value. The Company's other financial instruments are not significant. For the years ended December 31, 1995 and 1994, the Company recorded interest expense on notes payable and certain other interest bearing obligations.
Forward Contracts
The Company periodically uses forward contracts to hedge foreign currency assets and foreign currency payments that the Company is committed to make in connection with the normal course of its business. Gains or losses on forward contracts designated to hedge a foreign currency transaction are included in the measurement of income. At December 31, 1995, the Company had forward contracts, which mature throughout 1996, for foreign currencies totaling $4,900. The fair value of forward contracts approximated their carrying value in the financial statements at December 31, 1995. The counterparties to the Company's forward contracts are major financial institutions, which the Company continually evaluates as to their creditworthiness. The Company has never experienced, nor does it anticipate, nonperformance by any of its counterparties.
Research and Development
Expenditures for research and development activities, which are charged to income as incurred, amounted to $2,474 and $3,624 in 1995 and 1994, respectively.
Pending Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board issued Statement No. 123, "Accounting for Stock-Based Compensation," which encourages, but does not require, companies to recognize compensation expense for grants of common stock, stock options and other equity instruments to employees based on new fair value accounting rules. The Company does not expect to adopt the new rules and will continue to apply the existing accounting rules contained in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Statement No. 123 requires companies to comply with certain disclosures about stock-based employee compensation arrangements regardless of the method used to account for them.
3. TRANSACTIONS WITH INDUSTRIES:
Related-party transactions with Industries not disclosed elsewhere in the financial statements are as follows:
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
Revenues from Affiliates
The Company provides services to affiliates of Industries for the construction and expansion of facilities and for certain repair and maintenance work. During the years ended December 31, 1995 and 1994, the Company recorded revenues from affiliates of $40,374 and $104,045, respectively. Gross profit, net of overhead costs, were $5,516 and $9,422 for the years ended December 31, 1995 and 1994, respectively. The Company believes these revenues and gross profits approximate those of similar services provided to independent third parties.
Advances to Parent Company
Advances to Parent Company represent advances to Industries and its affiliates from operating cash flows generated by the Company, net of cash received from Industries and its affiliates to fund operating and investing activities.
The Advances to Parent Company have been included as a component of shareholder's equity as such amounts are generally not due and payable, and as the Advances to Parent Company will be eliminated as a part of the Company's reorganization, as discussed in Note 12.
Corporate Services
Industries provided certain support services to the Company including legal, finance, tax, human resources, information services and risk management. Charges for these services were allocated by Industries to the Company based on various methods which reasonably approximate the actual costs incurred. The allocations recorded by the Company for these corporate services in the accompanying consolidated income statements were approximately $10,008 and $11,599 for the years ended December 31, 1995 and 1994, respectively. The amounts allocated by Industries are not necessarily indicative of the actual costs which may have been incurred had the Company operated as an entity unaffiliated with Industries. However, the Company believes that the allocation is reasonable and in accordance with the Securities and Exchange Commission's Staff Accounting Bulletin No. 55.
4. UNCOMPLETED CONTRACTS:
Contract terms generally provide for progress billings based on completion of certain phases of the work. The excess of revenues recognized for construction contracts over progress billings on uncompleted contracts is reported as a current asset and the excess of progress billings over revenues recognized on uncompleted contracts is reported as a current liability as follows:
1995 1994
-------- --------
Revenues recognized on uncompleted contracts.............. $654,619 $785,703
Billings on uncompleted contracts......................... 631,361 762,658
-------- --------
$ 23,258 $ 23,045
======== ========
Shown on balance sheet as:
Contracts in progress with earned revenues exceeding
related progress billings.............................. $ 70,918 $ 64,624
Contracts in progress with progress billings exceeding
related earned revenues................................ 47,660 41,579
-------- --------
$ 23,258 $ 23,045
======== ========
|
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
5. LEASES:
Certain facilities and equipment are rented under operating leases that expire at various dates through 2006. Rental expense on operating leases was $3,589 and $3,472 in 1995 and 1994, respectively. Future rental commitments during the years ending in 1996 through 2000 and thereafter are $3,476, $1,873, $1,122, $885, $597 and $1,061, respectively.
6. SUPPLEMENTAL BALANCE SHEET DETAIL:
The activity recorded in the allowance for doubtful accounts is as follows:
DEDUCTIONS--
WRITE-
BALANCE, OFF OF TRADE BALANCE,
BEGINNING CHARGES RECEIVABLES, END OF
OF THE YEAR TO EXPENSE NET OF RECOVERIES THE YEAR
----------- ----------- ----------------- ---------
For the year ended De-
cember 31, 1995........ $2,862 $5,656 $(2,175) $6,343
For the year ended De-
cember 31, 1994........ 3,039 2,071 (2,248) 2,862
|
The components of property and equipment are:
1995 1994
--------- ---------
Land and improvements.................................. $ 10,373 $ 21,739
Buildings and improvements............................. 39,704 46,367
Plant and field equipment.............................. 164,964 189,057
--------- ---------
Total property and equipment......................... 215,041 257,163
Accumulated depreciation............................... (114,545) (140,487)
--------- ---------
Net property and equipment........................... $ 100,496 $ 116,676
========= =========
The components of accrued liabilities are:
1995 1994
--------- ---------
Self-insurance reserves................................ $ 11,700 $ 11,356
Payroll, vacation and bonuses.......................... 9,461 7,133
Accrued accounts payable............................... 6,182 5,406
Other.................................................. 10,036 13,700
--------- ---------
$ 37,379 $ 37,595
========= =========
The components of non-current liabilities are:
1995 1994
--------- ---------
Self-insurance reserves................................ $ 27,403 $ 25,504
Postretirement benefit obligation...................... 22,583 24,986
Other.................................................. 6,825 8,856
--------- ---------
$ 56,811 $ 59,346
========= =========
|
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
7. COMMITMENTS AND CONTINGENT LIABILITIES:
Environmental Matters
A subsidiary of the Company was a minority shareholder from 1934 to 1954 in a company which owned or operated at various times several wood treating facilities at sites in the United States, some of which are currently under investigation, monitoring or remediation under various environmental laws. With respect to some of these sites, the Company has been named a potentially responsible party ("PRP") under CERCLA and similar state laws. Without admitting any liability, the Company has entered into a consent decree with the federal government regarding one of these sites and has had an administrative order issued against it with respect to another. There can be no assurance that the Company will not be required to clean up one or more of these sites pursuant to agency directives or court orders. The Company has been involved in litigation concerning environmental liabilities, which are currently indeterminable, in connection with certain of those sites. The Company denies any liability for each site and believes that the successors to the wood treating business are responsible for the costs of remediation of the sites. Without admitting any liability, the Company has reached settlements for environmental clean-up at most of the sites. In July 1996, a judgment in favor of the Company was entered in the suit Aluminum Company of America v. Beazer East, Inc. v. Chicago Bridge & Iron Company, instituted in January 1991 before the U.S. District Court for the Western District of Pennsylvania. In July 1996, Beazer East, Inc. filed an appeal which is currently pending before the United States Court of Appeals for the Third Circuit. The Company believes that an estimate of the possible loss or range of possible loss relating to such matters cannot be made. Although the Company believes that it is reasonably likely that it will be successful in such appeal and that such settlements and any remaining potential liability will not be material, there can be no assurance that the Company will be successful in upholding the judgment in its favor or that such settlements and any remaining potential liability will not have a materially adverse effect on its business, financial condition or results of operations.
The Company's facilities have operated for many years and substances which currently are or might be considered hazardous were used and disposed of at some locations, which will or may require the Company to make expenditures for remediation. In addition, the Company has agreed to indemnify parties to whom it has sold facilities for certain environmental liabilities arising from acts occurring before the dates those facilities were transferred. The Company is aware of no manifestation by a potential claimant of an awareness by such claimant of a possible claim or assessment and does not consider it to be probable that a claim will be asserted which claim is reasonably possible to have an unfavorable outcome, in each case, which would be material to the Company with respect to the matters addressed in this paragraph. The Company believes that any potential liability for these matters will not have a materially adverse effect on its business, financial condition or results of operations.
Along with multiple other parties, a subsidiary of the Company is currently a PRP under CERCLA and analogous state laws at several sites as a generator of wastes disposed of at such sites. While CERCLA imposes joint and several liability on responsible parties, liability for each site is likely to be apportioned among the parties. The Company believes that an estimate of the possible loss or range of possible loss relating to such matters cannot be made. While it is impossible at this time to determine with certainty the outcome of such matters, and although no assurance can be given with respect thereto, based on information currently available to the Company and based on the Company's belief as to the reasonable likelihood of the outcomes of such matters, the Company does not believe that its liability, if any, in connection with these sites, either individually or in the aggregate, will have a material adverse effect on its business, financial condition or results of operations.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
The Company does not anticipate incurring material capital expenditures for environmental controls or for investigation or remediation of environmental conditions during the current or succeeding fiscal year. Nevertheless, the Company can give no assurance that it, or entities for which it may be responsible, will not incur liability in connection with the investigation and remediation of facilities it currently (or formerly) owns or operates or other locations in a manner that could materially and adversely affect the Company.
Other Contingencies
In 1991, CBI Na-Con, Inc. ("CBI Na-Con"), a subsidiary of the Company, installed a catalyst cooler bundle at Fina Oil & Chemical Company's ("Fina") Port Arthur, Texas Refinery. In July 1991, Fina determined that the catalyst cooler bundle was defective and had it replaced. Fina is seeking approximately $20,000 in damages for loss of use of Fina's catalyst cracking unit and the cost of replacement of the catalyst cooler bundle. On June 28, 1993, Fina filed a complaint against CBI Na-Con before the District Court of Harris County, Texas in Fina Oil & Chemical Company v. CBI Na-Con, Inc. et al. The Company denies that it is liable.The Company believes that an estimate of the possible loss or range of possible loss cannot be made. While the Company believes that the claims are without merit and/or the Company has valid defenses to such claims and that it is reasonably likely to prevail in defending against such claims, there can be no assurance that if the Company is finally determined to be liable for all or a portion of any damages payable, that such liability will not have a materially adverse effect on the Company's business, financial condition and results of operations.
The Company is a defendant in a number of other lawsuits arising in the normal course of its business. The Company believes that an estimate of the possible loss or range of possible loss relating to such matters cannot be made. While it is impossible at this time to determine with certainty the ultimate outcome of these lawsuits, and although no assurance can be given with respect thereto, based on information currently available to the Company and based on the Company's belief as to the reasonable likelihood of the outcomes of such matters, the Company's management believes that adequate provision has been made for probable losses with respect thereto as best as can be determined at this time and that the ultimate outcome, after provisions therefore, will not have a material adverse effect, either individually or in the aggregate, on the Company's business, financial condition and results of operations. The adequacy of reserves applicable to the potential costs of being engaged in litigation and potential liabilities resulting from litigation are reviewed as developments in the litigation warrant.
The Company is jointly and severally liable for certain liabilities of partnerships and joint ventures. The Company has also given certain performance guarantees, arising from the ordinary course of business for its subsidiaries and unconsolidated affiliates.
The Company has elected to retain portions of anticipated losses through the use of deductibles and self-insured retentions for its exposures related to third party liability and workers' compensation. Liabilities in excess of these amounts are the responsibilities of an insurance carrier. To the extent the Company self- insures for these exposures, reserves have been provided for based on management's best estimates with input from the Company's legal and insurance advisors. Changes in assumptions, as well as changes in actual experience, could cause these estimates to change in the near term. The Company's management believes that the reasonably possible losses, if any, for these matters, to the extent not otherwise disclosed and net of recorded reserves will not be material to its financial position or its results of operations.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
8. EMPLOYEE BENEFIT PROGRAMS:
Health and Welfare Programs
The Company participated in various health and welfare programs for active employees that were sponsored by Industries. These programs include medical, life insurance and disability. The Company reimbursed Industries for its proportionate cost of these programs based on historical experience and relative headcount. The Company recorded expense related to the reimbursement of these costs of approximately $8,585 and $9,048 in the years ended December 31, 1995 and 1994, respectively. The costs were charged to cost of revenues and selling and administrative expenses based on the number of employees in each of these categories. The Company believes its allocation of the proportionate cost is reasonable. Effective January 1, 1997, the Company intends to terminate participation in the Industries-sponsored plans and initiate its own plans.
Stock Benefit Programs
The Company participated in an employee stock ownership plan, a restricted stock award plan, employee stock purchase plans and a stock option plan sponsored by Industries. The Company reimbursed Industries for its proportionate cost of these programs based on an estimate of the proportionate costs attributable to its employees. The Company recorded expense related to the reimbursement of these costs of approximately $7,296 and $6,400 in the years ended December 31, 1995 and 1994, respectively. The Company believes its allocation of the proportionate cost was reasonable. As a result of the acquisition of Industries by Praxair, these stock programs were terminated.
Pension and Defined Contribution Plans
The Company participates in a defined benefit plan sponsored by Industries (the "CBI Pension Plan"), three defined benefit plans sponsored by the Company's Canadian subsidiary, and makes contributions to union sponsored multi-employer pension plans. The CBI Pension Plan, which is the principal non-contributory tax qualified defined benefit plan, covers most U.S. salaried employees. The Company's Canadian pension plans cover field, hourly, and salaried employees. The Company made contributions of $2,863 and $4,641 in the years ended December 31, 1995 and 1994, respectively, to the union sponsored multi-employer pension plans. Benefits under these defined benefit plans are based on years of service and compensation levels.
The Company's net pension expense amounted to $2,692, and $3,575 in 1995 and 1994, respectively. The Company reimburses Industries for its proportionate cost of these programs and funds pension costs as required. Separate calculations for the Company of the components of net pension cost and funded status are not available for the U.S. plan. The following tables reflect the components of net pension cost and the funded status of the Industries pension plans, which include the Company and the Company's Canadian pension plans:
1995 1994
----------------- ----------------
US CANADA US CANADA
-------- ------- ------- -------
Net Pension Cost
Service cost............................. $ 4,326 $ 291 $ 5,096 $ 368
Interest cost............................ 6,803 1,218 6,467 1,223
Actual return on assets.................. (15,420) (1,515) (1,262) (1,742)
Net amortization and deferral............ 9,523 (239) (2,961) (472)
-------- ------- ------- -------
Net defined benefit pension plans
expense................................. $ 5,232 $ (245) $ 7,340 $ (623)
======== ======= ======= =======
Amount allocated to Company.............. $ 2,937 $ (245) $ 4,198 $ (623)
======== ======= ======= =======
|
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
1995 1994
------------------- ------------------
US CANADA US CANADA
--------- -------- -------- --------
Funded Status
Accumulated benefit obligation
including vested benefits of $85,378
in 1995 and $68,378 in 1994.......... $ (80,495) $(15,611) $(63,112) $(14,083)
Additional benefits based on projected
salary levels........................ (24,867) (2,682) (19,266) (3,085)
--------- -------- -------- --------
Projected benefit obligation.......... (105,362) (18,293) (82,378) (17,168)
Market value of plan assets........... 73,622 23,718 52,012 24,612
--------- -------- -------- --------
Projected benefit obligation over plan
assets............................... (31,740) 5,425 (30,366) 7,444
Unrecognized loss..................... 24,648 3,042 18,511 1,818
Unrecognized net transition asset..... (545) (3,622) (606) (4,887)
Unrecognized prior service cost....... 4,516 495 4,940 545
Additional minimum liability.......... (3,753) -- (3,579) --
--------- -------- -------- --------
Pension asset/(liability)............. $ (6,874) $ 5,340 $(11,100) $ 4,920
========= ======== ======== ========
Amount allocated to Company........... $ (3,003) $ 5,340 $ (3,173) $ 4,920
========= ======== ======== ========
|
The principal defined benefit plan assets consist of long-term investments, including equity and fixed income securities and cash. The significant assumptions used in determining pension expense and the related pension obligations were: discount rate of 7.25% and 8.5% in 1995 and 1994, respectively; increase in compensation levels of 4.5% in 1995 and 1994; and long-term rate of return on plan assets of 9.0% in 1995 and 1994.
The Company is the sponsor for several defined contribution plans which cover salaried and hourly employees for which the Company does not provide matching contributions. The cost of these plans to the Company was insignificant in 1995 and 1994.
Effective January 1, 1997, the Company adopted a new tax-qualified defined contribution plan ("New 401(k) Plan") for eligible employees. The New 401(k) Plan consists of a voluntary pre-tax salary deferral feature under Sections 401(k) of the Internal Revenue Code, a Company matching contribution, and an additional Company profit-sharing contribution to be determined annually by the Company. The New 401(k) Plan substantially replaces the current Industries-sponsored pension and 401(k) plans.
Benefit accruals under the CBI Pension Plan for current Company employees were discontinued as of December 31, 1996. The Company's obligation to fund its portion of the accumulated benefit obligation for its participants in excess of plan assets was fixed at $17,270 as of December 31, 1996, as agreed to by the Company and Praxair. This obligation is payable ratably to Praxair over a twelve-year period beginning December 1, 1997 with interest at 7.5%.
Of the three previously mentioned Canadian plans, one was terminated in December 1994. Since that time, all members who elected to transfer their balance have been paid out, while the remaining members continue to have benefits under the plan. The second plan is in the process of being terminated. Curtailment gains and losses for these plans were insignificant.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
Postretirement Health Care and Life Insurance Benefits
The Company participates in a health care and life insurance benefit program sponsored by Industries. This program provides certain separate health care and life insurance benefits for employees retiring under the principal non- contributory defined benefit pension plan of Industries. Retiree health care benefits are provided under an established formula which limits costs based on prior years of service of retired employees. This plan may be changed or terminated by Industries at any time.
The Company's net cost of providing postretirement benefits was $2,258 and $2,326 in 1995 and 1994, respectively. The Company reimbursed Industries for its proportionate cost of this program. Separate calculations of the components of the net postretirement benefit cost for the Company and the Company's funded status are not available. The following tables reflect the components of the net cost of postretirement benefits and the funded status for the entire Industries plan, which includes the Company:
1995 1994
-------- --------
Net Periodic Postretirement Benefit Cost
Service cost.............................................. $ 563 $ 683
Interest cost............................................. 2,572 2,582
Actual return on assets................................... 46 --
Net amortization and deferral............................. -- (23)
-------- --------
Postretirement health care and life insurance benefits
cost..................................................... $ 3,181 $ 3,242
======== ========
Amount allocated to the Company........................... $ 2,258 $ 2,326
======== ========
1995 1994
-------- --------
Net Postretirement Liability
Accumulated postretirement benefit obligation applicable
to:
Retirees.................................................. $(25,136) $(24,553)
Active employees.......................................... (11,042) (11,535)
-------- --------
Projected benefit obligation.............................. (36,178) (36,088)
-------- --------
Plan assets............................................... -- --
Unrecognized (gain)/loss.................................. 2,757 (1,272)
Unrecognized prior service costs.......................... 530 577
-------- --------
Postretirement health care and life insurance liability... $(32,891) $(36,783)
======== ========
Amount allocated to the Company........................... $(24,069) $(27,367)
======== ========
|
The significant assumptions used in determining other postretirement benefit expense were: discount rate of 7.25% and 8.5% in 1995 and 1994, respectively; and long-term rate of return on plan assets of 9.0% in 1995 and 1994.
Effective January 1, 1997, the Company terminated its participation in the program sponsored by Industries. The Company's obligation with respect to existing retirees under the program was fixed at $21,400 as of December 31, 1996, as agreed to by the Company and Praxair. This obligation is payable ratably to Praxair over a twelve-year period beginning December 1, 1997 with interest at 7.5%. The future obligation for the Company's active employees under this program has been assumed by the Company.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
9. INCOME TAXES:
The Company's results are included in the consolidated Federal income tax return filed by Industries. The consolidated amount of current and deferred tax expense is allocated among the members of the Industries group using the pro- rata method, which assumes the Company's taxes would be filed as a part of Industries' consolidated return.
The sources of income/(loss) before income taxes and minority interest are:
1995 1994
-------- -------
U.S. .................................................... $(25,387) $ (395)
Non-U.S. ................................................ (4,736) 21,271
-------- -------
$(30,123) $20,876
======== =======
The provision/(benefit) for income taxes consisted of:
1995 1994
-------- -------
Current income taxes--
U.S. .................................................. $ (6,678) $ (913)
Non-U.S. .............................................. 1,586 6,399
-------- -------
(5,092) 5,486
-------- -------
Deferred income taxes--
U.S. .................................................. (1,469) (1,109)
Non-U.S. .............................................. (1,532) (1,303)
-------- -------
(3,001) (2,412)
-------- -------
Total provision/(benefit)................................ $ (8,093) $ 3,074
======== =======
The components of the deferred income tax provision/(benefit) are:
1995 1994
-------- -------
Depreciation expense..................................... $ (586) $(1,225)
Non-U.S. activity........................................ (619) (1,966)
Employee and retiree benefits............................ (255) (540)
Special charges.......................................... 250 4,069
Insurance................................................ (2,583) (909)
Other, net............................................... 792 (1,841)
-------- -------
$ (3,001) $(2,412)
======== =======
|
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
A reconciliation of income taxes at the U.S. statutory rate and the provision/(benefit) for income taxes follows:
1995 1994
-------- -------
Income/(loss) before income taxes and minority
interest............................................... $(30,123) $20,876
-------- -------
Tax provision/(benefit) at U.S. statutory rate.......... $(10,543) $ 7,307
State income taxes...................................... 82 389
Non-U.S. tax rate differential and losses without tax
benefit................................................ 1,610 (4,933)
Other, net.............................................. 758 311
-------- -------
Provision/(benefit) for income taxes.................... $ (8,093) $ 3,074
======== =======
Effective tax rates................................... (26.9)% 14.7%
======== =======
The principal temporary differences included in non-current deferred income
taxes reported on the balance sheets are:
1995 1994
-------- -------
Depreciation expense.................................... $ (8,810) $(9,595)
Non-U.S. activity....................................... 10,541 8,652
Employee and retiree benefits........................... 9,384 9,901
Special charges......................................... 2,781 2,520
Insurance............................................... 10,654 7,922
Other, net.............................................. 3,855 3,503
-------- -------
$ 28,405 $22,903
======== =======
|
Current deferred tax assets at December 31, 1995 of $7,369 consist of temporary differences resulting from insurance, $4,089; employee and retiree benefits, $2,141; and other items, net $1,139.
Realization of recognized tax assets is dependent on generating sufficient future taxable income. Although realization is not assured, management believes it is more likely than not that all of the tax assets will be realized on a consolidated Industries basis. The amount of the tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced. The Company has not recorded any additional U.S. deferred income taxes on indefinitely reinvested undistributed earnings of non-U.S. subsidiaries and affiliates at December 31, 1995. If any such undistributed earnings were distributed, foreign tax credits should become available under current law to significantly reduce or eliminate any resulting U.S. income tax liability.
10. OPERATIONS BY GEOGRAPHIC SEGMENT:
The Company operates in four major geographic business segments: North America; Central and South America; Europe, Africa, the Middle East; and the Asia Pacific Area. No customer accounted for more than 10% of revenues. Export sales, to unrelated customers outside of the United States, were less than 10% of revenues in each period reported. Transfers between geographic areas are not material. Corporate costs were allocated to the segments based on their relative revenues, assets or work force.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
Revenues, income/(loss) from operations and assets by geographic area are:
1995 1994
-------- --------
Revenues
North America........................................... $317,698 $416,138
Central and South America............................... 54,605 118,616
Europe, Africa, Middle East............................. 110,775 112,973
Asia Pacific Area....................................... 138,860 115,076
-------- --------
$621,938 $762,803
======== ========
Income/(loss) from operations
North America........................................... $(37,623) $(11,579)
Central and South America............................... 8,511 11,368
Europe, Africa, Middle East............................. (5,527) 856
Asia Pacific Area....................................... 4,124 18,759
-------- --------
$(30,515) $ 19,404
======== ========
Assets
North America........................................... $190,187 $216,584
Central and South America............................... 14,997 21,332
Europe, Africa, Middle East............................. 73,322 63,677
Asia Pacific Area....................................... 77,619 58,319
-------- --------
$356,125 $359,912
======== ========
|
11. SPECIAL CHARGES AND GAIN ON SALE OF ASSETS:
Special Charges
1995 1994
------ -------
Litigation.................................................... $ -- $16,990
Restructuring................................................. 5,230 --
------ -------
Total....................................................... $5,230 $16,990
====== =======
|
In the fourth quarter of 1995, the Company recorded a special charge of $5,230 for restructuring costs, including $1,850 in non-cash provisions for the write-down of a facility which has been closed and $3,380 in cash provisions for workforce reductions of $750 and idle facility costs of $2,630. The closed facility has been classified as assets held for sale at December 31, 1995. Workforce reductions consisted of approximately 80 hourly and salaried personnel from a manufacturing facility. Substantially all of the cash portion of the reserves established for these restructuring costs was expended during 1996.
In 1994, the Company recorded a special charge of $16,990 to recognize expense related to a major litigation settlement against the Company. Approximately $12,500 of the litigation settlement costs were paid in 1994 with the balance of $4,500 payable over 5 years together with 8% interest thereon.
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
Gain on Sale of Asset
1995 1994
------- -------
Gain on sale of property, plant and equipment............... $10,030 $ 4,360
Gain from affiliated entity transactions.................... -- 7,000
------- -------
Total..................................................... $10,030 $11,360
======= =======
|
The gain on the sale of property, plant and equipment recorded in 1995 includes the gain on certain under-utilized facilities sold as a result of the Company's restructuring program.
In 1994, the Company recognized $7,000 in gains from affiliated entity transactions. These gains primarily represent the gains from the sale of the Company's minority interest in a terminal in which the Company participated in the construction thereof and also the sale of the Company's interest in a fabrication facility.
12. SUBSEQUENT EVENTS:
In November 1996, Chi Bridge Holdings, Inc. ("Bridge Holdings"), a subsidiary of Praxair, formed its wholly owned subsidiary, Chicago Bridge & Iron Company N.V. (the "Issuer"), a corporation organized under the laws of the Netherlands. In December 1996, the Issuer filed a registration statement with the Securities and Exchange Commission for an initial public offering of a majority of the Issuer's common shares (the "Offering"). Praxair and its affiliates will own the balance of the Issuer's shares. The net proceeds of the Offering will remain with Praxair or its affiliates and the Issuer will not receive any of the proceeds from the sale of its common shares.
Prior to the consummation of the Offering, Bridge Holdings and certain of its subsidiaries will consummate a reorganization. Pursuant to the reorganization (i) the shares of substantially all of Chicago Bridge & Iron Company's ("Old CBIC") non-U.S. subsidiaries will be transferred by dividend to its parent corporation, Bridge Holdings, and contributed to Chicago Bridge & Iron Company B.V. ("CBICBV") in exchange for newly issued common shares of CBICBV; (ii) the shares of substantially all of Old CBIC's U.S. subsidiaries will be transferred by dividend to Bridge Holdings and contributed to a wholly owned subsidiary of Bridge Holdings ("New CBIC"), which will become a wholly owned subsidiary of the Issuer in the reorganization, in exchange for newly issued common stock of New CBIC; (iii) Bridge Holdings will contribute the shares held by it of each of New CBIC and CBICBV to the Issuer in exchange for additional Common Shares of the Issuer; and (iv) New CBIC will assume any remaining assets and liabilities of Old CBIC. After the reorganization and prior to the consummation of the Common Share Offering, Bridge Holdings will be merged into Praxair such that Praxair will then directly own all of the then outstanding Common Shares of the Issuer. This Reorganization will not affect the carrying amounts of the Company's assets and liabilities, nor result in any distribution of the Company's cash or other assets to Praxair.
Impact of Operating as a Stand-Alone Entity
The accompanying financial statements reflect the Company's costs of doing business, including expenses incurred by Industries on the Company's behalf in accordance with SEC Staff Accounting Bulletin No. 55. However, the Company estimates it would have incurred increased expenses as a stand-
CHICAGO BRIDGE & IRON COMPANY AND SUBSIDIARIES
(PRE-PRAXAIR ACQUISITION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
alone company as well as other incremental public company expenses. These additional costs would have increased pretax loss by approximately $1,900 for the year ended December 31, 1995.
13. QUARTERLY OPERATING RESULTS:
As discussed in the Notes to Consolidated Financial Statements for the two years ended December 31, 1995, the Company recorded special charges in 1995 and 1994 for a major litigation settlement and restructuring expenses. The fourth quarter of 1995 was negatively impacted by approximately $15,000 for significant losses on a few contracts and approximately $8,000 of underabsorbed overhead costs.
The following table sets forth selected unaudited consolidated statement of income information for the Company on a quarterly basis for the years ended December 31, 1995 and 1994:
THREE MONTHS ENDED 1995
-------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
-------- -------- -------- --------
Revenues................................ $160,584 $156,385 $147,342 $157,627
Gross profit............................ 10,338 9,019 4,451 (16,100)
Special charges........................... 0 0 0 (5,230)
Income (loss) from operations........... 1,223 (32) (2,966) (28,740)
Net income (loss)....................... 1,164 2,022 (5,263) (23,529)
THREE MONTHS ENDED 1994
-------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
-------- -------- -------- --------
Revenues................................ $161,151 $190,942 $192,821 $217,889
Gross profit............................ 19,721 18,505 12,070 20,241
Special charges......................... 0 0 (16,990) 0
Income (loss) from operations........... 10,780 9,624 (14,898) 13,898
Net income (loss)....................... 7,286 6,677 (10,713) 13,193
|
CHICAGO BRIDGE & IRON COMPANY N.V.
INDEX
PAGE
----
Report of Independent Public Accountants................................... F-43
Balance Sheet as of December 31, 1996...................................... F-44
Notes to Balance Sheet..................................................... F-45
|
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of Chicago Bridge & Iron Company N.V.:
We have audited the accompanying balance sheet of Chicago Bridge & Iron Company N.V. (a Netherlands corporation) as of December 31, 1996. This balance sheet is the responsibility of the Company's management. Our responsibility is to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Chicago Bridge & Iron Company N.V. as of December 31, 1996, in conformity with accounting principles generally accepted in the United States.
Arthur Andersen LLP
Chicago, Illinois
February 7, 1997
CHICAGO BRIDGE & IRON COMPANY N.V.
BALANCE SHEET
AS OF DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
Cash........................................................................ $59
---
Total Assets.............................................................. $59
===
LIABILITIES & SHAREHOLDER'S EQUITY
SHAREHOLDER'S EQUITY:
Common Stock (NLG .01 par value, 50,000,000 shares authorized;
10,000,000 issued and outstanding)......................................... $59
---
Total Shareholder's Equity................................................ $59
===
|
The accompanying notes are an integral part of this balance sheet.
CHICAGO BRIDGE & IRON COMPANY N.V.
NOTES TO BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
1. ORGANIZATION:
In November 1996, Chi Bridge Holdings, Inc. ("Bridge Holdings"), a subsidiary of Praxair, Inc., formed its wholly owned subsidiary Chicago Bridge & Iron Company N.V. (the "Issuer"), a corporation organized under the laws of the Netherlands. The original $59 investment in exchange for common stock and additional paid-in capital is the Company's only transaction for the year ended December 31, 1996, and as such, no income or cash flow statements are presented for the period.
2. SIGNIFICANT ACCOUNTING POLICIES:
The Issuer employs accounting policies that are in accordance with generally accepted accounting principles in the United States. The functional currency for the Issuer is the U.S. dollar. The translation from Dutch Guilders ("NLG") to U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date.
3. SUBSEQUENT EVENTS:
In December 1996, the Issuer filed a registration statement with the Securities and Exchange Commission for an initial public offering of a majority of the Issuer's common shares (the "Offering"). Praxair and its affiliates will own the balance of the Issuer's shares. The net proceeds of the Offering will remain with Praxair or its affiliates and the Issuer will not receive any of the proceeds from the sale of its common shares.
Prior to the consummation of the Offering, Bridge Holdings and certain of its subsidiaries will consummate a reorganization. Pursuant to the reorganization (i) the shares of substantially all of Chicago Bridge & Iron Company's ("Old CBIC") non-U.S. subsidiaries will be transferred by dividend to its parent corporation, Bridge Holdings, and contributed to Chicago Bridge & Iron Company B.V. ("CBICBV") in exchange for newly issued common shares of CBICBV; (ii) the shares of substantially all of Old CBIC's U.S. subsidiaries will be transferred by dividend to Bridge Holdings and contributed to a wholly owned subsidiary of Bridge Holdings ("New CBIC"), which will become a wholly owned subsidiary of the Issuer in the reorganization, in exchange for newly issued common stock of New CBIC; (iii) Bridge Holdings will contribute the shares held by it of each of New CBIC and CBICBV to the Issuer in exchange for additional Common Shares of the Issuer; and (iv) New CBIC will assume any remaining assets and liabilities of Old CBIC. After the reorganization and prior to the consummation of the Common Share Offering, Bridge Holdings will be merged into Praxair such that Praxair will then directly own all of the then outstanding Common Shares of the Issuer.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary....................................................... 3
Risk Factors............................................................. 12
The Company.............................................................. 21
Dividend Policy.......................................................... 22
Dilution................................................................. 23
Use of Proceeds.......................................................... 23
Capitalization........................................................... 24
Selected Consolidated Financial and Other Data........................... 25
Unaudited Pro Forma Consolidated Income Statement........................ 28
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 30
Business................................................................. 36
Certain Transactions; Relationship With Praxair.......................... 52
Principal and Selling Shareholders....................................... 55
Management............................................................... 57
Description of New Revolving Credit Facility............................. 68
Description of Share Capital............................................. 69
Share Certificates and Transfer.......................................... 74
Taxation................................................................. 77
Shares Eligible for Future Sale.......................................... 81
Underwriting............................................................. 83
Notice to Canadian Residents............................................. 86
Legal Matters............................................................ 87
Experts.................................................................. 87
Available Information.................................................... 87
Service of Process and Enforcement of
Civil Liabilities....................................................... 88
Index to Financial Statements............................................ F-1
|
UNTIL , (25 DAYS AFTER THE COMMENCEMENT OF THE COMMON SHARE OFFER- ING) ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PRO- SPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PRO- SPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT- MENTS OR SUBSCRIPTIONS.
[COMPANY LOGO]
CHICAGO BRIDGE & IRON COMPANY N.V.
10,500,000 Common Shares
(NLG 0.01 par value)
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
UBS SECURITIES
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.
SUBJECT TO COMPLETION, DATED MARCH 20, 1997
10,500,000 Shares
LOGO CHICAGO BRIDGE & IRON COMPANY N.V.
(A company incorporated in The Netherlands
with its registered seat in Amsterdam)
|
Common Shares
(NLG 0.01 par value)
All of the Common Shares, NLG 0.01 par value (the "Common Shares"), of Chicago Bridge & Iron Company N.V. (the "Issuer") offered hereby are being sold by Praxair, Inc. (the "Selling Shareholder"). The Issuer will not receive any of the proceeds from the sale of shares offered hereby. Of the 10,500,000 Common Shares being offered, 2,100,000 shares are initially being offered outside the United States and Canada (the "International Shares") by the Managers (the "International Offering") and 8,400,000 shares are initially being concurrently offered in the United States and Canada (the "U.S. Shares") by the U.S. Underwriters (the "U.S. Offering" and, together with the International Offering, the "Common Share Offering"). Prior to the Common Share Offering, the Issuer was a wholly owned subsidiary of Praxair, Inc. Upon completion of the Common Share Offering, the Issuer will no longer be a subsidiary of Praxair, Inc., and Praxair, Inc. will continue to own approximately 8% (and, if the Underwriters exercise their over- allotment option in full, none) of the then outstanding Common Shares. The offering price and underwriting discounts and commissions of the International Offering and the U.S. Offering are identical.
Prior to the offering, there has been no public market for the Common Shares. It is anticipated that the initial public offering price will be between $20 and $23 per share. For information relating to the factors considered in determining the initial offering price to the public, see "Subscription and Sale."
The Issuer has applied to list the Common Shares in bearer form on the Official Market of the AEX-Effectenbeurs nv (the "Amsterdam Stock Exchange") under the symbol "CBI". The Common Shares have been approved for listing on the New York Stock Exchange under the symbol "CBI," subject to notice of issuance. See "Share Certificates and Transfer."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON SHARES, SEE "RISK FACTORS" BEGINNING
ON PAGE 12.
|
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS SHAREHOLDER(1)
-------- ------------- --------------
Per Share(2).............................. $ $ $
Total(3).................................. $ $ $
|
(1) Before deduction of expenses payable by the Issuer and the Selling
Shareholder estimated at $2,000,000 and $ , respectively.
(2) The price per Common Share in Dutch guilders will be the Dutch guilder
equivalent of the U.S. dollar price per Common Share based on the noon
buying rate in New York City for cable transfers into Dutch guilders as
certified for customs purposes by the Federal Reserve Bank of New York on
the pricing date.
(3) The Selling Shareholder has granted the Managers and the U.S. Underwriters
an option, exercisable by Credit Suisse First Boston Corporation for 30
days from the date of this Prospectus, to purchase a maximum of 1,000,000
additional shares to cover over-allotment of shares. If such option is
exercised in full, the total Price to Public will be $ , Underwriting
Discounts and Commissions will be $ and Proceeds to Selling Shareholder
will be $ .
The International Shares are offered by the several Managers when, as and if delivered to and accepted by the Managers and subject to their right to reject orders in whole or in part. It is expected that the International Shares will be ready for delivery on or about , 1997, against payment in immediately available funds in U.S. dollars through the book-entry facilities of The Depository Trust Company and against payment therefor in immediately available funds in Dutch guilders through NECIGEF, Euroclear and Cedel.
CREDIT SUISSE FIRST BOSTON
GOLDMAN SACHS INTERNATIONAL
SMITH BARNEY INC.
UBS LIMITED
ABN AMRO ROTHSCHILD CAZENOVE & CO. CREDIT LYONNAIS SECURITIES
DEUTSCHE MORGAN GRENFELL HSBC INVESTMENT BANKING SOCIETE GENERALE
|
Prospectus dated , 1997.
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
[photos to come]
No dealer, salesperson or other person has been authorized to give any information or to make any representation not contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by the Company, the Selling Shareholder or any Manager. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy and of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. Neither the delivery of this Prospectus nor any sales made hereunder shall, under any circumstances, create any implication that the information herein is correct as of any time subsequent to the date hereof or that there has been no change in the affairs of the Company since such date.
CREDIT SUISSE FIRST BOSTON CORPORATION ON BEHALF OF THE U.S. UNDERWRITERS
AND THE MANAGERS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR
OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED HEREBY, INCLUDING OVER-
ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING TRANSACTIONS AND
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "SUBSCRIPTION AND
SALE."
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
TABLE OF CONTENTS
PAGE
----
Principal and Selling Shareholders.... 55
Management............................ 57
Description of New Revolving Credit
Facility............................. 68
Description of Share Capital.......... 69
Share Certificates and Transfer....... 74
Taxation.............................. 77
Shares Eligible for Future Sale....... 81
Subscription and Sale................. 83
Notice to Canadian Residents.......... 86
Legal Matters......................... 87
Experts............................... 87
Available Information................. 87
Service of Process and Enforcement of
Civil Liabilities.................... 88
Index to Financial Statements......... F-1
|
PAGE
----
Prospectus Summary..................... 3
Risk Factors........................... 12
The Company............................ 21
Dividend Policy........................ 22
Dilution............................... 23
Use of Proceeds........................ 23
Capitalization......................... 24
Selected Consolidated Financial and
Other Data............................ 25
Unaudited Pro Forma Consolidated Income
Statement............................. 28
Management's Discussion and Analysis of
FinancialCondition and Results of
Operations............................ 30
Business............................... 36
Certain Transactions; Relationship with
Praxair............................... 52
|
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. Unless the context otherwise requires, all references to the "Issuer" herein refer to Chicago Bridge & Iron Company N.V., a corporation organized under the laws of The Netherlands, all references to the "Company" or "CB&I" herein refer to the Issuer, together with its predecessors and subsidiaries, in each case after giving effect to the Reorganization (as defined below), all references to "Praxair" herein refer to Praxair, Inc. and its subsidiaries and all references to the "Selling Shareholder" herein refer to Praxair, Inc. In this Prospectus, references to "guilders" and "NLG" are to Dutch guilders, and references to "dollars," "U.S. $" and "$" are to United States dollars. Unless otherwise indicated, all data in this Prospectus assumes no exercise of the Underwriters' over-allotment option.
THE COMPANY
CB&I is a global engineering and construction company specializing in the engineering and design, materials procurement, fabrication, erection, repair and modification of steel tanks and other steel plate structures and associated systems such as petroleum terminals, refinery pressure vessels, low temperature and cryogenic storage facilities and elevated water storage tanks. Based on its knowledge of and experience in its industry, the Company believes it is the leading provider of field erected steel tanks and other steel plate structures, associated systems and related services in North America and one of the leading providers of these specialized products and services in the world. CB&I seeks to maintain its leading industry position by focusing on its technological expertise in design, metallurgy and welding, along with its ability to complete logistically and technically complex metal plate projects virtually anywhere in the world. CB&I has been continuously engaged in the engineering and construction industry since its founding in 1889. In 1996, the Company was involved in over 500 projects for over 250 customers in 34 countries.
In 1996, the Company generated revenues of $663.7 million, and its project backlog as of December 31, 1996 was $485.7 million. The Company's operating income improved to $31.3 million in 1996 from a loss of $30.5 million in 1995. CB&I primarily serves customers in the petroleum, petrochemical, chemical, electric and gas utility, pulp and paper, and metals and mining industries, both directly and through other companies which service these customers. Approximately 60% of the Company's revenues during 1996 were attributable to petroleum and petrochemical industry-related projects. The Company operates on a global basis and has the supporting infrastructure to compete in key geographic markets worldwide. In 1996, CB&I derived approximately one-half of its revenues from operations outside of the United States. Demand for the Company's products and services depends primarily on its clients' capital expenditures for construction. The Company seeks to benefit from recently higher levels of current and projected capital expenditures by its primary customer base in the petroleum and petrochemical industries, which it believes have resulted from increases in worldwide crude oil prices during 1996.
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
RECENT DEVELOPMENTS
In the first quarter of 1996, Praxair acquired CBI Industries, Inc.
("Industries"), then the parent company of CB&I, for the purpose of owning its
industrial gas operations. At that time, Praxair announced its intention to
divest those businesses of Industries which were not strategic to Praxair,
including the Company. Praxair undertook to strategically reposition the
Company and, as part of this process, a new management team was assembled for
the Company, headed by Gerald M. Glenn as President and Chief Executive
Officer. Mr. Glenn has over 30 years of combined experience with Fluor
Corporation, the world's largest publicly-owned engineering and construction
company, and Daniel International Corporation, and from 1986 to 1994 served as
Group President of Fluor Corporation's principal operating subsidiary, Fluor
Daniel, Inc. The new management team has focused its efforts on (i) redirecting
and accelerating a restructuring program designed to increase the Company's
base profitability; (ii) implementing a new compensation program linking
management incentives to improvements in shareholder value; and
(iii) developing a business strategy to enhance CB&I's future growth and
profitability.
RESTRUCTURING PROGRAM
The comprehensive restructuring program (the "Restructuring Program") currently being implemented by the Company's new management has achieved estimated cost savings of approximately $10 million in 1996, and is expected to result in estimated annual cost savings of approximately $21 million in 1997 and approximately $23 million in 1998, relative to the Company's 1995 cost base. The benefits of the Restructuring Program have been an integral component in the Company's recent improvement in operating income.
The Restructuring Program is based on initiatives begun in 1994, and was significantly refocused and accelerated in 1996 following the appointment of the new management team. The program is expected to be fully implemented by the end of 1997. The Restructuring Program initially focused on consolidating the Company's organizational structure from six separate, decentralized business units into a single global business operation. On-going enhancements in connection with such consolidation include centralization of procurement, equipment and personnel mobilization, and certain financial functions, as well as streamlining and consolidating administrative and engineering support. As part of the program, seven fabrication plants or warehouses have been closed and three administrative office sites have been downsized or relocated, including the headquarters of the Company's United States operations. The Company also has targeted a reduction of approximately 160 salaried positions, of which approximately 147 had been eliminated as of December 31, 1996.
COMPENSATION PROGRAM
In order to more closely align the interests of the Company's management and employees with those of its shareholders, CB&I is redesigning its compensation program to include long-term, equity-based incentives. In addition, Praxair and the Company have agreed to compensate approximately 40 to 60 officers and key management employees of the Company for their services in connection with the further development and implementation of the Restructuring Program and the Company's initial public offering. As a result, on or immediately before the consummation of the Common Share Offering, the Company will adopt the CB&I Management Defined Contribution Plan (the "Management Plan") and upon consummation of the Common Share Offering, contribute to the Management Plan approximately 1,017,552 Common Shares (assuming an initial public offering price of $21.50 per share) (the "Management Plan Shares"), representing approximately 8% of the total number of Common Shares outstanding upon consummation of the Common Share Offering. The Management Plan Shares will vest three years (and with respect to one participant, two years) after the date of the Common Share Offering.
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
SUBSCRIPTION AND SALE
The institutions named below (the "Managers") have, pursuant to a Subscription Agreement dated , 1997 (the "Subscription Agreement"), severally and not jointly, agreed to purchase from the Selling Shareholder the following respective numbers of International Shares as set forth opposite their names:
NUMBER OF
MANAGER INTERNATIONAL SHARES
------- --------------------
Credit Suisse First Boston (Europe) Limited.............
Goldman Sachs International.............................
Smith Barney Inc........................................
UBS Limited.............................................
ABN AMRO Rothschild.....................................
Cazenove & Co. .........................................
Credit Lyonnais Securities..............................
Deutsche Morgan Grenfell................................
HSBC Investment Banking.................................
Societe Generale........................................
---------
Total................................................. 2,100,000
=========
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The Subscription Agreement provides that the obligations of the Managers are such that, subject to certain conditions precedent, the Managers will be obligated to purchase all the International Shares (other than those shares covered by the over-allotment option described below) if any are purchased. The Subscription Agreement provides that, in the event of a default by a Manager, in certain circumstances the purchase commitments of non-defaulting Managers may be increased or the Subscription Agreement may be terminated.
The Issuer and the Selling Shareholder have entered into an Underwriting Agreement with the U.S. Underwriters of the U.S. Offering (the "U.S. Underwriters") providing for the concurrent offer and sale of the U.S. Shares in the United States and Canada. The closing of the U.S. Offering is a condition to the closing of the International Offering and vice versa.
The Selling Shareholder has granted to the Managers and the U.S. Underwriters an option, exercisable by Credit Suisse First Boston Corporation, the representative of the U.S. Underwriters, expiring at the close of business on the 30th day after the date of this Prospectus, to purchase up to 1,000,000 additional shares at the initial public offering price, less the underwriting discounts and commission, all as set forth on the cover page of this Prospectus. Such option may be exercised only to cover over-allotments, if any, in the sale of the Common Shares offered hereby. To the extent that this option to purchase is exercised, each Manager and each U.S. Underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of additional shares being sold to the Managers and the U.S. Underwriters as the number of International Shares set forth next to such Manager's name in the preceding table and as the number set forth next to such U.S. Underwriter's name in the corresponding table in the Prospectus relating to the U.S. Offering bears to the sum of the total number of Common Shares in such tables.
The Company and the Selling Shareholder have been advised by Credit Suisse First Boston (Europe) Limited, on behalf of the Managers, that the Managers propose to offer the International Shares outside the United States and Canada to the public initially at the offering price set forth on the cover page of this Prospectus and, through the Managers, to certain dealers at such price less a commission of $ per share and that the Managers and such dealers may reallow a commission of $ per share on sales to certain other dealers. After the initial public offering, the public offering price and commission and reallowance may be changed by the Managers.
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
The offering price and the aggregate underwriting discounts and commissions per share and per share commission and discount to dealers for the International Offering and the concurrent U.S. Offering will be identical except that, in accordance with customary practice with respect to initial public offerings on the Amsterdam Stock Exchange, institutions admitted to the AEX-Effectenbeurs N.V. who are not Managers may, in the International Offering, be allowed a concession not in excess of NLG per share. Pursuant to an Agreement between the U.S. Underwriters and Managers (the "Intersyndicate Agreement") relating to the Common Share Offerings, changes in the offering price, commission and reallowance to dealers will be made only upon the mutual agreement of Credit Suisse First Boston (Europe) Limited, on behalf of the Managers, and Credit Suisse First Boston Corporation, as representative of the U.S. Underwriters.
Pursuant to the Intersyndicate Agreement, each of the Managers has agreed that, as part of the distribution of the International Shares and subject to certain exceptions, it has not offered or sold, and will not offer or sell, directly or indirectly, any Common Shares or distribute any prospectus relating to the Common Shares to any person in the United States or Canada or to any other dealer who does not so agree. Each of the U.S. Underwriters has agreed that, as part of the distribution of the U.S. Shares and subject to certain exceptions, it has not offered or sold and may not offer or sell, directly or indirectly, any Common Shares or distribute any prospectus relating to the Common Shares to any person outside the United States and Canada or to any other dealer who does not so agree. The foregoing limitations do not apply to stabilization transactions or to transactions between the Managers and the U.S. Underwriters pursuant to the Intersyndicate Agreement. As used herein, "United States" means the United States of America (including the States and the District of Columbia), its territories, possessions and other areas subject to its jurisdiction, "Canada" means Canada, its provinces, territories, possessions and other areas subject to its jurisdiction, and an offer or sale shall be in the United States or Canada if it is made to (i) any individual resident in the United States or Canada or (ii) any corporation, partnership, pension, profit-sharing or other trust or other entity (including any such entity acting as an investment adviser with discretionary authority) whose office most directly involved with the purchase is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the Managers and the U.S. Underwriters of such number of Common Shares as may be mutually agreed upon. The price of any shares so sold will be the public offering price less such amount agreed upon by Credit Suisse First Boston (Europe) Limited, on behalf of the Managers, and Credit Suisse First Boston Corporation, as representative of the U.S. Underwriters, but not exceeding the selling concession applicable to such shares. To the extent there are sales between the Managers and the U.S. Underwriters pursuant to the Intersyndicate Agreement, the number of shares of Common Shares initially available for sale by the Managers or by the U.S. Underwriters may be more or less than the amount appearing on the cover page of this Prospectus. Neither the Managers nor the U.S. Underwriters are obligated to purchase from the other any unsold Common Shares.
Each of the Managers and the U.S. Underwriters severally represents and agrees that (i) it has not offered or sold, and prior to the date six months after the date of issue of the Common Shares will not offer or sell any Common Shares to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act of 1986 with respect to anything done by it in relation to the Common Shares in, form or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue and pass on in the United Kingdom any document received by it in connection with the issue of the Common Shares to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or passed on.
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
The Company, its officers and directors, the Selling Shareholder and certain other shareholders have agreed (subject to certain exceptions) that they will not offer, sell, contract to sell, announce an intention to sell, pledge or otherwise dispose of, directly or indirectly, or file or cause to be filed with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any Common Shares or securities or other rights convertible into or exchangeable or exercisable for Common Shares, without the prior written consent of Credit Suisse First Boston Corporation, for a period of 180 days after the date of this Prospectus.
The Company and the Selling Shareholder have agreed to indemnify the Managers and the U.S. Underwriters against certain liabilities, including civil liabilities under the Securities Act, or to contribute to payments that the Managers and the U.S. Underwriters may be required to make in respect thereof.
At the request of the Company, the Managers and the U.S. Underwriters have reserved up to 525,000 Common Shares for sale at the initial offering price to certain directors, officers and employees (current and former) of the Company and its subsidiaries. The number of Common Shares available to the general public will be reduced to the extent these persons purchase the reserved shares. Any reserved shares that are not so purchased by such persons at the closing of the Common Share Offerings will be offered by the Managers and the U.S. Underwriters to the general public on the same terms as the other shares offered by this Prospectus.
The Managers and the Representatives of the U.S. Underwriters have informed the Company and the Selling Shareholder that they do not expect discretionary sales by the Managers and the U.S. Underwriters to exceed 5% of the Common Shares offered hereby.
The Issuer has applied to list the Common Shares in bearer form on the Official Market of the Amsterdam Stock Exchange. The Common Shares have been approved for listing on the New York Stock Exchange, subject to notice of issuance.
Prior to the Common Share Offering, there has been no public market for the Common Shares. The initial public offering price for the Common Shares will be determined by negotiations among the Company, the Selling Shareholder and the Representatives. In determining such price, consideration will be given to various factors, including market conditions for initial public offerings, the history of and prospects for the Company's business, the Company's past and present operations, its past and present earnings and current financial position, an assessment of the Company's management, the market of securities of companies in businesses similar to those of the Company, the general condition of the securities markets and other relevant factors. There can be no assurance that the initial public offering price will correspond to the price at which the Common Shares will trade in the public market subsequent to the Common Share Offering or that an active trading market for the Common Shares will develop and continue after the Common Share Offering.
Credit Suisse First Boston Corporation on behalf of the U.S. Underwriters and the Managers, may engage in over-allotment, stabilizing transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934 (the "Exchange Act"). Over- allotment involves syndicate sales in excess of the offering size, which creates a syndicate short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Syndicate covering transactions involve purchases of the Common Shares in the open market after the distribution has been completed in order to cover syndicate short positions. Penalty bids permit the Representatives to reclaim a selling concession from a syndicate member when the Common Shares originally sold by such syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. Such stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the Common Shares to be higher than it would otherwise be in the absence of such transactions. These transactions may be effected on The New York Stock Exchange, the Amsterdam Stock Exchange or otherwise and, if commenced, may be discontinued at any time.
Certain of the Managers and the U.S. Underwriters have from time to time performed, and continue to perform, financial advisory, investment banking and commercial banking services for the Company or Praxair, for which customary compensation has been received.
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of Chicago Bridge & Iron Company N.V.:
We have audited the accompanying balance sheet of Chicago Bridge & Iron Company N.V. (a Netherlands corporation) as of December 31, 1996. This balance sheet is the responsibility of the Company's management. Our responsibility is to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Chicago Bridge & Iron Company N.V. as of December 31, 1996, in conformity with accounting principles generally accepted in the United States.
Arthur Andersen & Co.
Amsterdam, The Netherlands
February 7, 1997
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
[LOGO] CB&I
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC registration fee............................................. $ 80,152
NASD filing fee.................................................. 26,950
New York Stock Exchange listing fees............................. 120,000
Amsterdam Stock Exchange listing fees and expenses............... 125,000
Printing and engraving expenses.................................. 300,000
Legal fees and expenses.......................................... 975,000
Accounting fees and expenses..................................... 550,000
Transfer agents fees and expenses................................ 20,000
Blue Sky fees and expenses (including counsel fees).............. 12,500
Directors' and officers' IPO insurance premium................... 350,350
Miscellaneous.................................................... 390,048
----------
Total.......................................................... $2,950,000
==========
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ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Chicago Bridge & Iron Company N.V. (the "Issuer") is a Netherlands corporation.
The Articles of Association of the Issuer, as amended, provide for indemnification of directors and officers to the fullest extent permitted by the law of The Netherlands.
The form of Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement will contain certain provisions for indemnification of directors and officers of the Company and the Underwriters against civil liabilities under the Securities Act.
The Issuer intends to enter into indemnification agreements with certain of its directors providing for indemnification to the fullest extent permitted by the law of The Netherlands. These agreements provide for specific procedures to better assure the directors' rights to indemnification, including procedures for directors to submit claims, for determination of directors' entitlement to indemnification (including the allocation of the burden of proof and selection of a reviewing party), and for enforcement of directors' indemnification rights. The Company will also obtain officers' and directors' liability insurance in amounts that it believes are reasonable under the circumstances.
Article 25 of the Articles of Association of the registrant also provides
that, to the fullest extent permitted by the law of The Netherlands, directors
of the Issuer will not be personally liable for monetary damages for breach of
a director's fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its shareholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for any transaction from which
the director derived an improper personal benefit or (iv) for personal
liability which is imposed by the law of The Netherlands, as from time to time
amended.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since its inception on November 22, 1996, the Issuer has made the following sales of unregistered securities:
On November 22, 1996, upon its formation, the Issuer issued 10,000,000 Common Shares to Chi Bridge Holdings, Inc. in exchange for a capital contribution of NLG 100,000 (approximately $59,150, calculated on the basis of the exchange rate published in The Wall Street Journal on November 22, 1996).
In March 1997, the Issuer issued 1,500,000 Common Shares to Chi Bridge Holdings, Inc. in exchange for a capital contribution of shares of capital stock of certain subsidiaries of Chi Bridge Holdings, Inc. and certain other assets.
II-1
All of the securities described above were issued without registration under the Securities Act of 1933, as amended, in reliance upon the exemption provided by Section 4(2) of that Act. No underwriting commissions were paid in connection with such issuance.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following Exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K.
1. Form of Underwriting Agreement.
3. Amended Articles of Association of the Issuer (English translation).
4.1 Specimen Stock Certificate.
5. Form of Opinion of Loeff Claeys Verbeke as to the validity of the
Common Shares being offered, including consent.
8.1 Form of Opinion of Cahill Gordon & Reindel as to certain U.S. tax
matters relative to the Common Shares, including consent.
8.2 Form of Opinion of Loeff Claeys Verbeke as to certain Netherlands tax
matters relative to the Common Shares, including consent.
10.1 Form of Indemnification Agreement between the Issuer and its
supervisory and managing directors.
10.2 The Company's Employee Stock Purchase Plan.
10.3 The Company's Bonus Plan.
10.4 The Company's Incentive Plan.
10.5 The Company's Deferred Compensation Plan.
10.6 The Company's Management Plan.
10.7 The Company's Excess Benefit Plan.
10.8 Form of The Company's Supplemental Executive Death Benefits Plan.
10.9 Employment Agreements including Special Stock-Based, Long-Term
Compensation Related to the Common Share Offering between the Company
and certain executive officers.
10.10 Form of Termination Agreements between the Company and certain
executive officers.
10.11 Separation Agreement.
10.12 Form of Amended and Restated Tax Disaffiliation Agreement.
10.13 Employee Benefits Separation Agreement.
10.14 Registration Rights Agreement.
10.15 Note of the Company regarding a debt owed to Praxair, Inc.
10.16 Conforming Agreement.
10.17 New Revolving Credit Facility.
21. List of subsidiaries of the Issuer.+
23.1.1 Consent of U.S. Independent Public Accountants.
23.1.2 Consent of Netherlands Independent Public Accountants.
23.2 Consents of Loeff Claeys Verbeke+ (certain consents included as part
of Exhibits 5 and 8.2).
23.3 Consent of Cahill Gordon & Reindel (included as part of Exhibit 8.1).
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II-2
23.4 Consent of Director Nominee Gerald M. Glenn.+ 23.5 Consent of Director Nominee John A. Clerico.+ 23.6 Consent of Director Nominee Robert F.X. Fusaro.+ 23.7 Consent of Director Nominee J. Dennis Bonney.+ 23.8 Consent of Director Nominee Gary L. Neale.+ 23.9 Consent of Director Nominee Vincent L. Kontny.+ 23.10 Consent of Director Nominee J. Charles Jennett.+ 23.11 Consent of Director Nominee Marsha Williams.+ 23.12 Consent of Director Nominee L. Donald Simpson.+ 23.13 Consent of Director Nominee Jerry H. Ballengee. 24. Powers of Attorney.+ 27. Schedule of Summary Financial Information.+ |
(b) Financial Statement Schedules
Schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
1. To provide to the Underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser.
2. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Issuer pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, and is, therefore, unenforceable. If a claim for indemnification against such liabilities (other than payment by the Issuer of expenses incurred or paid by a director, officer or controlling person of the Issuer in the successful defense of any action, suit or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
3. That for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of Prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the Issuer pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective.
4. That for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
5. The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
II-3
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DANBURY, STATE OF CONNECTICUT, ON MARCH 20, 1997.
CHICAGO BRIDGE & IRON COMPANY N.V.
/s/ James S. Sawyer
By: _________________________________
JAMES S. SAWYER
MANAGING DIRECTOR
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PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
--------- ----- ----
* Managing Director March 20, 1997
- ------------------------------------------------
ROBERT F.X. FUSARO
/s/ James S. Sawyer Managing Director March 20, 1997
- ------------------------------------------------
JAMES S. SAWYER
/s/ James S. Sawyer
*By: _____________________________________
JAMES S. SAWYER
ATTORNEY-IN-FACT
Registrant's Agent for
Service in the United States
/s/ Robert H. Wolfe March 20, 1997
- ------------------------------------------------
ROBERT H. WOLFE
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II-4
EXHIBIT INDEX
1. Form of Underwriting Agreement.
3. Amended Articles of Association of the Issuer (English translation).
4.1 Specimen Stock Certificate.
5. Form of Opinion of Loeff Claeys Verbeke as to the validity of the
Common Shares being offered, including consent.
8.1 Form of Opinion of Cahill Gordon & Reindel as to certain U.S. tax
matters relative to the Common Shares, including consent.
8.2 Form of Opinion of Loeff Claeys Verbeke as to certain Netherlands tax
matters relative to the Common Shares, including consent.
10.1 Form of Indemnification Agreement between the Issuer and its
supervisory and managing directors.
10.2 The Company's Employee Stock Purchase Plan.
10.3 The Company's Bonus Plan.
10.4 The Company's Incentive Plan.
10.5 The Company's Deferred Compensation Plan.
10.6 The Company's Management Plan.
10.7 The Company's Excess Benefit Plan.
10.8 Form of The Company's Supplemental Executive Death Benefits Plan.
10.9 Employment Agreements including Special Stock-Based, Long-Term
Compensation Related to the Common Share Offering between the Company
and certain executive officers.
10.10 Form of Termination Agreements between the Company and certain
executive officers.
10.11 Separation Agreement.
10.12 Form of Amended and Restated Tax Disaffiliation Agreement.
10.13 Employee Benefits Separation Agreement.
10.14 Registration Rights Agreement.
10.15 Note of the Company regarding a debt owed to Praxair, Inc.
10.16 Conforming Agreement.
10.17 New Revolving Credit Facility.
21. List of subsidiaries of the Issuer.+
23.1.1 Consent of U.S. Independent Public Accountants.
23.1.2 Consent of Netherlands Independent Public Accountants.
23.2 Consents of Loeff Claeys Verbeke+ (certain consents included as part of
Exhibits 5 and 8.2).
23.3 Consent of Cahill Gordon & Reindel (included as part of Exhibit 8.1).
23.4 Consent of Director Nominee Gerald M. Glenn.+
23.5 Consent of Director Nominee John A. Clerico.+
23.6 Consent of Director Nominee Robert F.X. Fusaro.+
23.7 Consent of Director Nominee J. Dennis Bonney.+
23.8 Consent of Director Nominee Gary L. Neale.+
23.9 Consent of Director Nominee Vincent L. Kontny.+
23.10 Consent of Director Nominee J. Charles Jennett.+
23.11 Consent of Director Nominee Marsha Williams.+
23.12 Consent of Director Nominee L. Donald Simpson.+
23.13 Consent of Director Nominee Jerry H. Ballengee.
24. Powers of Attorney.+
27. Schedule of Summary Financial Information.+
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+ Previously filed.
EXHIBIT 1
Draft of 3/17/97
10,500,000 SHARES
CHICAGO BRIDGE & IRON COMPANY N.V.
COMMON SHARES
(NLG 0.01 PAR VALUE)
___________, 1997
Credit Suisse First Boston Corporation
Goldman, Sachs & Co.
Smith Barney Inc.
UBS Securities LLC
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629.
Dear Sirs:
It is understood that the Company and the Selling Shareholder are concurrently entering into a Subscription Agreement, dated the date hereof ("Subscription Agreement"), with Credit Suisse First Boston (Europe) Limited ("CSFBL"), Goldman Sachs International, Smith Barney Inc., UBS Limited, and the other managers named therein ("Managers") relating to the concurrent offering and sale of 2,100,000 shares of Securities ("International Firm Securities") outside the United States and Canada ("International Offering").
In addition, as set forth below the Selling Shareholder proposes to sell
(i) to the U.S. Underwriters, at the option of the U.S. Underwriters, an
aggregate of not more than 800,000 additional shares of Securities ("U.S.
Optional Securities") and (ii) to the Managers, at the option of the Managers,
an aggregate of not more than 200,000 additional shares of Securities
("International Optional Securities"). The U.S. Firm Securities and the U.S.
Optional Securities are hereinafter called the "U.S. Securities"; the
International Firm Securities and the International Optional Securities are
hereinafter called the "International Securities"; the U.S. Firm Securities and
the International Firm Securities are hereinafter called the "Firm Securities";
the U.S. Optional Securities and the International Optional Securities are
hereinafter called the "Optional Securities". The U.S. Securities and the
International Securities are collectively referred to as the "Offered
Securities". To provide for the coordination of their activities, the U.S.
Underwriters and the Managers have entered into an Agreement Between U.S.
Underwriters and Managers which permits them, among other things, to sell the
Offered Securities to each other for purposes of resale.
In connection with the offering of the Offered Securities, Chi Bridge Holdings, Inc. ("Holdings"), a Delaware corporation which was a wholly-owned subsidiary of the Selling Shareholder prior to being
merged with and into the Selling Shareholder, has effected, through its subsidiaries, a restructuring which is described in the Prospectuses and which is hereinafter referred to as the "Reorganization."
The Company and the Selling Shareholder hereby agree with the several U.S. Underwriters as follows:
2. Representations and Warranties of the Company and the Selling Shareholder. (a) The Company represents and warrants to, and agrees with, the several U.S. Underwriters that:
(i) A registration statement (No. 333-18065) relating to the Offered Securities, including a form of prospectus relating to the U.S. Securities and a form of prospectus relating to the International Securities being offered in the International Offering, has been filed with the Securities and Exchange Commission ("Commission") and either (A) has been declared effective under the Securities Act of 1933 ("Act") and is not proposed to be amended or (B) is proposed to be amended by amendment or post-effective amendment. If such registration statement (the "initial registration statement") has been declared effective, either (I) an additional registration statement (the "additional registration statement") relating to the Offered Securities may have been filed with the Commission pursuant to Rule 462(b) ("Rule 462(b)") under the Act and, if so filed, has become effective upon filing pursuant to such Rule and the Offered Securities all have been duly registered under the Act pursuant to the initial registration statement and, if applicable, the additional registration statement or (II) such an additional registration statement is proposed to be filed with the Commission pursuant to Rule 462(b) and will become effective upon filing pursuant to such Rule and upon such filing the Offered Securities will all have been duly registered under the Act pursuant to the initial registration statement and such additional registration statement. If the Company does not propose to amend the initial registration statement or if an additional registration statement has been filed and the Company does not propose to amend it, and if any post-effective amendment to either such registration statement has been filed with the Commission prior to the execution and delivery of this Agreement, the most recent amendment (if any) to each such registration statement has been declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c) ("Rule 462(c)") under the Act or, in the case of the additional registration statement, Rule 462(b). For purposes of this Agreement, "Effective Time" with respect to the initial registration statement or, if filed prior to the execution and delivery of this Agreement, the additional registration statement means (I) if the Company has advised the Representatives that it does not propose to amend such registration statement, the date and time as of which such registration statement, or the most recent post-effective amendment thereto (if any) filed prior to the execution and delivery of this Agreement, was declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c), or (II) if the Company has advised the Representatives that it proposes to file an amendment or post-effective amendment to such registration statement, the date and time as of which such registration statement, as amended by such amendment or post-effective amendment, as the case may be, is declared effective by the Commission. If an additional registration statement has not been filed prior to the execution and delivery of this Agreement but the Company has advised the Representatives that it proposes to file one, "Effective Time" with respect to such additional registration statement means the date and time as of which such registration statement is filed and becomes effective pursuant to Rule 462(b). "Effective Date" with respect to the initial registration statement or the additional registration statement (if any) means the date of the Effective Time thereof. The initial registration statement, as amended at its Effective Time, including all information contained in the additional registration statement (if any) and deemed to be a part of the initial registration statement as of the Effective Time of the additional registration statement pursuant to the General Instructions of the Form on which it is filed and including all information (if any) deemed to be a part of the initial registration statement as of its Effective Time pursuant to Rule 430A(b) ("Rule 430A(b)") under the Act, is hereinafter referred to as the "Initial Registration Statement". The additional registration statement, as amended at its Effective Time, including the contents of the initial registration statement incorporated by reference therein and including all information (if any) deemed to be a part of the additional registration statement as of its Effective Time pursuant to Rule 430A(b), is hereinafter referred to as the "Additional Registration Statement". The Initial Registration Statement and the Additional Registration Statement are hereinafter referred to
collectively as the "Registration Statements" and individually as a "Registration Statement". The form of prospectus relating to the U.S. Securities and the form of prospectus relating to the International Securities, each as first filed with the Commission pursuant to and in accordance with Rule 424(b) ("Rule 424(b)") under the Act or (if no such filing is required) as included in the Registration Statement, are hereinafter referred to as the "U.S. Prospectus" and the "International Prospectus", respectively, and collectively as the "Prospectuses". No document has been or will be prepared or distributed in reliance on Rule 434 under the Act.
(ii) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement: (A) on the Effective Date of the Initial Registration Statement, the Initial Registration Statement complied in all material respects with the requirements of the Act and the rules and regulations of the Commission thereunder ("Rules and Regulations") and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (B) on the Effective Date of the Additional Registration Statement (if any), each Registration Statement complied, or will comply, in all material respects with the requirements of the Act and the Rules and Regulations and did not include, or will not include, any untrue statement of a material fact and did not omit, or will not omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (C) on the date of this Agreement, the Initial Registration Statement and, if the Effective Time of the Additional Registration Statement is prior to the execution and delivery of this Agreement, the Additional Registration Statement each conforms, and at the time of filing of each of the Prospectuses pursuant to Rule 424(b) or (if no such filing is required) at the Effective Date of the Additional Registration Statement in which the Prospectuses are included, and on each Closing Date (as hereinafter defined), each Registration Statement and each of the Prospectuses will conform, in all material respects to the requirements of the Act and the Rules and Regulations, and none of such documents includes, or will include, any untrue statement of a material fact or omits, or will omit, to state any material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectuses, in the light of the circumstances under which they were made) not misleading. If the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement: (A) on the Effective Date of the Initial Registration Statement, the Initial Registration Statement and each of the Prospectuses will conform in all material respects to the requirements of the Act and the Rules and Regulations, none of such documents will include any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectuses, in the light of the circumstances under which they were made) not misleading, and no Additional Registration Statement has been or will be filed and (B) on each Closing Date, the Initial Registration Statement and each of the Prospectuses will conform in all material respects to the requirements of the Act and the Rules and Regulations, none of such documents will include any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectuses, in the light of the circumstances under which they were made,) not misleading, and no Additional Registration Statement has been or will be filed. The two preceding sentences do not apply to statements in or omissions from a Registration Statement or the U.S. Prospectus based upon written information furnished to the Company by any U.S. Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 7(c) hereof.
(iii) The Company has been duly incorporated and is validly existing as a public company with limited liability (naamloze vennootschap) under the laws of The Netherlands, with corporate power and authority to own its properties and conduct its business as described in the Prospectuses; and the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries (as hereinafter defined) taken as a whole.
(v) The Offered Securities and all other outstanding shares of capital stock of the Company have been duly authorized; all outstanding shares of capital stock of the Company are, and, when the Offered Securities have been delivered and paid for in accordance with this Agreement and the Subscription Agreement on each Closing Date (as defined below), such Offered Securities will have been, validly issued, fully paid and nonassessable and will conform in all material respects to the description thereof contained in the Prospectuses; and, except as described in the Prospectuses, the stockholders of the Company have no preemptive rights with respect to the Offered Securities which have not been waived.
(vi) Except as described in the Prospectuses, there are no contracts, agreements or understandings between the Company and any third party that would give rise to a valid claim against the Company or any U.S. Underwriter or Manager for a brokerage commission, finder's fee or other like payment in connection with the transactions contemplated by this Agreement or the Subscription Agreement.
(vii) Except as described in the Prospectuses, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to a Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act; and there are no legal or governmental proceedings, statutes, regulations, contracts or other documents that are required to be described in the Registration Statements or Prospectuses or required to be filed as exhibits to the Registration Statement that are not described or filed as required.
(viii) The Offered Securities have been approved for listing on the Official Market of the AEX-Effectenbeurs nv (the "Amsterdam Stock Exchange"), subject to notice of issuance, and the Offered Securities in the form of New York Shares (as defined in the Prospectuses) have been approved for listing on the New York Stock Exchange (the "NYSE") subject to notice of issuance.
(ix) No consent, approval or authorization, and no order, registration or qualification of, or filing with, any third party (whether acting in an individual, fiduciary or other capacity) or any governmental or regulatory agency or body or any court is required for the consummation of the transactions to be effected by the Company, the Selling Shareholder and their respective subsidiaries contemplated by this Agreement or the Subscription Agreement, except such as have been obtained and made under the Act and such as may be required under state or foreign securities laws in connection with the offer and sale of the Offered Securities. The Reorganization has been completed, and no consent, approval or authorization, and no order, registration or
qualification of, or filing with, any third party (whether acting in an individual, fiduciary or other capacity) or any governmental or regulatory agency or body or any court which has not been obtained is required in connection therewith.
(x) Except as described in the Prospectuses, under current laws and regulations of The Netherlands and any political subdivision thereof, all dividends and other distributions declared and payable on the Offered Securities may be paid by the Company to the holder thereof in United States dollars (including, without limitation, payments on any Offered Securities in the form of New York Shares), and all such payments made to holders thereof who are non-residents of The Netherlands will not be subject to income, withholding or other taxes under laws and regulations of The Netherlands and any political subdivision or taxing authority thereof or therein and will otherwise be free and clear of any other tax, duty, withholding or deduction in The Netherlands or any political subdivision or taxing authority thereof or therein and without the necessity of obtaining any governmental authorization in The Netherlands or any political subdivision or taxing authority thereof or therein.
(xi) No stamp or other issuance or transfer taxes or duties and no capital gains, income, withholding or other taxes are payable by or on behalf of the U.S. Underwriters or Managers to The Netherlands or any political subdivision or taxing authority thereof or therein in connection with (A) the sale and delivery of the Offered Securities to or for the respective accounts of the U.S. Underwriters and Managers or (B) the sale and delivery outside The Netherlands by the U.S. Underwriters and Managers of the Offered Securities to the initial purchasers thereof.
(xii) The execution, delivery and performance of this Agreement and the Subscription Agreement, and the consummation of the transactions herein and therein contemplated and of the Reorganization, will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under (A) any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any Subsidiary or any of their properties or operations, or any agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound or to which any of the properties or operations of the Company or any Subsidiary is subject, or (B) the articles of association or the charter or by-laws of the Company or any Subsidiary, as the case may be, except, in the case of clause (A), for such conflicts, breaches, violations or defaults which could not reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole, or a material adverse effect on the consummation of the transactions contemplated by this Agreement or the Subscription Agreement; and the Company has full corporate power and authority to consummate the Reorganization and perform its obligations as contemplated by this Agreement and the Subscription Agreement.
(xiii) This Agreement and the Subscription Agreement have been duly authorized, executed and delivered by the Company.
(xiv) Except as described in the Prospectuses, the Company and its Significant Subsidiaries have good and marketable title to all material real properties and all other material properties and material assets described in the Prospectuses as being owned by them, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by them; and except as described in the Prospectuses, the Company and its Significant Subsidiaries hold any material leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or to be made thereof by them and neither the Company nor any Significant Subsidiary has been notified of any material claim that has been asserted by anyone adverse to the rights of the Company or any Significant Subsidiary under any of such leases.
(xv) The Company and its Subsidiaries possess adequate certificates, authorizations, licenses or permits issued by appropriate governmental agencies or bodies necessary to conduct the
business now operated by them and have not received any written notice of threatened or actual proceedings (and are not aware of any facts that would be expected to result in such proceeding) relating to the revocation or modification of any such certificate, authorization, license or permit that, if determined adversely to the Company or any of its Subsidiaries, could reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole. The Company and its Subsidiaries are in compliance with their respective obligations under such certificates, authorizations, licenses or permits and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination of such certificates, authorizations, licenses or permits or violation of such laws or regulations, except for such non-compliance and events as could not reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole.
(xvi) No labor dispute with the employees of the Company or any Subsidiary exists or, to the knowledge of the Company, is imminent that could reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries, taken as a whole.
(xvii) The Company and its Subsidiaries own or have obtained valid and enforceable licenses for all material trademarks, trademark registrations, service marks, service mark registrations, trade names, copyrights, copyright registrations, computer software, trade secrets and proprietary or other intellectual property owned, sold or used by or licensed to or by the Company or any of its Subsidiaries or that are necessary for the conduct of their businesses (collectively, the "Intellectual Property"), and the Company and its Subsidiaries are not aware of any claim or challenge by any third party to the rights of the Company or its Subsidiaries with respect to any Intellectual Property or to the validity or scope of the Intellectual Property and neither the Company nor any Subsidiary has any claim against any third party with respect to infringement of any Intellectual Property, which claims or challenges, if adversely determined, could reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole.
(xviii) Except as described in the Prospectuses and except as could not reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries, taken as a whole, the properties, assets and operations of each of the Company and its Subsidiaries are in compliance with all applicable federal, state, local and foreign laws, rules and regulations, orders, decrees, judgments, permits and licenses relating to worker health and safety, and to the protection and clean-up of the natural environment and to the protection or preservation of natural resources, including, without limitation, those relating to the processing, manufacturing, generation, handling, disposal, transportation or release of hazardous materials (collectively, "Environmental Laws"). With respect to such properties, assets and operations, there are no events, conditions, circumstances, activities, practices, incidents, actions or plans of the Company or any of its Subsidiaries of which the Company is aware that may interfere with or prevent compliance or continued compliance with applicable Environmental Laws in a manner that could reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries, taken as a whole. Except as described in the Prospectuses and except as could not reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries, taken as a whole, (A) to the Company's knowledge, none of the Company or any of its Subsidiaries is the subject of any federal, state, local or foreign investigation pursuant to Environmental Laws, (B) none of the Company or any of its Subsidiaries has received any written notice or claim pursuant to Environmental Laws and (C) there are no pending, or, to the knowledge of the Company, threatened actions, suits or proceedings against the Company, any of its Subsidiaries or its properties, assets or operations, in connection with any such Environmental
Laws. The term "hazardous materials" shall mean those substances that are regulated by or pursuant to any applicable Environmental Laws.
(xix) Each "employee benefit plan" within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), in which employees of the Company or any Subsidiary participate or as to which the Company or any Subsidiary has any liability (the "ERISA Plans") is in compliance with the applicable provisions of ERISA and the Internal Revenue Code of 1986, as amended (the "Code"). Neither the Company nor any Subsidiary has any liability with respect to the ERISA Plans, nor does the Company expect that any such liability will be incurred, that could reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole. Except as described in the Prospectuses, the value of the aggregate vested and nonvested benefit liabilities under each of the ERISA Plans that is subject to Section 412 of the Code, determined as of the end of such ERISA Plan's most recent ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such ERISA Plan allocable to such benefit liabilities. Neither the Company nor any Subsidiary has any liability, whether or not contingent, with respect to any ERISA Plan that provides post-retirement welfare benefits that could reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole. The descriptions of the Company's stock option, incentive compensation and other employee benefits plans or arrangements, and the options or other rights granted and exercised thereunder, set forth in the Prospectuses are accurate in all material respects.
(xx) (A) Neither the Company nor any of its Subsidiaries is in violation of its articles of incorporation or of its charter or by-laws, as the case may be, (B) neither the Company nor any of its Subsidiaries is in violation of any applicable law, ordinance, administrative or governmental rule or regulation, or any order, decree or judgment of any court or governmental agency or body having jurisdiction over the Company or any of its Subsidiaries and (C) no event of default or event that, but for the giving of notice or the lapse of time or both, would constitute an event of default exists, and the sale of the Offered Securities will exist, under any indenture, mortgage, loan agreement, note, lease, permit, license or other agreement or instrument to which the Company or any of its Subsidiaries is a party or to which any of the properties, assets or operations of the Company or any such Subsidiary is subject, except, in the case of clauses (B) and (C), for such violations and defaults that could not reasonably be expected, individually or in the aggregate, to have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries, taken as a whole.
(xxi) The Company and its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are customary in the businesses in which they are engaged; all material policies of insurance and material performance bonds insuring the Company or any Subsidiary or their businesses, assets, employees, officers and directors are in full force and effect; the Company and its Subsidiaries are in compliance with such policies and instruments in all material respects; and except as described in the Prospectuses or as could not reasonably be expected, individually or in the aggregate, to have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries, taken as a whole, there are no claims by the Company or a Subsidiary under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause.
(xxii) Except as described in the Prospectuses, there are no pending actions, suits or proceedings against or, to the knowledge of the Company, affecting the Company, any of its Subsidiaries or any of their respective properties, assets or operations that, if determined adversely to the Company or any of its Subsidiaries, could reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries, taken as a whole, or could materially
and adversely affect the ability of the Company to perform its obligations under this Agreement or the Subscription Agreement; and no such actions, suits or proceedings are, to the knowledge of the Company, threatened or contemplated.
(xxiii) The financial statements, together with the related schedules and notes, included in each Registration Statement and the Prospectuses present fairly, in all material respects, the financial position of the Company and its consolidated Subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis; the pro forma financial information included in the Prospectuses has been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial information, the assumptions used in preparing such pro forma financial information provide a reasonable basis for presenting the effects directly attributable to the transactions or events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma columns therein reflect the proper application of those adjustments to the corresponding historical financial statement amounts. The other financial and statistical information set forth in the Prospectuses present fairly, in all material respects, the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement.
(xxiv) Since the dates as of which information is given in the Registration Statements and the Prospectuses, and except as has occurred as described in the Prospectuses, (i) the Company and its Subsidiaries, taken as a whole, have not incurred any material liability or obligation (indirect, direct or contingent) or entered into any material verbal or written agreement or other transaction that is not in the ordinary course of business or that could result in a material reduction in the future earnings of the Company and its Subsidiaries taken as a whole; (ii) the Company and its Subsidiaries, taken as a whole, have not sustained any material loss or interference with their business or properties from fire, flood, windstorm, accident or other calamity (whether or not covered by insurance); (iii) there has been no material change, except as contemplated by the Prospectuses, in the indebtedness of the Company and except as contemplated by the Prospectuses, no change in the capital stock of the Company and except as contemplated by the Prospectuses, no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock; and (iv) there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole.
(xxv) The Company is not and, after giving effect to the offering and sale of the Offered Securities will not be, an "investment company" or any entity "controlled" by an "investment company" as defined in the Investment Company Act of 1940.
(xxvi) The Company has not taken and will not take, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in stabilization or manipulation of the price of the Offered Securities and the Company has not distributed and will not distribute any offering material in connection with the offering and sale of the Offered Securities other than any preliminary prospectus filed with the Commission or the Prospectuses or other materials, if any, permitted by the Act or the Rules and Regulations.
(xxvii) The Company has delivered as requested to the U.S. Representatives and the Managers true and correct copies of all documents executed in connection with the Reorganization and there have been no amendments, alterations, modifications or waivers of any of the provisions thereof.
(xxviii) Each of the Company and the Subsidiaries has timely filed (or joined in the filing of) all material federal, state, local and foreign tax reports and returns that it was required to file (or join in the filing of) and such reports and returns are complete and correct in all material respects. All material taxes shown to be due on such reports and returns or otherwise relating to periods ending on or before the Closing Date, owed by the Company or any of its Subsidiaries
(whether or not shown on any report or return) or to which the Company or any of the Subsidiaries may be liable under the Treasury regulations section 1.1502-6 (or analogous state or foreign law provisions) on account of having been a member of an "affiliated group" as defined in section 1504 of the Code (or other group filing on a combined basis) at any time on or prior to the Closing Date, if required to have been paid, have been paid, except such tax assessments, if any, as are being contested in good faith and as to which reserves have been provided which the Company reasonably believes are adequate. To the Company's knowledge after due inquiry, the charges, accruals and reserves on the books of the Company and the Subsidiaries in respect of any tax liability for any year not finally determined are adequate to meet any assessments or reassessments. No tax deficiency has been asserted or threatened against the Company or any of the Subsidiaries that could reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or otherwise), business, properties or results of operations of the Company and the Subsidiaries taken as a whole.
(xxix) The Company is neither a foreign personal holding company ("FPHC") within the meaning of section 552 of the Code nor a passive foreign investment company ("PFIC") within the meaning of section 1296 of the Code, is not likely to become an FPHC, a PFIC or a controlled foreign corporation ("CFC") (within the meaning of section 957 of the Code), and the Company is not aware of any contemplated action by any shareholder or shareholders of the Company that would be likely to cause the Company to become an FPHC, PFIC or CFC.
(xxx) Arthur Andersen LLP are independent public accountants with respect to the Company as required by the Securities Act.
(xxxi) The Company has obtained the written agreement of each director and each officer of the Company, in form reasonably satisfactory to the U.S. Underwriters, that such person will not, for a period of 180 days after the date of the initial public offering of the Offered Securities, offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or request or demand the filing with the Commission of a registration statement under the Act relating to, any Securities or securities convertible into or exchangeable or exercisable for any Securities, or publicly disclose the intention to make any such offer, sale, pledge, disposition or filing, without the prior written consent of CSFBC, other than the exercise of employee stock options outstanding on the date hereof.
(b) The Selling Shareholder represents and warrants to, and agrees with, the several U.S. Underwriters that:
(i) The Selling Shareholder has and on each Closing Date hereinafter mentioned will have valid and unencumbered title to the Offered Securities to be delivered by the Selling Shareholder hereunder and under the Subscription Agreement on such Closing Date and full right, power and authority to enter into this Agreement and the Subscription Agreement and to sell, assign, transfer and deliver the Offered Securities to be delivered by such Selling Shareholder on such Closing Date hereunder and thereunder; and upon the delivery of and payment for the Offered Securities on each Closing Date hereunder and thereunder the U.S. Underwriters and Managers will acquire valid and unencumbered title to the Offered Securities to be delivered by the Selling Shareholder on such Closing Date, assuming each of the U.S. Underwriters and Managers has purchased the Offered Securities purchased by it in good faith and without notice of any adverse claim.
(ii) If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement: (A) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement did not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, (B) on the
Effective Date of the Additional Registration Statement (if any), each
Registration Statement did not include, or will not include, any untrue
statement of a material fact and did not omit, or will not omit, to state
any material fact required to be stated therein or necessary to make the
statement therein not misleading and (C) on the date of this Agreement,
and at the time of filing of the Prospectuses pursuant to Rule 424(b) or
(if no such filing is required)
at the Effective Date of the Additional Registration Statement in which the Prospectuses are included, and on each Closing Date, none of any Registration Statement or the Prospectuses includes, or will include, any untrue statement of a material fact or omits, or will omit, to state any material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectuses, in the light of the circumstances under which they were made) not misleading. If the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement: on the Effective Date of the Initial Registration Statement and on each Closing Date, none of the Initial Registration or the Prospectuses will include any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectuses, in the light of the circumstances under which they were made) not misleading. The two preceding sentences shall apply solely to statements in or omissions from a Registration Statement or either of the Prospectuses based upon information relating to the Selling Shareholder or contained in a representation or warranty given by the Selling Shareholder in this Agreement.
(iii) Except as described in the Prospectuses, there are no contracts, agreements or understandings between the Selling Shareholder and any third party that would give rise to a valid claim against the Selling Shareholder or any U.S. Underwriter or Manager for a brokerage commission, finder's fee or other like payment in connection with the transactions contemplated by this Agreement or the Subscription Agreement.
(iv) This Agreement and the Subscription Agreement have been duly authorized, executed and delivered by the Selling Shareholder.
(v) The execution, delivery and performance of this Agreement and the Subscription Agreement by the Selling Shareholder and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under (A) any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, have jurisdiction over the Selling Shareholder or any of its properties or operations, or any agreement or instrument to which the Selling Shareholder is a party or by which the Selling Shareholder is bound or to which any of the properties or operations of the Selling Shareholder is subject, or (B) the charter or by-laws of the Selling Shareholder, except, in the case of clause (A), for such conflicts, breaches, violations or defaults which could not reasonably be expected to, individually or in the aggregate, have a material adverse effect on the consummation of the transactions contemplated by this Agreement or the Subscription Agreement; and the Selling Shareholder has full power and authority to sell or cause the sale of the Offered Securities as contemplated by this Agreement and the Subscription Agreement.
(vi) No consent, approval or authorization, and no order, registration or qualification of, or filing with, or with any third party (whether acting in an individual, fiduciary or other capacity) or any court or governmental or regulatory agency or body, is required for the performance by the Selling Shareholder of its obligations under this Agreement or the Subscription Agreement, except such as have been obtained under the Act and such as may be required under state or foreign securities laws in connection with the offer and sale of the Offered Securities.
(vii) The Selling Shareholder has not taken and will not take, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in stabilization or manipulation of the price of the Offered Securities and the Selling Shareholder has not distributed and will not distribute any offering material in connection with the offering and sale of the Offered Securities other than any preliminary prospectus filed with the Commission or the Prospectuses or other materials, if any, permitted by the Act or the Rules and Regulations.
(viii) There are no pending (or, to the Selling Shareholder's knowledge, threatened or contemplated) actions, suits or proceedings or investigations against or affecting the Selling Shareholder or any of its properties, assets or operations that could reasonably be expected to,
individually or in the aggregate, have a material adverse effect on the ability of the Selling Shareholder to perform its obligations under this Agreement.
(ix) The Selling Shareholder is not a "foreign person" within the meaning of section 1445 of the Code, and Selling Shareholder shall furnish to you on or prior to the First Closing Date (as defined below) a certification of the Selling Shareholder's non-foreign status, as set forth in Treasury regulations section 1.1445-2(b).
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Selling Shareholder agrees to sell to the U.S. Underwriters, and the U.S. Underwriters agree, severally and not jointly, to purchase from the Selling Shareholder, at a purchase price of U.S.$______ per share, the respective numbers of shares of U.S. Firm Securities set forth opposite the names of the U.S. Underwriters in Schedule A hereto.
The Selling Shareholder will deliver the U.S. Firm Securities to the Representatives for the accounts of the U.S. Underwriters, against payment of the purchase price in Federal (same day) funds by wire transfer to an account at a bank specified by the Selling Shareholder to, and reasonably acceptable to, CSFBC, drawn to the order of the Selling Shareholder, at the office of Dewey Ballantine, 1301 Avenue of the Americas, New York, New York 10019-6092, at 10:00 A.M., New York time, on _____________, 1997, or at such other time not later than seven full business days thereafter as CSFBC and the Selling Shareholder agree (such time being herein referred to as the "First Closing Date"). For purposes of Rule 15c6-1 under the Securities Exchange Act of 1934, the First Closing Date (if later than the otherwise applicable settlement date) shall be the settlement date for payment of funds and delivery of securities for all the Offered Securities sold pursuant to the U.S. Offering and the International Offering. The certificates for the U.S. Firm Securities so to be delivered will be in definitive form, in such denominations and registered in such names as CSFBC requests upon reasonable notice, and will be made available for checking and packaging at the office of Credit Suisse First Boston Corporation, New York, New York, at least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company and the Selling Shareholder from time to time not more than 30 days subsequent to the date of the Prospectuses, the U.S. Underwriters may purchase all or less than all of the U.S. Optional Securities at the purchase price per Security to be paid for the U.S. Firm Securities. The U.S. Optional Securities to be purchased by the U.S. Underwriters on any Optional Closing Date shall be in the same proportion to all the Optional Securities to be purchased by the U.S. Underwriters and the Managers on such Optional Closing Date as the U.S. Firm Securities bear to all the Firm Securities. The Selling Shareholder agrees to sell to the U.S. Underwriters such U.S. Optional Securities and the U.S. Underwriters agree, severally and not jointly, to purchase such U.S. Optional Securities. Such U.S. Optional Securities shall be purchased for the account of each U.S. Underwriter in the same proportion as the number of shares of U.S. Firm Securities set forth opposite such U.S. Underwriter's name bears to the total number of shares of U.S. Firm Securities (subject to adjustment by CSFBC to eliminate fractions) and may be purchased by the U.S. Underwriters only for the purpose of covering over-allotments made in connection with the sale of the U.S. Firm Securities. No Optional Securities shall be sold or delivered unless the U.S. Firm Securities and the International Firm Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional Securities or any portion thereof may be exercised from time to time and to the extent not previously exercised may be surrendered and terminated at any time upon notice by CSFBC on behalf of U.S. Underwriters and the Managers to the Selling Shareholder. It is understood that CSFBC is authorized to make payment for and accept delivery of such Optional Securities on behalf of the U.S. Underwriters and Managers pursuant to the terms of CSFBC's instructions to the Selling Shareholder.
Each time for the delivery of and payment for the U.S. Optional Securities, being herein referred to as an "Optional Closing Date", which may be the First Closing Date (the First Closing Date and each Optional Closing Date, if any, being sometimes referred to as a "Closing Date"), shall be agreed by CSFBC and the Selling Shareholder but shall be not later than five full business days after written notice of election to purchase Optional Securities is given. The Selling Shareholder will deliver the U.S. Optional Securities being purchased on each Optional Closing Date to the Representatives for the accounts of the several U.S.
Underwriters, against payment of the purchase price in Federal (same day) funds by wire transfer to an account specified by the Selling Shareholder reasonably acceptable to CSFBC, at the above office of Dewey Ballantine. The certificates for the U.S. Optional Securities will be in definitive form, in such denominations and registered in such names as CSFBC requests upon reasonable notice prior to such Optional Closing Date and will be made available for checking and packaging at the above office of CSFBC, at a reasonable time in advance of such Optional Closing Date.
4. Offering by U.S. Underwriters. It is understood that the several U.S. Underwriters propose to offer the U.S. Securities for sale to the public as set forth in the U.S. Prospectus.
It is further understood that, at the request of the Company, up to an aggregate of 525,000 Firm Securities will be reserved for offering and sale, at the initial public offering price, to certain officers, directors and employees (current and former) of the Company who have heretofore delivered to CSFBC, in a timely manner and in form satisfactory to CSFBC and its counsel, written indications of interest to purchase the Offered Securities. Under no circumstances shall you or any U.S. Underwriter or Manager be liable to the Company or any of such persons for any action taken or omitted in good faith in connection with such offering and sale to such persons. Any Offered Securities not purchased by such persons at the First Closing Date will be offered to the public by the U.S. Underwriters and the Managers on the same terms as the other Offered Securities offered by the Prospectuses.
5. Certain Agreements of the Company and the Selling Shareholder. (A) The Company agrees with the several U.S. Underwriters that:
(a) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, the Company will file each of the Prospectuses with the Commission pursuant to and in accordance with subparagraph (1) (or, if applicable and if consented to by CSFBC, subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the second business day following the execution and delivery of this Agreement or (B) the fifteenth business day after the Effective Date of the Initial Registration Statement.
The Company will advise CSFBC promptly of any such filing pursuant to Rule 424(b). If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement and an additional registration statement is necessary to register a portion of the Offered Securities under the Act but the Effective Time thereof has not occurred as of such execution and delivery, the Company will file the additional registration statement or, if filed, will file a post-effective amendment thereto with the Commission pursuant to and in accordance with Rule 462(b) on or prior to 10:00 P.M., New York time, on the date of this Agreement or, if earlier, on or prior to the time either Prospectus is printed and distributed to any U.S. Underwriter or Manager, or will make such filing at such later date as shall have been consented to by CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to amend or supplement the initial or any additional registration statement as filed or either of the related prospectuses or the Initial Registration Statement, the Additional Registration Statement (if any) or either of the Prospectuses and will not effect such amendment or supplementation without CSFBC's prior consent (which consent shall not be unreasonably withheld); and the Company will also advise CSFBC promptly of the effectiveness of each Registration Statement (if its Effective Time is subsequent to the execution and delivery of this Agreement) and of any amendment or supplementation of a Registration Statement or either of the Prospectuses and of the institution by the Commission of any stop order proceedings in respect of a Registration Statement and will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered Securities is required to be delivered under the Act in connection with sales by any U.S. Underwriter, Manager or dealer, any event occurs as a result of which either or both of the Prospectuses as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary at any time to amend either or both of the Prospectuses to comply with the Act, the Company will promptly notify CSFBC of such event and will promptly prepare and file with the Commission, at its own expense, an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance. Neither CSFBC's consent to, nor the U.S. Underwriters' delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6 hereof.
(d) As soon as practicable, but not later than the Availability Date (as defined below), the Company will make generally available to its securityholders an earnings statement covering a period of at least 12 months beginning after the Effective Date of the Initial Registration Statement (or, if later, the Effective Date of the Additional Registration Statement) which will satisfy the provisions of Section 11(a) of the Act. For the purpose of the preceding sentence, "Availability Date" means the 45th day after the end of the fourth fiscal quarter following the fiscal quarter that includes such Effective Date, except that, if such fourth fiscal quarter is the last quarter of the Company's fiscal year, "Availability Date" means the 90th day after the end of such fourth fiscal quarter.
(e) The Company will furnish to the Representatives copies of the Registration Statement (five of which will be signed and will include all exhibits), each preliminary prospectus relating to the U.S. Securities, and, so long as a prospectus relating to the Offered Securities is required to be delivered under the Act in connection with sales by any U.S. Underwriter or dealer, the U.S. Prospectus and all amendments and supplements to such documents, in each case in such quantities as CSFBC reasonably requests. The U.S. Prospectus shall be so furnished on or prior to 3:00 P.M., New York time, on the business day following the later of the execution and delivery of this Agreement or the Effective Time of the Initial Registration Statement. All other such documents shall be so furnished as soon as available. The Company will pay the expenses of printing and distributing to the U.S. Underwriters all such documents.
(g) During the period of three years hereafter, the Company will furnish to the Representatives and, upon request, to each of the other U.S. Underwriters, as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to the Representatives (i) as soon as available, a copy of each report and any definitive proxy statement of the Company filed with the Commission under the Securities Exchange Act of 1934 or mailed to stockholders, and (ii) from time to time, such other public information concerning the Company as CSFBC may reasonably request.
(h) For a period of 180 days after the date of the initial public offering of the Offered Securities, the Company will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Commission a registration statement under the Act relating to, any Securities or securities convertible into or exchangeable or exercisable for any Securities, or publicly disclose the intention to make any such offer, sale, pledge, disposition or filing, without the prior written consent of CSFBC, except: (i) the contribution by the Company to the Management Plan (as defined in the Prospectuses) of ________ shares of Securities immediately prior to the consummation of the U.S. Offering, as described in the Prospectuses and (ii) grants of employee stock options pursuant to the terms of a plan in effect on the date hereof, issuances of Securities pursuant to the exercise of such options or the exercise of any other employee stock options outstanding on the date hereof.
(i) The Company agrees with the several U.S. Underwriters and the Selling Shareholder that the Company will pay all expenses incident to the performance of the obligations of the
Selling Shareholder and the obligations of the Company under this Agreement for any filing fees and other expenses (including fees and disbursements of counsel not to exceed $12,500) in connection with qualification of the Offered Securities for sale under the laws of such jurisdictions as CSFBC designates and the printing of memoranda relating thereto, for the filing fee incident to, and the reasonable fees and disbursements of counsel to the U.S. Underwriters in connection with, the review by the National Association of Securities Dealers, Inc. of the Offered Securities, for any travel expenses of the Company's officers and employees and any other expenses of the Company in connection with attending or hosting meetings with prospective purchasers of the Offered Securities, for the fees and expenses in connection with qualification of the Offered Securities for listing on the NYSE and the Amsterdam Stock Exchange, for any transfer taxes on the sale of the Offered Securities to the U.S. Underwriters and for expenses incurred in distributing preliminary prospectuses and the Prospectuses (including any amendments and supplements thereto) to the U.S. Underwriters. The agreement in this paragraph (i) shall not modify the separate agreement between the Selling Shareholder and the Company regarding the payment of expenses set forth in the Registration Rights Agreement (as defined in the Prospectuses) between such parties dated March __, 1997.
(B) The Selling Shareholder agrees with the several U.S. Underwriters that:
(a) The Selling Shareholder will indemnify and hold harmless the U.S. Underwriters against any documentary, stamp or similar issuance tax, including any interest and penalties, on the sale of the Offered Securities and on the execution and delivery of this Agreement. All payments to be made by the Selling Shareholder hereunder shall be made without withholding or deduction for or on account of any present or future taxes, duties or governmental charges whatsoever unless the Selling Shareholder is compelled by law to deduct or withhold such taxes, duties or charges. In that event, the Selling Shareholder shall pay such additional amounts as may be necessary in order that the net amounts received after such withholding or deduction shall equal the amounts that would have been received if no withholding or deduction had been made.
(b) The Selling Shareholder agrees to deliver to CSFBC, Attention:
Transactions Advisory Group, on or prior to the First Closing Date a
properly completed and executed United States Treasury Department Form
W-9 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof).
(c) The Selling Shareholder agrees, for a period of 180 days after the date of the initial public offering of the Offered Securities, not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly or request or demand the filing with the Commission of a registration statement under the Act relating to, any Securities of the Company or securities convertible into or exchangeable or exercisable for any Securities, or publicly disclose the intention to make any such offer, sale, pledge, disposition or filing, without the prior written consent of CSFBC, except the sale of Offered Securities to the U.S. Underwriters and the Managers pursuant to this Agreement and the Subscription Agreement.
6. Conditions of the Obligations of the U.S. Underwriters. The obligations of the several U.S. Underwriters to purchase and pay for the U.S. Firm Securities on the First Closing Date and the U.S. Optional Securities to be purchased on each Optional Closing Date will be subject to the accuracy of the representations and warranties on the part of the Company and the Selling Shareholder, to the accuracy of the statements of Company and Selling Shareholder officers made pursuant to the provisions hereof, to the performance by the Company and the Selling Shareholder of their respective obligations hereunder and to the following additional conditions precedent:
(a) The Representatives shall have received a letter, dated the date of delivery thereof (which, if the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, shall be on or prior to the date of this Agreement or, if the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement, shall be prior to the filing of the amendment or post-effective amendment to the registration statement to be filed shortly prior to such Effective Time), of Arthur Andersen LLP
confirming that they are independent public accountants within the meaning of the Act and the applicable published Rules and Regulations thereunder and stating to the effect that:
(i) in their opinion the financial statements examined by them and included in the Registration Statements comply as to form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations;
(ii) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than three business days prior to the date of this Agreement, there was any change in the capital stock or any increase in short-term indebtedness or long-term debt of the Company and its consolidated subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any decrease in consolidated net assets, as compared with amounts shown on the latest balance sheet included in the Prospectuses, except in all instances for changes, increases or decreases that the Registration Statement discloses have occurred or may occur;
(iii) for the period from the closing date of the latest income statement included in the Prospectus to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year and with the period of corresponding length ended the date of the latest income statement included in the Prospectus, in consolidated net sales, income from operations, income before extraordinary items or net income, except in all instances for changes, increases or decreases that the Registration Statement discloses have occurred or may occur;
(iv) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Registration Statements with the results obtained from inquiries, a reading of general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter; and
(v) (A) they have read the unaudited pro forma income statement and other pro forma financial information included in the Registration Statements (collectively, the "Pro Forma Information");
(B) they have made inquiries of certain officials of the Company who have responsibility for financial and accounting matters about (i) the basis for the determination of the pro forma adjustments , and (ii) whether the unaudited pro forma consolidated income statement complies as to form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X under the Act;
(C) they have proved the arithmetic accuracy of the application of the pro forma adjustments to the historical amounts in the Pro Forma Information; and
(D) on the basis of such procedures, and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that the Pro Forma Information does not comply as to form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X under the Act or that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of such Pro Forma Information.
For purposes of this subsection, (i) if the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement, "Registration Statements" shall mean
the initial registration statement as proposed to be amended by the amendment or post-effective amendment to be filed shortly prior to its Effective Time, (ii) if the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement but the Effective Time of the Additional Registration is subsequent to such execution and delivery, "Registration Statements" shall mean the Initial Registration Statement and the additional registration statement as proposed to be filed or as proposed to be amended by the post-effective amendment to be filed shortly prior to its Effective Time, and (iii) "Prospectuses" shall mean the prospectuses included in the Registration Statements.
(b) If the Effective Time of the Initial Registration Statement is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later than 10:00 P.M., New York time, on the date of this Agreement or such later date as shall have been consented to by CSFBC. If the Effective Time of the Additional Registration Statement (if any) is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later than 10:00 P.M., New York time, on the date of this Agreement or, if earlier, the time either Prospectus is printed and distributed to any U.S. Underwriter or Manager, or shall have occurred at such later date as shall have been consented to by CSFBC. If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, each of the Prospectuses shall have been filed with the Commission in accordance with the Rules and Regulations and Section 5(a) of this Agreement. Prior to such Closing Date, no stop order suspending the effectiveness of a Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Company, the Selling Shareholder or the Representatives, shall be contemplated by the Commission.
(c) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Company or its Subsidiaries which, in the judgment of a majority in interest of the U.S. Underwriters including the Representatives, is material and adverse and makes it impractical or inadvisable to proceed with completion of the public offering or the sale of and payment for the U.S. Securities; (ii) any downgrading in the rating of any debt securities of the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (iii) any suspension or limitation of trading in securities generally on the NYSE or the Amsterdam Stock Exchange or any setting of minimum prices for trading on any such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (iv) any banking moratorium declared by either U.S. Federal or New York authorities or in Amsterdam declared by the relevant authorities in The Netherlands; or (v) any outbreak or escalation of major hostilities in which the United States or The Netherlands is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of a majority in interest of the U.S. Underwriters including the Representatives, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the public offering or the sale of and payment for the U.S. Securities.
(d) The Representatives shall have received an opinion, dated such Closing Date, of Cahill, Gordon & Reindel, United States counsel for the Company and the Selling Shareholder, to the effect that:
(i) There are no contracts, agreements or understandings known to such counsel between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement;
(ii) The Company is not and, after giving effect to the offering and sale of the Offered Securities will not be, an "investment company" or an entity "controlled" by an "investment company" as defined in the Investment Company Act of 1940;
(iii) To the knowledge of such counsel, no consent, approval or authorization and no order, registration or qualification of, or filing with, any third party (whether acting in an individual fiduciary or other capacity) or any governmental or regulatory agency or body or any court is required to be obtained or made by the Company or the Selling Shareholder for the consummation of the transactions to be effected by the Company or the Selling Shareholder contemplated by this Agreement or the Subscription Agreement, except such as have been obtained and made under the Act and such as may be required under state securities laws in connection with the offer and sale of the Offered Securities; and to the knowledge of such counsel, the execution, delivery and performance of this Agreement and the Subscription Agreement and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court having jurisdiction over the Company or any Subsidiary of the Company or the Selling Shareholder or any of their properties or operations, or any material agreement or instrument identified to such counsel to which any of them is a party or by which any of them is bound or to which any of their properties is subject, or the charter or by-laws of any such Subsidiary or the Selling Shareholder, and the Selling Shareholder has full power and authority to consummate the transactions to be effected by it contemplated by this Agreement and the Subscription Agreement;
(iv) To the knowledge of such counsel, the Selling Shareholder had valid and unencumbered title to the Offered Securities delivered by such Selling Shareholder on such Closing Date and had full corporate power and authority to sell, assign, transfer and deliver the Offered Securities delivered by the Selling Shareholder on such Closing Date hereunder; and, assuming each of the U.S. Underwriters and Managers has purchased the Offered Securities purchased by it in good faith and without notice of any adverse claim, the several U.S. Underwriters have acquired valid and unencumbered title to the Offered Securities purchased by them on such Closing Date hereunder;
(v) The Initial Registration Statement was declared effective under the Act as of the date and time specified in such opinion, the Additional Registration Statement (if any) was filed and became effective under the Act as of the date and time (if determinable) specified in such opinion, each of the Prospectuses either were filed with the Commission pursuant to the subparagraph of Rule 424(b) specified in such opinion on the date specified therein or were included in the Initial Registration Statement or the Additional Registration Statement (as the case may be), and, to the knowledge of such counsel, no stop order suspending the effectiveness of a Registration Statement or any part thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Act, and each Registration Statement and each amendment or supplement thereto, as of their respective effective or issue dates, complied as to form in all material respects with the requirements of the Act and the Rules and Regulations; the descriptions in the Registration Statements and the Prospectuses of statutes, contracts and other documents and, to the knowledge of such counsel, legal and governmental proceedings, are accurate in all material respects and fairly present the information required to be shown with respect to such statutes, proceedings, contracts and other documents;
(vi) This Agreement and the Subscription Agreement have been duly authorized, executed and delivered by the Company and the Selling Shareholder;
(vii) The statements made in the U.S. Prospectuses under "Taxation - United States Federal Income Taxes", insofar as they relate to provisions of U.S. federal tax law
therein described, have been reviewed by such counsel and fairly present the information disclosed therein in all material respects;
(viii) Except as described in the Prospectuses, the stockholders of the Company have no preemptive rights with respect to the Offered Securities; and
(ix) Such counsel has participated in conferences with
officers and other representatives of the Company and the Selling
Shareholder, counsel for the Company, representatives of the
independent public accountants of the Company and representatives
of the U.S. Underwriters and Managers at which the contents of the
Registration Statement and the Prospectuses and related matters
were discussed and, although such counsel is not passing upon and
does not assume any responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration
Statement and the Prospectuses (except to the extent described in
(v) and (vii) above), such counsel shall advise that, on the basis
of the foregoing (relying as to materiality to a large extent upon
the opinions of officers and other representatives of the Company
and the Selling Shareholder), no facts have come to the attention
of such counsel that lead it to believe that the Registration
Statement, at the time it became effective, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectuses, as of their dates
and as of such Closing Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading (it being understood that such counsel need not express
any comment with respect to the financial statements and schedules
and other financial and statistical data contained in the
Registration Statement and the Prospectuses).
In giving such opinions, such counsel may limit its opinion to laws of the State of New York, the General Corporation Law of the State of Delaware and the Federal laws of the United States of America, and matters specifically governed thereby.
(e) The Representatives shall have received an opinion, dated such Closing Date, of Robert H. Wolfe, General Counsel of the Company, to the effect that:
(ii) No consent, approval or authorization and no order, registration or qualification of, or filing with, any third party (whether acting in an individual fiduciary or other capacity) or any governmental or regulatory agency or body or, any court is required to be obtained or made by the Company for the consummation of the transactions to be effected by the Company or its Subsidiaries contemplated by this Agreement or the
Subscription Agreement, except such as have been obtained and made under the Act and such as may be required under state or foreign securities laws in connection with the offer and sale of the Offered Securities; the execution, delivery and performance of this Agreement and the Subscription Agreement and the consummation of the transactions herein and therein contemplated and of the Reorganization will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under (A) any statute, any rule, regulation or order of any governmental agency or body or any court having jurisdiction over the Company or any Subsidiary of the Company or any of their properties, or any agreement or instrument to which the Company or any such Subsidiary is a party or by which the Company or any such Subsidiary or the Selling Shareholder is bound or to which any of the properties of the Company or any such Subsidiary is subject, or (B) the charter or by-laws of the Company or any such Subsidiary, except, in the case of clause (A), for such conflicts, breaches, violations, or defaults which could not reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries, taken as a whole, or a material adverse effect on the consummation of the transactions contemplated by this Agreement or the Subscription Agreement; and the Company has full power and authority to consummate the transactions to be effected by it contemplated by this Agreement, the Subscription Agreement and the Reorganization;
(iii) The Company and its Subsidiaries possess adequate certificates, authorizations, licenses or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them and to such counsel's knowledge have not received any written notice of threatened or actual proceedings relating to the revocation or modification of any such certificate, authorization, license or permit that, if determined adversely to the Company or any of its Subsidiaries, could reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole. To the knowledge of such counsel, the Company and its Subsidiaries are in compliance with their respective obligations under such certificates, authorizations, licenses or permits and to such counsel's knowledge no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination of such certificates, authorizations, licenses or permits or violation of such laws or regulations, except for such non-compliance and events as could not reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole;
(iv) Except as described in the Prospectuses, to the knowledge of such counsel, there are no pending actions, suits or proceedings against or affecting the Company, any of its Subsidiaries or any of their respective properties, assets or operations that, if determined adversely to the Company or any of its Subsidiaries, could reasonably be expected to, individually or in the aggregate, have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole, or could materially and adversely affect the ability of the Company to perform its obligations under this Agreement or the Subscription Agreement; and, to the knowledge of such counsel, no such actions, suits or proceedings are threatened or contemplated;
(v) To the knowledge of such counsel, except as described in the Prospectuses and except as could not reasonably be expected, individually or in the aggregate, to have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole, the properties, assets and operations of the Company and its Subsidiaries are in compliance with all applicable Environmental Laws. To the knowledge of such counsel, except as described in the Prospectuses and except as could not reasonably be expected, individually or in the
aggregate, to have a material adverse effect on the condition
(financial or other), business, properties or results of operations
of the Company and its Subsidiaries taken as a whole, none of the
Company or any of its Subsidiaries is the subject of any federal,
state, local or foreign investigation pursuant to Environmental
Laws, and none of the Company or any of its Subsidiaries has
received any written notice or claim pursuant to Environmental Laws.
For the purpose of this opinion, "Environmental Laws" means all
federal, state, local and foreign laws, statutes, codes, ordinances,
rules, regulations, directives, permits, licenses, or orders
relating to the natural environment, or employee health or safety,
including, but not limited to, any law, statute, code, ordinance,
rule, regulation, directive, permit, license or order relating to
(1) the release, discharge or emission of any pollutant into the
natural environment, (2) damage to any natural resource, (3) the
use, handling or disposal of any chemical substance or (4) workplace
or worker safety and health, as such requirements are promulgated by
the specifically authorized governmental authority responsible for
administering such requirements, or imposed by judicial order or
fiat;
(vi) Such counsel does not know of any legal or governmental proceedings required to be described in a Registration Statement or the Prospectuses which are not described as required or of any contracts or documents of a character required to be described in a Registration Statement or the Prospectuses or to be filed as exhibits to a Registration Statement which are not described or filed as required; and
(vii) Such counsel has participated in conferences with officers and other representatives of the Company and the Selling Shareholder, counsel for the Company, representatives of the independent public accountants of the Company and representatives of the U.S. Underwriters and Managers at which the contents of the Registration Statement and the Prospectuses and related matters were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and the Prospectuses (except to the extent described in (vi) above), such counsel shall advise that, on the basis of the foregoing, no facts have come to the attention of such counsel that lead it to believe that the Registration Statement, at the time it became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectuses, as of their dates and as of such Closing Date, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need not express any comment with respect to the financial statements and schedules and other financial data contained in the Registration Statement and the Prospectuses).
In giving such opinions, such counsel may limit its opinion to laws of the State of Illinois, the General Corporation Law of the State of Delaware and the Federal laws of the United States of America, and matters specifically governed thereby, except that such counsel shall make such investigations of law in such other jurisdictions in which the Company does business, as is appropriate to render such opinions.
(f) The Representatives shall have received an opinion, dated such Closing Date, of Loeff Claeys Verbeke, Netherlands counsel for the Company and the Selling Shareholder, to the effect that:
(i) The Company has been duly incorporated and is validly existing as a company limited by shares (naamloze vennootschap) under the laws of The Netherlands, with corporate power and authority to own its properties and conduct its business as described in the Prospectuses; and the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification;
(ii) Chicago Bridge & Iron Company B.V. ("CBICBV") has been duly incorporated and is an existing corporation in good standing under the laws of The Netherlands with corporate power and authority to own its properties and conduct its business as described in the Prospectuses, and CBICBV is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which the ownership of or lease of property or the conduct of its business requires such qualification; all of the outstanding capital stock of CBICBV has been duly authorized and validly issued and is fully paid and non-assessable and are owned directly by the Company, free from liens, encumbrances and defects;
(iii) The Offered Securities delivered on such Closing Date and all other outstanding Securities of the Company have been duly authorized and validly issued, are fully paid and nonassessable and the stockholders of the Company have no preemptive rights with respect to the Offered Securities;
(iv) According to the Shareholders Register of the Company, the Offered Securities are free of rights of pledge ("pandrecht") and rights of usufruct ("vruchtgebruik");
(v) By the due execution by the Selling Shareholder and the U.S. Underwriters and Managers of a Deed of Transfer relating to the Offered Securities sold by such Selling Shareholder to the U.S. Underwriters and Managers pursuant to this Agreement and the Subscription Agreement and the written acknowledgement of such transfer by the Company, title to such Offered Securities will under Netherlands law validly have been transferred to the U.S. Underwriters and Managers, free from all liens, encumbrances and defects;
(vi) The filing of the Registration Statements with the Commission has been duly authorized by the Company and the Registration Statements has been duly signed on behalf of the Company;
(vii) To the knowledge of such counsel, no consent, approval or authorization and no order, registration, qualification of, or filing with, any third party (whether acting in an individual, fiduciary or other capacity) or any governmental or regulatory agency or body or any court, in each case of The Netherlands, is required for the consummation of the Reorganization or the transactions contemplated by this Agreement or the Subscription Agreement and for the listing of the Offered Securities on the Amsterdam Stock Exchange;
(viii) To the knowledge of such counsel, the execution, delivery and performance of this Agreement and the Subscription Agreement and the consummation of the transactions herein and therein contemplated and of the Reorganization, will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court, in each case of the Netherlands, having jurisdiction over the Company or any Subsidiary of the Company or any of their properties, or any agreement or instrument to which the Company or any such Subsidiary is a party or by which the Company or any such Subsidiary is bound or to which any of the properties of the Company or any such Subsidiary is subject, or the charter or by-laws of the Company or any such Subsidiary, and the Company has full power and authority to consummate the transactions contemplated by this Agreement, the Subscription Agreement and the Reorganization;
(ix) The Company has the power to submit, and, insofar as the law of The Netherlands is concerned, has taken all necessary corporate action to submit, to the jurisdiction of any United States federal or state courts in the State of New York, County of New York, and irrevocably to appoint ____________ as the authorized agent of the
Company for the purpose described in Section 15 hereof; judgments obtained in any such courts arising out of or in relation to the obligations of the Company under this Agreement and the Subscription Agreement would be enforceable against the Company in the courts of the Netherlands;
(x) The Company is not entitled to any immunity on the basis of sovereignty or otherwise in respect of its obligations under this Agreement or the Subscription Agreement and could not successfully interpose any such immunity as a defense to any suit or action brought or maintained in respect of its obligations under this Agreement or the Subscription Agreement; and the waiver by the Company of immunity to jurisdiction (including the waiver of sovereign immunity to which the Company may become entitled subsequent to the date of this Agreement or the Subscription Agreement) and immunity to prejudgment attachment, post-judgment attachment and execution in any suit, action or proceeding against it arising out of or based on this Agreement or the Subscription Agreement is a valid and binding obligations of the Company under Netherlands law;
(xi) Under the laws of The Netherlands currently in force, the U.S. Underwriters and the Managers would be permitted to commence proceedings against the Company in the competent Netherlands courts based upon this Agreement and the Subscription Agreement. Such competent Netherlands courts would accept jurisdiction over any such action or proceedings and would give effect to the choices of New York law as the proper law of this Agreement and the Subscription Agreement;
(xii) The statements made in the Prospectuses under "Dividend Policy", "Management", "Description of Share Capital", "Share Certificates and Transfer" and "Service of Process and Enforcement of Civil Liabilities", to the extent that they constitute summaries of Netherlands law and the Company's Articles of Association, have been reviewed by such counsel and fairly and accurately present the information disclosed therein in all material respects; the Offered Securities and the Company's Articles of Association conform in all material respects to the descriptions thereof contained in the Prospectuses;
(xiii) Except as described in the Prospectuses, under current laws and regulation of The Netherlands and any political subdivision or taxing authority thereof, all dividends and other distributions declared and payable on the Offered Securities (including, without limitation, dividend payments on any Offered Securities in the form of New York Shares) may be paid by the Company to the holder thereof in United States dollars; all such payments made to holders thereof who are non-residents of The Netherlands will not be subject to income, withholding or other taxes under laws and regulations of The Netherlands or any political subdivision or taxing authority thereof or therein and will otherwise be free and clear of any other tax, duty, withholding or deduction in The Netherlands or any political subdivision or taxing authority thereof or therein and without the necessity of obtaining any governmental authorization in The Netherlands or any political subdivision or taxing authority thereof or therein;
(xiv) The opinions of such counsel set forth in the Prospectuses under the caption "Taxation - Netherlands Taxes" are confirmed as of such Closing Date;
(xv) No stamp or other issuance or transfer taxes of duties and no capital gains, income, withholding or other taxes are payable by or on behalf of the U.S. Underwriters or the Managers to The Netherlands or to any political subdivision or having authority thereof or therein in connection with (A) the sale and delivery by the Company of the Offered Securities to or for the respective accounts of the U.S. Underwriters or the Managers or (B) the sale and delivery outside The Netherlands by the U.S. Underwriters or the Managers of the Offered Securities to the initial purchasers thereof in the manner contemplated herein and in the Subscription Agreement; and
(xvi) Although such counsel does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or Prospectuses (other than as set forth in (xii) and (xiv) above), such counsel has no reason to believe that any part of a Registration Statement or any amendment thereto, as of its effective date or as of such Closing Date , contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that either of the Prospectuses or any amendment or supplement thereto, as of its issue date or as of such Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Registration Statement or Prospectuses.
In giving such opinion, such counsel may rely on the opinions of Cahill, Gordon & Reindel and Robert H. Wolfe, Esq. referred to above as to matters of laws other than the laws of The Netherlands.
(g) The Representatives shall have received from Dewey Ballantine, counsel for the U.S. Underwriters, such opinion or opinions, dated such Closing Date, with respect to the validity of the Offered Securities delivered on such Closing Date, the Registration Statements, the Prospectuses and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters. In rendering such opinion, Dewey Ballantine may rely as to all matters governed by Netherlands law upon the opinion of Loeff Claeys Verbeke referred to above.
(h) The Representatives shall have received a certificate, dated such Closing Date, of Gerald M. Glenn, President and Chief Executive Officer of the Company, and Timothy J. Wiggins, Vice President - Treasurer and Chief Financial Officer of the Company, in which they shall state that, to the best of their knowledge after reasonable investigation: the representations and warranties of the Company in this Agreement and the Subscription Agreement are true and correct; the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder and under the Subscription Agreement at or prior to such Closing Date; no stop order suspending the effectiveness of any Registration Statement has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission; the Additional Registration Statement (if any) satisfying the requirements of subparagraphs (1) and (3) of Rule 462(b) was filed pursuant to Rule 462(b), including payment of the applicable filing fee in accordance with Rule 111(a) or (b) under the Act, prior to the time either Prospectus was printed and distributed to any U.S. Underwriter or Manager; and, subsequent to the dates of the most recent financial statements in the Prospectuses, there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its Subsidiaries taken as a whole except as set forth in or contemplated by the Prospectuses or as described in such certificate.
(i) The Representatives shall have received a letter, dated such Closing Date, of Arthur Andersen LLP which meets the requirements of subsection (a) of this Section, except that the specified date referred to in such subsection will be a date not more than three business days prior to such Closing Date for the purposes of this subsection.
(j) The Representatives shall have received a certificate, dated such Closing Date, of the President or any Vice President and a principal financial or accounting officer of the Selling Shareholder in which such officers shall state that, to the best of their knowledge after reasonable investigation: the representations and warranties of the Selling Shareholder in this Agreement and the Subscription Agreement are true and correct; and the Selling Shareholder has complied with
all agreements and satisfied all conditions on its part to be performed or satisfied hereunder and under the Subscription Agreement at or prior to such Closing Date.
(k) The Offered Shares have been approved for listing on the NYSE and the Amsterdam Stock Exchange, in each case, subject to notice of issuance.
(l) On such Closing Date, the Managers shall have simultaneously purchased the International Firm Securities or the International Optional Securities, as the case may be, pursuant to the Subscription Agreement.
(m) The Reorganization shall have been consummated; all actions required in connection with the Reorganization shall have been taken; no material consent, approval or authorization of, notice to, or registration with, any person or entity which shall not have been obtained prior to the Closing Date shall be necessary in connection with the Reorganization, and there shall not be any pending or threatened legal or governmental proceedings with respect thereto; the Company shall have provided to the U.S. Underwriters and Managers copies of all documents with respect thereto as they may reasonably request.
[(n) The $100 million bank credit facility of the Company contemplated by the Prospectuses shall have been executed and delivered and be in full force and effect and all conditions to borrowing thereunder shall have been satisfied, and the Company shall have provided to the U.S. Underwriters and Managers copies of all documents with respect thereto as they may reasonably request.]
The Company will furnish the Representatives with such conformed copies of such opinions, certificates, letters and documents as the Representatives reasonably request. CSFBC may in its sole discretion waive on behalf of the U.S. Underwriters compliance with any conditions to the obligations of the U.S. Underwriters hereunder, whether in respect of an Optional Closing Date or otherwise.
(b) The Selling Shareholder will indemnify and hold harmless each U.S. Underwriter against any losses, claims damages or liabilities, joint or several, to which such U.S. Underwriter may become subject,
(c) Each U.S. Underwriter will severally and not jointly indemnify and hold harmless the Company and the Selling Shareholder against any losses, claims, damages or liabilities to which the Company or the Selling Shareholder may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, either of the Prospectuses, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such U.S. Underwriter through the Representatives specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company and the Selling Shareholder in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by any U.S. Underwriter consists of the following information in the U.S. Prospectus furnished on behalf of each U.S. Underwriter: the last paragraph at the bottom of the cover page concerning the terms of the offering by the U.S. Underwriters, the legends concerning over- allotments and stabilizing on the inside front cover page, the concession and reallowance figures appearing in the fifth paragraph under the caption "Underwriting," the last sentence of the sixth paragraph under the caption "Underwriting," and the seventh, eighth and twelfth paragraphs under the caption "Underwriting."
(d) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action or proceeding (including any
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under subsection (a), (b)
or (c) above, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a), (b) or (c) above. In case any such action or proceeding
is brought against any indemnified party and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such
settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action.
(e) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a), (b) or (c) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a), (b) or (c) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Shareholder on the one hand and the U.S. Underwriters on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Selling Shareholder on the one hand and the U.S. Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Shareholder on the one hand and the U.S. Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering of the U.S. Securities (before deducting expenses) received by the Selling Shareholder bear to the total underwriting discounts and commissions received by the U.S. Underwriters. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the Selling Shareholder or the U.S. Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (e). Notwithstanding the provisions of this subsection (e), no U.S. Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the U.S. Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such U.S. Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The U.S. Underwriters' obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Shareholder under this Section shall be in addition to any liability which the Company and the Selling Shareholder may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any U.S. Underwriter within the meaning of the Act; and the obligations of the U.S. Underwriters under this Section shall be in addition to any liability which the respective U.S. Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each director of the Company, to each officer or managing director of the Company who has signed a Registration Statement and to each person, if any, who controls the Company within the meaning of the Act.
8. Default of U.S. Underwriters. If any U.S. Underwriter or U.S. Underwriters default in their obligations to purchase U.S. Securities hereunder on either the First or any Optional Closing Date and the number of shares of U.S. Securities that such defaulting U.S. Underwriter or U.S. Underwriters agreed but failed to purchase does not exceed 10% of the total number of shares of U.S. Securities that the U.S. Underwriters are obligated to purchase on such Closing Date, CSFBC may make arrangements satisfactory to the Selling Shareholder for the purchase of such U.S. Securities by other persons, including any of the U.S. Underwriters, but if no such arrangements are made by such Closing Date the non-defaulting U.S. Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the U.S. Securities that such defaulting U.S. Underwriters agreed but failed to purchase on such Closing Date. If any U.S. Underwriter or U.S. Underwriters so default and the aggregate number of shares of U.S. Securities with respect to which such default or defaults occur exceeds 10% of the total number of shares of U.S. Securities that the U.S. Underwriters are obligated to purchase on such Closing Date and arrangements satisfactory to CSFBC and the Selling Shareholder for the purchase of such U.S. Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting U.S. Underwriter, the Company or the Selling Shareholder except as provided in Section 9 (provided that if such default occurs with respect to U.S. Optional Securities after the First Closing Date, this Agreement will not terminate as to the U.S. Firm Securities or any U.S. Optional Securities purchased prior to such termination). As used in this Agreement, the term "U.S. Underwriter" includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting U.S. Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of
the Company, the Selling Shareholder, and their respective officers and of the
several U.S. Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation, or statement
as to the results thereof, made by or on behalf of any U.S. Underwriter, the
Company or the Selling Shareholder, or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the U.S. Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the U.S. Securities by the
U.S. Underwriters is not consummated, the Company shall remain responsible for
the expenses to be paid or reimbursed by it pursuant to Section 5 and the
respective obligations of the Company, the Selling Shareholder and the U.S.
Underwriters pursuant to Section 7 shall remain in effect and if any U.S.
Securities have been purchased hereunder the representations and warranties in
Section 2 and all obligations under Section 5 shall also remain in effect. If
the purchase of the U.S. Securities by the U.S. Underwriters is not consummated
for any reason other than solely because of the termination of this Agreement
pursuant to Section 8 or the occurrence of any event specified in clause (iii),
(iv), or (v) of Section 6(c), the Company will reimburse the U.S. Underwriters
for all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) reasonably incurred by them in connection with the offering of the
U.S. Securities.
11. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder.
12. Representation of U.S. Underwriters. The Representatives will act for the several U.S. Underwriters in connection with this financing, and any action under this Agreement taken by the Representatives jointly or by CSFBC will be binding upon all the U.S. Underwriters.
13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
15. Submission to Jurisdiction. The Company and the Selling Shareholder each hereby submit to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. The Company irrevocably appoints Robert H. Wolfe, c/o Chicago Bridge & Iron Company, 1501 North Division Street, Plainfield, IL 60544- 8929, as its authorized agent in the
16. Foreign Currency Judgments. The obligation of the Company in respect of any sum due to any U.S. Underwriter shall, notwithstanding any judgment in a currency other than United States dollars, not be discharged until the first business day, following receipt by such U.S. Underwriter of any sum adjudged to be so due in such other currency, on which (and only to the extent that) such U.S. Underwriter may in accordance with normal banking procedures purchase United States dollars with such other currency; if the United States dollars so purchased are less than the sum originally due to such U.S. Underwriter hereunder, the Company agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such U.S. Underwriter against such loss. If the United States dollars so purchased are greater than the sum originally due to such U.S. Underwriter hereunder, such Underwriter agrees to pay to the Company an amount equal to the excess of the dollars so purchased over the sum originally due to such U.S. Underwriter hereunder.
If the foregoing is in accordance with the Representatives' understanding of our agreement, kindly sign and return to the Company one of the counterparts hereof, whereupon it will become a binding agreement among the Company, the Selling Shareholder and the several U.S. Underwriters in accordance with its terms.
Very truly yours,
CHICAGO BRIDGE & IRON COMPANY N.V.
By.........................................
Name:
Title:
PRAXAIR, INC.
By.........................................
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
UBS SECURITIES LLC
Acting on behalf of themselves and
as the Representatives of the
several Underwriters.
By CREDIT SUISSE FIRST BOSTON CORPORATION
By................................................
Name:
Title:
SCHEDULE A
NUMBER OF
U.S. FIRM SECURITIES
U.S. UNDERWRITER TO BE PURCHASED
---------------- ---------------
Credit Suisse First Boston Corporation.............
Goldman, Sachs & Co................................
Smith Barney Inc...................................
UBS Securities LLC.................................
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EXHIBIT 3
English Translation of
ARTICLES OF ASSOCIATION
CHICAGO BRIDGE & IRON COMPANY N.V.
INCORPORATION OF A PUBLIC COMPANY
This twenty-second day of November nineteen hundred ninety-six appeared before me, Robert Jan Jozef Lijdsman, civil law notary, officiating in Rotterdam: Mr. "Mr." Hendrikus Johannes Portengen, deputy civil law notary, residing at (3056 JV) Rotterdam, Terbregseweg 91, born in Zevenaar on the twentieth day of February nineteen hundred and sixty-nine, married, and of Dutch nationality, whose identity has been established from his passport, number X908582, for the purposes hereof acting as attorney in writing of Chi Bridge Holdings, Inc., a company incorporated under the law of the State of Delaware, with its principal office at 39 Old Ridgebury Road, Danbury, CT 06851-5113, United States of America.
The appearer has declared that he hereby incorporates a public company with the following articles of association:
CHAPTER I
Article 1.
In the articles of association the following expressions shall have the following meanings:
a. the general meeting: the body of the company formed by shareholders, and other persons entitled to vote;
b. the general meeting of shareholders: the meeting of shareholders, and other persons entitled to attend the general meetings;
c. the distributable part of the net assets: that part of the company's net assets which exceeds the aggregate of the part of the capital which has been paid and called up and the reserves which must be maintained by virtue of the law;
d. the annual accounts: the balance sheet and profit and loss account with the explanatory notes;
e. the accountant: a registered accountant or other accountant referred to in Section 393 of Book 2 of the Civil Code;
f. the annual meeting: the general meeting of shareholders held for the purpose of discussion and adoption of the annual accounts.
CHAPTER II
1. The name of the company is: Chicago Bridge & Iron Company N.V.
2. The official seat of the company is in Amsterdam.
The objects of the company are:
a. to incorporate, to own, to participate in any way whatsoever, to manage, to supervise, to operate and to promote enterprises, companies and businesses;
b. to perform any and all activity of an industrial, financial or commercial nature;
c. to design, develop, manufacture, market, sell and service products of any nature, including without limitation any hardware and/or software;
d. to develop and trade in patents, trademarks, copyrights, licenses, know-how and other intellectual property rights;
e. to borrow, to lend and to raise funds, including the issuance of bonds, promissory notes or other securities or evidence of indebtedness, as well as to enter into agreements in connection with the aforementioned;
f. to furnish advice and to render services to enterprises and companies with which the company forms a group and to third parties;
g. to render guarantees, to bind the company and to pledge its assets for obligations of the companies and enterprises with which it forms a group, including its subsidiaries, and on behalf of third parties;
h. to obtain, alienate, manage and exploit real estate and items of property in general;
i. to trade in securities and items of property in general; as well as everything pertaining to the foregoing, relating thereto or in furtherance thereof, all in the widest sense of the word.
CHAPTER III
1. The authorized capital amounts to five hundred thousand Dutch guilders (NLG 500,000.--).
2. The authorized capital is divided into [fifty million (50,000,000)] shares of [one cent (NLG 0.01) each].
3. All shares are at the option of the shareholder, either registered shares or bearer shares.
1. For bearer shares, share certificates shall be issued. Share certificates may, at the request of a shareholder, also be issued for registered shares. Share certificates shall be numbered in the manner to be determined by the management board.
2. Multiple certificates shall be issued at a shareholder's request for such numbers of shares as shall be determined by the management board. At the holder's request, a multiple certificate shall be exchanged for certificates of single shares up to the same nominal amount.
3. The share certificates shall be signed by a member of the management board or by both a member of the supervisory board and a member of the management board and such signatures will be valid if reproduced on the certificates in print. One or, as the case may be, both of these signatures may also be replaced by a distinctive company stamp, provided by the company under its supervision. If there is at least one original signature, then no company stamp described hereinabove is required.
4. The company shall not charge any fee for the issuance and exchange of share certificates.
1. A share certificate relating to one or more bearer shares shall be provided with a simplified dividend sheet, without dividend coupons and voucher. Such share certificates shall be referred to hereinafter as CF-certificates.
2. A simplified dividend sheet (hereinafter referred to as a CF-dividend sheet) may only be issued by the company to a custodian to be designated by the shareholder. This custodian may only be designated from a group of custodians which are accepted as such by the company and who provide for the custody of the CF-dividend sheets to be administered by an organisation independent of the company but accepted by it. These custodians shall undertake not to issue the CF-dividend sheets in their charge to any persons other than custodians accepted by the company or the company itself.
3. For all dividends and other distributions relating to a share for which a CF certificate has been issued, the company shall be released towards the person entitled thereto by placing those dividends or distributions at the disposal of, or at the instruction of the independent organisation referred to in paragraph 2.
4. A share certificate relating to one or more bearer shares may have a dividend sheet annexed, consisting of dividend coupons and a voucher. Such share certificates shall be referred to hereinafter as K-certificates.
The management board decides whether or not K-certificates shall be issued. A decision of the management board to issue K-certificates is subject to the approval of the supervisory board.
5. The management board has the right to draw up further rules governing the issuance of K-certificates, CF-certificates and the conversion of K-certificates into CF-certificates and vice versa.
1. Bearer shares may, at the shareholder's request, be converted into registered shares and vice versa.
2. Conversion of bearer shares into registered shares shall be effected by the surrendering share certificates and simultaneous entry in the register referred to in article 5.D. The dividend sheets belonging thereto must also be surrendered.
3. Conversion of registered shares into bearer shares shall be effected at the written request of the shareholder. If a life interest or a right of pledge is created in a share, the cooperation of the beneficiary of the life interest or pledgee shall be required. At the issuance of bearer share certificates the entry in the register shall be deleted.
4. The company shall not charge any fee for conversion.
1. In the event of the loss, theft or destruction of share certificates, coupon sheets, dividend coupons or vouchers relating to bearer shares, the management board can issue duplicates. The management, board may attach conditions to the issuance of duplicates, including the provision of security and the payment of costs by the applicant.
2. The issuance of a duplicate shall render the original document of no value with regard to the company.
3. The new document shall clearly state that it is a duplicate.
1. The management board shall keep a register containing the names and addresses of all holders of registered shares.
2. Every holder of one or more registered shares and any person having a life interest or a right of pledge over one or more such shares shall be obliged to provide the company in writing with their address.
3. All entries and notes in a register shall be signed by a member of the management board or by a person authorised thereto by a member of the management board.
4. Furthermore, article 85, Book 2 of the Civil Code applies to the register.
5. Extracts from the register are not transferable.
CHAPTER IV
1. The issuance of shares shall be effected pursuant to a resolution of the supervisory board provided that the supervisory board has been designated by the general meeting as authorized body for this purpose. Such authorization of the supervisory board shall only take place for a specific period of no more than five years and may not be extended by more than five years on each occasion.
2. The provisions of paragraph 1 of this article shall also apply to the issuance of options to subscribe for new shares.
3. In case the supervisory board is no longer authorized to issue shares, the general meeting shall be authorized to issue shares upon the proposal of the supervisory board.
4. The supervisory board is authorized, provided that the supervisory board has been designated by the general meeting as the body authorized to issue shares, to issue, at the expense of a reserve of the company, with due observance of the provisions of Article 31, paragraph 3, shares and options to subscribe for new shares, provided that such shares and options are issued to employees of the company under a valid employee option scheme of the company.
1. A resolution for the issuance of shares shall stipulate the price and further conditions of issuance.
2. On the issuance of shares, each shareholder shall have a right of pre-emption in proportion to the aggregate nominal value of his shares. No pre- emptive rights shall exist with regard to shares issued against a contribution other than cash nor with regard to shares issued to employees of the company or employees of group companies.
3. Shareholders shall have a similar right of pre-emption if options are granted to subscribe for shares.
4. The company shall inform the shareholders of the issuance of shares in respect of which there is a right of pre-emption, or, as the case may be, the granting of options to subscribe for shares in respect of which there is a right of
pre-emption, as well as the period of time during which the right of pre-emption may be exercised, with due observance of the applicable provisions of Dutch law.
5. The right of pre-emption may, subject to due observance of the relevant provisions of the law, be limited or excluded by the supervisory board provided the supervisory board is designated as the authorized body in this respect by resolution of the general meeting for a fixed period of time not exceeding five years. Article 6 paragraph 3 shall apply correspondingly.
1. The full nominal amount of each share must be paid in on issue, as such as, if a share is subscribed for at a higher price, the balance of these amounts.
2. Payment for a share must be made in cash insofar as no other manner of payment has been agreed on. Payment in foreign currency can be made only after approval by the company, which approval shall be deemed given upon acceptance of foreign currency by the company.
3. The management board shall be authorized to enter into transactions concerning non-monetary contributions on common shares, and the other transactions referred to in Article 94 paragraph 1, Book 2 of the Civil Code, without the prior approval of the general meeting.
1. When issuing shares the company shall not be entitled to subscribe for its own shares.
2. The company shall be entitled to acquire its own fully paid up shares or depository receipts in respect thereof, provided either no valuable consideration is given or provided that:
a. the distributable part of the net assets is at least equal to the purchase price; and
b. the nominal value of the shares or the depository receipts in respect thereof to be acquired by the company itself, already held by the company or pledged for the benefit of the company, or which are held by a subsidiary, does not exceed one tenth of the issued share capital.
3. The validity of the acquisition shall be determined by the amount of the net assets according to the latest adopted balance sheet, decreased by the consideration for shares in the company's capital or depository receipts in respect thereof and distributions of profits or by the charge of any reserve to third parties which have fallen due by the company and its subsidiaries after the balance sheet date. If more than six months of a financial year have elapsed and the annual accounts have not been adopted, any acquisition in conformity with paragraph 2 shall not be permitted.
4. An acquisition for valuable consideration shall be permitted only if the general meeting has authorized the management board in this respect and after approval of the supervisory board. The authorization by the general meeting shall be valid for a period not exceeding eighteen months. The general meeting shall stipulate in the authorization how many shares or depositary receipts in respect thereof may be acquired, how they may be acquired, and between what limits the price must be.
5. An acquisition of shares in contravention of paragraphs 2-4 shall be void. Depository receipts in respect of shares acquired by the company in contravention of paragraphs 2-4 shall be transferred to all members of the management board by operation of law.
6. The transfer of shares owned by the company or depositary receipts in respect thereof held by the company shall be effected by virtue of a resolution of the management board after approval of the supervisory board. The resolution to such transfer shall also stipulate the conditions thereof.
7. No voting rights can be exercised in the general meeting in respect of any share belonging to the company or to any subsidiary of the company; the same applies to any share in respect of which either the company or any subsidiary holds depositary receipts. The beneficiary of a life interest in respect of a share held by the company itself or a subsidiary company is, however, not excluded from exercising the right to vote if the life interest was created before the share was held by the company or one of its subsidiaries. The company or its subsidiary may not exercise voting rights in respect of shares of which the company has a life interest.
8. In establishing to what extent shareholders exercise voting rights, are present or are represented, shares
for which no voting rights can be exercised shall not be taken into consideration.
9. The company may take its own shares or depositary receipts in respect thereof as pledge only if:
a. the shares to be pledged are fully paid up;
b. the aggregate nominal value of the shares and depositary receipts in respect thereof to be pledged and already held or held in pledge does not exceed one tenth of the issued capital, and
c. the general meeting has approved the pledge agreement.
10. Upon the proposal of the management board --which proposal must have prior approval from the supervisory board -- the general meeting shall have the power to decide to cancel shares acquired by the company in its own share capital, subject, however, to the statutory provisions relating hereto.
CHAPTER V
1. The transfer of shares and the creation and transfer of limited rights thereon shall take place in accordance with the provisions of Dutch law applicable thereto.
2. The shareholder shall have the voting rights in respect of the shares in which a life interest has been created. However, the voting rights shall accrue to the beneficiary of a life interest if it was so stipulated at the creation of the life interest. The shareholder who holds no voting rights and the beneficiary of a life interest who does hold voting rights, shall have the rights which the law attributes to holders of depository receipts issued with the company's co-operation. The rights referred to in the
preceding sentence shall not accrue to the beneficiary of the life interest who holds no voting rights.
3. The shareholder shall have the rights resulting from a share in which a life interest has been created relating to the acquisition of newly issued shares, such as stock dividends, it being understood that he/she shall have to compensate the beneficiary of the life interest for the value of these rights insofar as the latter is entitled thereto by virtue of his/her life interest.
4. When shares are pledged, the voting rights cannot be assigned to the pledgee. He shall not have the rights which the law attributes to holders of depository receipts issued with the company's co-operation.
5. The company shall not co-operates with the issuance of depository receipts in respect of its shares.
CHAPTER VI
1. The management of the company shall be constituted by a management board consisting of one or more members.
2. The number of members shall be determined by the supervisory board.
1. The members of the management board shall be appointed by the general meeting from a nomination of at least two persons for every position to be filled, which has been drawn up by the supervisory board.
2. The general meeting shall be free to make the appointment if the supervisory board has not made any nomination within, on or before the date which is three months after the vacancy occurs.
3. Every nomination made by the supervisory board shall be binding if made on or before the date which is three months after the vacancy occurs. The general meeting can only disturb the binding character of the nomination by resolution passed by a majority of at least two thirds of the votes cast, which two thirds of the votes represents more than half of the issued share capital.
1. A member of the management board may at any time be suspended or dismissed by the general meeting.
2. With respect to any suspension or dismissal other than on the proposal of the supervisory board, the general meeting can only pass a resolution based on a majority of at least two thirds of the votes cast which two thirds of the votes represent more than half of the issued share capital.
3. A member of the management board may at any time be suspended by the supervisory board. Such suspension may be discontinued by the general meeting at any time.
4. Any suspension may be extended one or more times, but may not last longer than three months in the aggregate. If at the end of that period no decision has been take on termination of the suspension, or on dismissal, the suspension shall cease.
The remuneration and further conditions of employment of every member of the management board shall be determined by the supervisory board.
1. Subject to the restrictions imposed by these articles of association, the management board shall be entrusted with the management of the company.
2. The management board may lay down rules regarding its own decision-making process. These rules shall be subject to the approval of the supervisory board.
3. Meetings of the management board shall only be held in the Netherlands, except that the management board may decide to have telephonic meetings. The management board may adopt resolutions without a meeting, provided the proposal concerned is submitted to all members of the management board and none of them objects to this manner of adopting resolutions.
4. The management board may determine which duties in particular each member of the management board will be charged with. The allocation of duties shall be subject to the approval of the supervisory board.
1. The management board as such is authorized to represent the company. Each member of the management board shall also be authorized to represent the company.
2. The management board may appoint staff members with general or limited power to represent the company. Each of these staff members shall be authorized to represent the company with due observance of any restrictions imposed on him/her. The management board shall determine such staff members' titles.
3. In the event of a conflict of interest between the company and a member of the management board, the company shall be represented by a member of the management board or another person, as the supervisory board shall designate for this purpose.
1. The supervisory board is entitled to require such resolutions of the management board to be subject to its approval as the supervisory board shall decide. Such resolutions shall be clearly specified and notified to the management board in writing.
2. The supervisory board is authorized to give the management board instructions concerning the general policy of the company for financial, social and economic matters. The management board shall act in accordance with such instructions.
3. The lack of approval referred to in this Article 17 does not affect the authority of the management board or its members to represent the company.
If a member of the management board is absent or is prevented from performing his duties, the remaining members or member of the management board shall be temporarily entrusted with the entire management of the company. If all members of the management board or the sole member of the management board are/is absent or are/is prevented from performing their duties, the management of the company shall be temporarily entrusted to the supervisory board, which shall then be authorized to entrust the management temporarily to one or more persons, whether or not from among its members.
CHAPTER VII
1. The company shall have a supervisory board, consisting of at least six and a maximum of nine members.
2. With due observance of the provisions of paragraph 1., the number of members of the supervisory board shall be determined by the supervisory board.
3. Where the number of members of the supervisory board falls below six, measures shall be taken forthwith to fill the number of members. In the meantime, the supervisory board shall keep all its powers.
1. Two members of the supervisory board shall be appointed by Praxair, Inc., a company organised under the laws of Delaware, so long as Praxair, Inc. owns, directly, or indirectly through a wholly owned subsidiary ("dochtermaatschappij"), at least twenty percent (20%) of the company's issued share capital. In case Praxair, Inc. owns at least ten percent (10%) of the issued share capital but less than twenty percent (20%) it shall appoint one member of the supervisory board.
2. All members of the supervisory board which shall not be appointed by Praxair, Inc. in accordance with paragraph 1., shall be appointed by the general meeting from a nomination of at least two persons for every position to be filled, which has been drawn up by the supervisory board.
3. The provisions in paragraph 2 and 3 of Article 12 shall likewise apply to an appointment by the general meeting.
4. No person who has reached the age of seventy-two may be appointed as a supervisory board member.
1. A member of the supervisory board who was appointed by Praxair, Inc. may at any time be suspended or dismissed by Praxair, Inc. This authority ceases to exist if the authority to appoint such members will cease to exist in accordance with article 20 paragraph 1. At the time the shareholding of Praxair, Inc. in the company falls below twenty percent (20%) of the issued share capital, Praxair Inc. shall inform the company for which member of the supervisory board it will remain the authority to suspend or dismiss such member.
2. A member of the supervisory board appointed by Praxair, Inc. with respect to whom Praxair, Inc. no longer has the authority to suspend or dismiss, shall retire no later than ninety (90) days after Praxair, Inc. has lost the authority to suspend or dismiss such member, unless the chairman decides within such period of ninety (90) days that this clause shall not apply.
3. Every member of the supervisory board who can not be suspended or dismissed by Praxair, Inc. may be suspended or dismissed by the general meeting at any time.
4. The provisions in paragraph 2 of Article 13 shall similarly apply to the suspension and dismissal of supervisory board members by the general meeting.
5. A supervisory board member shall retire no later than at the next annual meeting held after a period of three years following his appointment. A so-retired member of the supervisory board may be immediately re-elected.
6. Every member of the supervisory board shall retire no later than on the day on which the annual meeting is held in the financial year in which he reaches the age of seventy-two.
7. With due observance of the preceding paragraphs the supervisory board shall draw up a rotation plan.
The general meeting shall determine the remuneration for every member of the supervisory board.
1. It shall be the duty of the supervisory board to supervise the activities of the management board and the general course of affairs in the company and in the business connected therewith. It shall assist the management board with advice. In performing their duties, the supervisory board members shall act in accordance with the interests of the company and of the business connected therewith.
2. The management board shall supply the supervisory board, in due time, with the information required for the performance of its duties.
3. The supervisory board may delegate any of its powers to committees consisting of such member or members of its body as it thinks fit; any committee so formed shall, in the exercise of the power so delegated, conform to any regulations that may be imposed on it by the supervisory board.
1. The supervisory board shall elect a chairman from among its members, and a vice chairman who shall take the place of the chairman in the latter's absence. It shall appoint a secretary, who need not be a member of the supervisory board, and shall make arrangements for his/her substitution in case of absence.
2. In the absence of the chairman and the vice chairman at a meeting, the board members in attendance shall designate a chairman therefor.
3. The supervisory board shall meet whenever the chairman, or two other supervisory board members, or the management board, deem(s) such necessary, but if the supervisory board has not met for six months, any supervisory board member may call a meeting.
4. The secretary shall keep minutes of the proceedings at meetings of the supervisory board. The minutes shall be adopted in the same meeting or in the following meeting of the supervisory board and shall be signed by the chairman and the secretary as evidence thereof.
5. All resolutions of the supervisory board shall be adopted by a majority of the votes cast.
6. With the exception of Article 25 paragraph 4 under a., resolutions of the supervisory board shall only be valid if passed at a meeting at which the majority of the supervisory board members are present or represented. The supervisory board may also adopt resolutions in a telephone meeting or without a meeting, provided the proposal concerned is submitted to all supervisory board members and none of them objects to this manner of adopting resolutions. The secretary
shall draw up a report regarding a resolution thus adopted and shall attach the replies received to the report, which shall be signed by the chairman and the secretary.
7. A supervisory board member may be represented by a co-member of the supervisory board authorized in writing. The expression "in writing" shall include any message transmitted by current means of communication and received in writing. A supervisory board member may not act as representative for more than one co-member.
8. The supervisory board shall meet together with the management board as often as the supervisory board or management board deems necessary.
1. The company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the company) by reason of the fact that he is or was a supervisory director, member of the management board, officer, employee or agent of the company, or is or was serving at the request of the company as a supervisory director, member of the management board, officer, director, employee, trustee or agent of another company, a partnership, joint venture, trust or other enterprise or entity, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful or outside of his mandate. The termination of any action, suit or proceeding by a judgment, order, settlement, conviction, or upon a plea of nolo contendre or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and not in a manner which he reasonably could believe to be in or not opposed to the best interest of the company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
2. The company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or proceeding by or in the right of the company to procure a judgment in its favor, by reason of the fact that he is or was a supervisory director, member of the management board, officer or agent of the company, or is or was serving at the request of the company as a supervisory director, member of the management board, officer, director, employee, trustee or agent of another company, a partnership, joint venture, trust or other enterprise or entity, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the company, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for gross negligence or willful misconduct in the performance of his duty to the company, unless and only to the extent that the court in which such action or proceeding was brought or any other court having appropriate jurisdiction shall determine upon application that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnification against such expenses which the court in which such action or proceeding was brought or such other court having appropriate jurisdiction shall deem proper.
3. To the extent that a supervisory director, member of the management board, officer, employee or agent of the company has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraphs 1 and 2, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.
4. Any indemnification by the company referred to in paragraphs 1 and 2 shall (unless ordered by a court) only be made upon a determination that indemnification of the supervisory director, member of the management board, officer, director, employee, trustee or agent is proper under the circumstances because he had met the applicable standard of conduct set forth in paragraph 1 and 2 of this Article 25. Such determination shall be made:
a. by a majority of supervisory directors who are not parties to such action, suit or proceeding, even though less than a quorum, or;
b. if there are no supervisory directors who are not named as parties to such action, suit or proceeding or if the supervisory directors who are not named as parties to such action, suit or proceeding so direct, by independent legal counsel in a written opinion; or
c. by the general meeting of shareholders.
5. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the company in advance of the final disposition of such action, suit or proceeding upon a resolution of the supervisory board with respect to the specific case upon receipt of an undertaking by or on behalf of the supervisory director, member of the management board, officer, director, employee, trustee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the company as authorized in this article.
6. The indemnification provided for by this article shall not be deemed exclusive of any other right to which a person seeking indemnification may be entitled under the laws of the Netherlands as from time to time amended or under any by-laws, agreement, resolution of the general meeting of shareholders or of the disinterested members of the supervisory board or otherwise, both as to actions in his official capacity and as to actions in another capacity while holding such position, and shall continue as to a person who has ceased to be a supervisory director, member of the management board, officer, director, employee, trustee or agent and shall also inure to the benefit of the heirs, executors and administrators of such a person.
7. The company shall have the power to purchase and maintain insurance on behalf of any person who is or was a supervisory director, member of the management board, officer, employee or agent of the company, or is or was serving at the request of the company as a supervisory director, member of the management board, officer, director, employee, trustee or agent of another company, a partnership, joint venture, trust or other enterprise or entity, against any liability asserted against him and incurred by him in any such capacity or arising out of his capacity as such, whether or not the company would
have the power to indemnify him against such liability under the provisions of this Article.
8. Whenever in this article reference is made to the company, this shall include, in addition to the resulting or surviving company also any constituent company (including any constituent company of a constituent company) absorbed in a consolidation or merger which, if its separate existence had continued, would have had the power to indemnify its supervisory directors, members of the management board, officers, employees and agents, so that any person who is or was a supervisory director, member of the management board, officer, employee or agent of such constituent company, or is or was serving at the request of such constituent company as a supervisory director, member of the management board, officer, director, employee, trustee or agent of another company, a partnership, joint venture, trust or other enterprise or entity, shall stand in the same position under the provisions of this article with respect to the resulting or surviving company as he would have with respect to such constituent company if its separate existence had continued.
9. No person shall be personally liable to the company or its stockholders for monetary damages for breach of fiduciary duty as a supervisory director or member of the management board; provided, however, that the foregoing shall not eliminate or limit the liability of a supervisory director or member of the management board (1) for any breach of such individual's duty of loyalty to the company or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) for any transactions from which the director derived an improper personal benefit or (4) for personal liability which is imposed by Dutch law, as from time to time amended. Any amendment, repeal or modification of this Article 25 shall not adversely affect any right or protection of any person with respect to any act or omission occurring prior to such amendment, repeal or modification.
CHAPTER VIII
1. The fiscal year of the Company shall be the calendar year.
2. Annually, and not later than five months after the end of the fiscal year, the management board shall draw up the annual accounts, unless, by reason of special circumstances, this period is extended with a maximum extension of six months by the general meeting.
3. Within the period referred to in paragraph 2, the annual accounts shall be deposited at the office of the company for inspection by the shareholders. Within this period of time, the management board shall also submit the annual report. The statement of the accountant, as mentioned in Article 29, and the additional information required by virtue of the law shall be added to the annual accounts.
4. The annual accounts shall be signed by all the members of the management board; if the signature of one or more of the members is lacking, this shall be stated and reasons given.
1. The Company shall appoint an accountant to audit the annual accounts.
2. Such appointment shall be made by the general meeting. This resolution of the general meeting shall require the approval of the supervisory board. If the general meeting fails to make an appointment, the supervisory board shall be competent to do so or, in the absence of the supervisory board members or in the event the supervisory board fails to do so, the management board shall be competent to do so. The appointment of an accountant shall not be limited by virtue of any nomination; the appointment may, at all times, be revoked
by the general meeting or by the supervisory board or management board if either of the latter boards has appointed the accountant.
3. The accountant shall issue a report on his audit examination to the supervisory board and the management board.
4. The accountant shall give the results of his investigations in a declaration as to the faithfulness of the annual accounts.
1. The management board shall submit simultaneously the annual accounts and the annual report to the supervisory board.
2. The annual accounts shall be signed by the members of the supervisory board; if the signature of one or more of them is lacking, this shall be stated and reasons given.
3. The supervisory board shall present a report on the annual accounts to the general meeting.
1. The Company shall ensure that the annual accounts, the annual report and the information to be added by virtue of the law are kept at its office as of the date on which the annual meeting is convened. Shareholders, and beneficiaries of a life interest in shares to whom the right to vote the shares accrue, may inspect the documents at such place and obtain a copy thereof, free of charge.
2. The general meeting shall adopt the annual accounts. The annual accounts may not be adopted in the event that the general meeting has been unable to inspect the accountant's declaration referred to in Article 27, paragraph 4, unless a legal ground is given in the information required to be added by law for the lack of the accountant's declaration referred to in Article 27, paragraph 4.
3. The unconditional adoption of the annual accounts by the general meeting shall serve to constitute a
discharge of the management board members for their management and for the supervisory board members for their supervision insofar as such management supervision is apparent from the annual accounts.
1. The Company shall publish the annual accounts within eight days following the adoption thereof. The publication shall be effected by the deposit of a complete copy in the Dutch language or, if such copy was not prepared, a copy in the French, German or English language, at the offices of the Trade Register in whose district the Company has its official seat according to these articles of association. The date of adoption must be stated on the copy.
2. If the annual accounts are not adopted within seven months of the termination of the fiscal year, in accordance with the legal requirements, then the management board shall, without further delay, publish the prepared annual accounts in the manner prescribed in paragraph 1; it shall be noted on the annual accounts that they have not yet been adopted.
3. In the event that the general meeting shall have extended the period for the preparation of the annual accounts in accordance with Article 28 paragraph 2, then the last preceding paragraph shall apply with effect from the date falling two months from the termination of such period.
4. A copy of the annual report, produced in the same language or in Dutch, shall, together with the additional information required by virtue of law, be published at the same time and in the same manner as the annual accounts. Insofar as the law permits, the foregoing shall not apply if copies of those documents are held at the office of the company for inspection by any person and, upon request, full or partial copies thereof are supplied at a price not exceeding the cost; the company shall make an official return thereof for filing in the Trade Register.
5. The publication shall be effected with due observance of the applicable legal exemptions.
1. From the profits appearing from the annual accounts as adopted, such an amount shall be reserved by the company as shall be determined by the management board, which resolution requires the approval of the supervisory board. The profits remaining thereafter shall be treated in accordance with the provisions of the following paragraphs of this article.
2. The profits remaining after the reservation referred to in paragraph 1 are at the disposal of the general meeting for distribution on the shares equally and proportionally and/or for reservation.
3. A distribution can only take place up to the distributable part of the net assets.
4. Distributions of profits shall take place after adoption of the annual accounts from which it shall appear that approval of such accounts has been given.
5. The management board may, subject to due observance of the provisions of Article 31, paragraph 3, and with the approval of the supervisory board, resolve to pay an interim dividend in anticipation of the final dividends.
6. On the proposal of the management board, which proposal shall require the prior approval of the supervisory board, subject to the due observance of the provisions of Article 31, paragraph 3, the general meeting may resolve to make distributions at the expense of any reserve.
7. The supervisory board or -- in case the supervisory board is no longer authorized to issue shares in accordance with Article 6 -- the general meeting, may determine to distribute stock dividends.
1. The date on which dividends and other payments become payable shall be announced in accordance with Article 43. Such date may differ for shares for which share
certificates are issued and shares for which no share certificates are issued.
2. The management board may resolve to make payments in the currency of the country where these payments are made payable.
3. Any claim of a shareholder for payment shall be barred after five years have elapsed.
CHAPTER IX
1. Annually, and not later than six months after the end of the fiscal year, the annual meeting shall be held.
2. The agenda for such meeting shall set forth, inter alia, the following points for discussion:
a. the annual report;
b. adoption of the annual accounts;
c. appropriation of profits;
d. filling of any vacancies in the management board and/or supervisory board and, if necessary, the appointment of the accountants;
e. other proposals put forward for discussion and announced with due observance of Article 35 by the supervisory board, the management board or by the shareholders and beneficiaries of a life interest to whom the voting right has been granted, representing, in the aggregate, at least one tenth of the issued capital.
1. Other general meetings of shareholders shall be held as often as the management board or the supervisory board deems such necessary.
2. Shareholders, and beneficiaries of a life interest to whom the voting right has been granted, representing in the aggregate at least one tenth of the issued capital, may request the management board to convene a general meeting of shareholders, stating the subjects to be discussed. If the management board has not convened a meeting within four weeks in such a manner that the meeting can be held within six weeks after the request has been made, the persons who have made the request shall be authorized to convene a meeting themselves.
1. General meetings of shareholders shall be convened by the management board.
2. The convocation shall be given no later than on the fifteenth day prior to the date of the meeting.
3. The convocation shall specify the subjects to be discussed. Subjects that were not specified in the notification may be announced at a later date, subject to due observance of the requirements set out in this article.
4. The convocation shall be made in the manner stated in Article 43.
As long as the entire issued capital is represented at a general meeting of shareholders, valid resolutions can be adopted on all subjects brought up for discussion, even if the formalities prescribed by law or by the articles of association for the convocation and holding of meetings have not been complied with, provided such resolutions are adopted unanimously.
The general meetings of shareholders shall be held in Amsterdam, Rotterdam, The Hague or Schiphol Airport (municipality Haarlemmermeer). In meetings held elsewhere, resolutions can be validly adopted provided the entire issued capital is present.
1. The general meetings of shareholders shall be presided over by the chairman of the supervisory board or, in his absence, by the vice chairman of the supervisory board; in the event that the latter is also absent, the supervisory board members present shall elect a chairman from their midst. The supervisory board may designate another person to act as chairman of a general meeting of shareholders.
2. If the chairman has not been appointed in accordance with paragraph 1, the shareholders present at such meeting shall, themselves, choose a chairman.
1. Minutes of the proceedings at any general meeting of shareholders shall be kept by a secretary to be designated by the chairman. The minutes shall be confirmed by the chairman and the secretary and shall be signed by them as proof thereof.
2. The supervisory board, the chairman or the person who has convened the meeting may determine that notarial minutes of the proceedings of the meeting shall be drawn up. The notarial minutes shall be co-signed by the chairman.
3. The management board shall keep a record of the resolutions made at this general meeting. If the management board is not represented at a general meeting, the chairman of the meeting shall provide the management board with a transcript of the resolutions made as soon as possible after the meeting. The records shall be deposited at the offices of the company for inspection by the shareholders and the holders of depositary receipts. Upon request, each of them shall be provided with a copy or an extract of such record at not more
than the actual cost thereof. Shareholders in this respect shall include beneficiaries of a life interest who hold voting rights.
1. Each shareholder entitled to vote and each beneficiary of a life interest or pledgee to whom the voting rights accrue shall be entitled to attend the general meeting of shareholders, to address the meeting and to exercise his voting rights. Where it concerns registered shares, the management board must be notified in writing of the intention to attend the meeting. Such notice must be received by the management board not later than on the date mentioned in the notice of the meeting. Where it concerns bearer shares the share certificates must be lodged not later than on the date mentioned in the notice of the meeting, at the place mentioned therein.
2. The right to take part in the meeting in accordance with paragraph 1 may be exercised by a proxy authorised in writing, provided that the power of attorney has been received by the management board not later than on the date mentioned in the notice of the meeting.
3. The date mentioned in the notice of the meeting, referred to in paragraphs 1 and 2, cannot be prior than the seventh day prior to the date of the meeting.
4. If the voting rights on a share accrue to the beneficiary of a life interest or to a pledgee, instead of to the shareholder, the shareholder is also authorised to attend the general meeting of shareholders and to address the meeting, provided that, where it concerns registered shares, the management board has been notified of the intention to attend the meeting in accordance with paragraph 1, and, where it concerns bearer shares, the lodging as prescribed by paragraph 1 has taken place. Paragraph 2 applied accordingly.
5. Each share confers the right to cast one vote.
6. Each person entitled to vote or his proxy shall sign the attendance list.
7. The members of the supervisory board and of the management board shall, as such, have the right to advise the general meeting of shareholders.
8. The chairman shall decide whether persons other than those who shall be admitted in accordance with the above provisions of this article shall be admitted to the meeting.
1. Insofar as no greater majority is prescribed by law or these articles of association, all resolutions of the general meeting shall be adopted by a majority of the votes cast.
2. If, in an election of persons, a majority is not obtained, a second vote shall be taken. If, again, a majority
is not obtained, further votes shall be taken until either one person obtains the absolute majority or the election is between two persons who have received an equal number of votes. In the event of a further election (not including the second free vote), the election shall be between the persons who participated in the preceding election, with the exception of the person who received the smallest number of votes in that preceding election. If, in that preceding election, more than one person received the smallest number of votes, it shall be decided by lot who of these persons shall no longer participate in the new election. If the votes are equal in the election between the two, it shall be decided by lot who is to be chosen. If there is a tie vote in a vote for the election of persons out of a binding list of nominees, the first person on that list shall be elected.
3. If there is a tie vote on a matter other than a vote for the election of persons, the proposal shall be rejected.
4. Votes need not be held in writing. The chairman is, however, entitled to decide that a vote shall be by secret ballot. If the vote concerns an election of persons, any person present at the meeting and entitled to vote can also demand a vote by a secret ballot.
5. Abstentions and invalid votes shall not be counted as votes that have been cast.
6. Voting by acclamation shall be allowed if none of the persons present and entitled to vote objects to it.
7. The chairman's decision at the meeting about the outcome of a vote shall be final and conclusive. The same shall apply to the contents of an adopted resolution regarding the voting on an unwritten proposal. If, however, the correctness of that decision is challenged immediately after its pronouncement, a new vote shall be taken if either the majority of the persons present and entitled to vote so requests, or, if the original voting was taken by roll call or in writing, any person present and entitled to vote so requests. As a result of the new vote, the original vote shall have no legal consequence and shall be cancelled.
CHAPTER X
1. All announcements for the general meetings of shareholders, all notifications concerning dividend and other payments and all other communications to holders of registered shares shall be effected by means of letters mailed to the addresses as shown in the register of shareholders.
In case there are bearer shares issued any outstanding announcements, notifications and other communications to shareholders shall also be effected by means of a notice in a national daily paper and, in case of a listing on the Amsterdam Stock Exchange, in the Official Price List, without prejudice to the provisions of article 96a paragraph 4, Book 2 of the Civil Code.
2. The expression "shareholders" in paragraph ? shall include the beneficiaries of a life interest and pledgees to which the voting rights on shares accrue.
CHAPTER XI
1. When a proposal to amend the articles of association or to dissolve the company is to be submitted to the general meeting, such must be mentioned in the notice of the general meeting of shareholders and, if an amendment to the articles of association is to be discussed, a copy of the proposal, setting forth the text of the proposed amendment verbatim, shall at the same time be deposited at the company's office and, if shares are listed on the Amsterdam Stock Exchange, at the office of a member of the Amsterdam Stock Exchange to be designated in the notice of the meeting or another payment office as referred to in the relevant Rules of the Amsterdam Stock Exchange for inspection and shall be held available for shareholders as well as for beneficiaries of a life interest and pledgees to which the voting rights on shares accrue, free of charge until the end of the meeting.
2. A proposal to amend the articles of association, to legally merge or to dissolve the company shall require prior approval of the supervisory board.
1. In the event of dissolution of the company by virtue of a resolution of the general meeting, the members of the management board shall be charged with the liquidation of the business of the company, and the members of the supervisory board with the supervision thereof.
2. During liquidation, the provisions of these articles of association shall remain in force to the extent possible.
3. The balance remaining after payment of creditors shall be transferred to the shareholders.
4. The liquidation shall take place in accordance with the provisions of Section 1 of Volume 2 of the Civil Code.
Finally the appearer has declared:
a. at the incorporation the issued share capital amounts to one hundred thousand Dutch guilders (NLG 100,000.--). The incorporator participates in the issued capital for all ten million (10,000,000) shares. The issuance takes place at par value. The issued share capital has been paid up in cash. Payment in foreign currency is permitted. The documents which must be attached by virtue of Section 93a Book 2 of the Civil Code have been attached to this instrument. The Company accepts the payments on the shares issued at the incorporation;
b. the first members of the management board are:
Mr. Robert Francis Xavier Fusaro, residing at 8 Rebel Road, Westport, Connecticut, United States of America,
born at New York, United States of America, on the twenty-second day of November, nineteen hundred forty-one; and
Mr. James Shiels Sawyer, residing at 10 Ben Court, Old Greenwich, Connecticut, United States of America, born at Connecticut, United States of America, on the third day of November nineteen hundred fifty-six.
c. the provisions in these articles with respect to the supervisory board shall only come into effect as per the moment that at least one supervisory director has been appointed by the general meeting and has been filed with the Trade Register of the Chamber of Commerce and Industry.
The authority and powers of the supervisory board pursuant to Article 17 and 18 of these articles shall until such time be exercised by the general meeting;
The ministerial declaration of no objections was granted on the twentieth day of November nineteen hundred ninety-six, under number N.V. 579.328, as stated in the certified draft of this instrument, which has been attached to this instrument.
The appearer is known to me, notary.
THIS DEED, drawn up to be kept in the notary's custody, was executed in Rotterdam on the date first above written.
Before reading out, a concise summary of the contents of this instrument was given to the appearer. He then declared that he had noted the contents and did not want a full reading thereof. Thereupon, after limited reading, this instrument was signed by the appearer and by me, notary.
The foregoing represents, to the best of the Company's knowledge, a fair and accurate translation from Dutch of the Articles of Association of Chicago Bridge & Iron Company N.V.
CHICAGO BRIDGE & IRON COMPANY N.V.
By: /s/ Robert F.X. Fusaro
--------------------------------
Robert F.X. Fusaro
Managing Director
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EXHIBIT 4.1
SPECIMEN
CERTIFICATE NUMBER COMMON SHARES
CHICAGO BRIDGE & IRON COMPANY N.V.
INCORPORATED UNDER THE CUSIP
LAWS OF THE NETHERLANDS SEE REVERSE FOR CERTAIN
WITH ITS SEAT AT DEFINITIONS
AMSTERDAM, THE
NETHERLANDS
(Commercial Register
Number 286.441)
THIS CERTIFIES THAT
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IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE COMMON SHARES OF THE PAR VALUE OF NLG 0.01
(NETHERLANDS GUILDER) OF
CHICAGO BRIDGE & IRON COMPANY N.V. (the "Company") transferable on the books of the Company by the holder hereof in person or by duly authorized attorney upon surrender of this share certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be subject to all of the provisions of the laws of The Netherlands, to the Articles of Association of the Company, if and as amended (copies of which are available at the office of the Company at Amsterdam, The Netherlands and at the office of the Transfer Agent and Registrar in New York), and to all provisions whereof the holder hereof hereby asserts and is bound. The Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile signatures of the duly authorized officers of the
Company
Dated: Countersigned and Registered
HARRIS TRUST AND SAVINGS BANK,
New York Transfer Agent
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CHICAGO BRIDGE & IRON COMPANY N.V.
Transfers of Common Shares may only be made in accordance with Article [ ] of the Articles of Association of the Company. The undersigned Assignor hereby certifies that all requirements relating to the transfer of Common Shares have been complied with. The Company will furnish without charge to each shareholder who so requests information about the designations, preferences and relative, participating, optional or other special rights of each class of shares or series thereof of the Company, and about the qualifications, limitations or restrictions of such preferences and/or rights. Such request may be made to the office of the Company at Amsterdam, The Netherlands, or to the office of the Transfer Agent and Registrar in New York. Keep this Certificate in a safe place. If it is lost, stolen or destroyed the Company may require a bond and/or indemnity as a condition to the issuance of a replacement certificate. The share(s) represented by this Certificate have been issued by CHICAGO BRIDGE & IRON COMPANY N.V., a company organized and existing under the laws of The Netherlands (the "Company"). The Company has authorized the Transfer Agent to acknowledge the transfer of share(s) on its behalf, which acknowledgment is required by Netherlands law.
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM - as tenants in UNIF GIFT MIN ACT _______ Custodian _______
common (Cust.) (Minor)
TEN ENT - as tenants by under Uniform Gifts to
the entireties Minors
JT TEN - as joint tenants with Act ___________________
right of ownership and (State)
not as tenants in common
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Additional abbreviations may also be used though not listed.
For value received _________________________________________ hereby sell and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
Such transferee accepts title to _______ shares each with a nominal value of
0.01 Dutch Guilder (NLG 0.01) in the share capital of the Company, represented
by this Certificate. The parties waive their right to invoke a rescission of
this agreement on any ground whatsoever. This agreement is governed by the laws
of The Netherlands.
Date ______________
X_____________________________
(Signature)
X_____________________________
(Signature)
ACKNOWLEDGMENT
The undersigned selling on behalf of the Company, hereby acknowledges the transfer of the Common Shares (as described above) and confirms that entry hereof has been made in the Company's shareholders' register as of ________
CHICAGO BRIDGE & IRON COMPANY N.V.
By: ____________________________
Date: __________________________
DRAFT: 3/16/97 8:23 PM #25666 v1 (JSY01!.DO
EXHIBIT 5
[Letterhead of Loeff Claeys Verbeke]
[Form of Opinion]
Chicago Bridge & Iron Company N.V.
P.O. Box 74658
1070 RR Amsterdam
The Netherlands
Dear Sirs:
We have acted as special counsel on matters of Netherlands law to Chicago Bridge & Iron Company N.V. (the "Company") in connection with the offer for sale by Praxair, Inc. of Common Shares, par value NLG 0.01 (the "Shares"), in the capital of the Company.
In rendering this opinion, we have examined and relied upon the following documents:
1. The Articles of Association (statuten) of the Company as currently in effect, dated [ ] March 1997 (the "Articles of Association");
2. An excerpt dated [ ] March 1997 of the registration of the Company in the Trade Register of the Chamber of Commerce of Amsterdam;
3. A copy of the Registration Statement on Form S-1 of the Company relating to the offering (the "Registration Statement"), filed with the United States Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended;
and such other documents and such other laws, rules, regulations, and the like, as we have deemed necessary as a basis for the opinions hereinafter expressed.
In the Amsterdam and Rotterdam offices the practice is conducted by Loeff Claeys Verbeke (Nederland), a professional partnership consisting of private limited liability companies and individuals. A list of partners is available on request. The general conditions of Loeff Claeys Verbeke (Nederland), which provide for limitation of liability, are applicable.
Capitalized terms used but not defined herein are used as defined in the Registration Statement.
For the purpose of the opinion expressed herein, we have assumed the conformity to the originals of all documents submitted to us as copies.
Subject to the foregoing, we are of the opinion that the Common Shares are validly issued, fully paid and non-assessable.
In this opinion Netherlands legal concepts are expressed in English terms and not in their original Dutch terms. The concepts concerned may not be identical to the concepts described by the same English term as they exist under the laws of other jurisdictions. This opinion may, therefore, only be relied upon under the express condition that any issues of interpretation or liability arising thereunder will be governed by Netherlands law and be brought before a Netherlands court.
This opinion is strictly limited to the matters stated herein and may not be read as extending by implication to any matters not specifically referred to. Nothing in this opinion should be taken as expressing an opinion in respect of any representations or warranties, or other information, contained in the Registration Statement.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to us in the prospectus in the Registration Statement. In giving such consent, we do not thereby admit that we are within the category of persons whose consent is required under the Securities Act, or the rules and regulations of the SEC thereunder.
Yours faithfully
EXHIBIT 8.1
[LETTERHEAD OF CAHILL GORDON & REINDEL]
Chicago Bridge & Iron Company N.V.
P.O. Box 74658
1070 BR Amsterdam
The Netherlands
Gentlemen:
We hereby confirm the discussion set forth in the Prospectuses for Chicago Bridge & Iron Company N.V. (the "Company") dated ________, 1997, contained in the Registration Statement on Form S-1 of the Company, which discussion is set forth under the heading "Taxation-United States Federal Income Taxes."
We hereby consent to the filing of this opinion as an exhibit to such Registration Statement and the reference to the above-mentioned opinion under "Taxation-United States Federal Income Taxes." In giving such consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
EXHIBIT 8.2
[Letterhead of Loeff Claeys Verbeke]
[Form of Opinion]
Chicago Bridge & Iron Company N.V.
P.O. Box 74658
1070 RR Amsterdam
The Netherlands
Dear Sirs:
We have acted as your special tax counsel in The Netherlands in connection with the Registration Statement on Form S-1 as filed by you with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act"), in relation to the proposed public offering of Common Shares of Chicago Bridge & Iron Company N.V. (the "Issuer") to be sold by underwriters represented by Credit Suisse First Boston Corporation, Goldman, Sachs & Co., Smith Barney Inc. and UBS Securities LLC. Capitalized terms to which no meaning is assigned herein have the meaning assigned thereto in the Prospectus.
We have advised the Issuer in connection with the description of the material Netherlands tax consequences to an owner of Common Shares who is not, or is not deemed to be, a resident of The Netherlands for purposes of the relevant tax codes (a "Netherlands Shareholder") that appears under the heading "Taxation - Netherlands Taxes" in the Prospectus included in the Registration Statement (the "Netherlands Tax Description") and we confirm that the Netherlands Tax Description is accurate in all material respects. While the Netherlands Tax Description discusses the material Netherlands tax consequences of the purchase, ownership and disposition of the Common Shares by a Nonresident Shareholder, it does not purport to discuss all Netherlands tax considerations and consequences and
In the Amsterdam and Rotterdam offices the practice is conducted by Loeff Claeys Verbeke (Nederland), a professional partnership consisting of private limited liability companies and individuals. A list of partners is available on request. The general conditions of Loeff Claeys Verbeke (Nederland), which provide for limitation of liability, are applicable.
our opinion is limited to those Netherlands tax consequences specifically discussed therein.
We hereby consent to the filing of this letter as an exhibit to the Registration Statement and further consent to the reference to our firm under the heading "Taxation - Netherlands Taxes" in the Prospectus forming a part of the Registration Statement. This consent is not to be construed as an admission that we are a person whose consent is required to be filed with the Registration Statement under the provisions of the Act.
Very truly yours,
EXHIBIT 10.1
This Indemnification Agreement is dated [ ] between:
Chicago Bridge & Iron Company N.V., a public company with limited
liability, with its statutory seat and offices at Koningslaan 34, 1075 AD,
Amsterdam, registered with the Trade Register in Amsterdam under number:
[ ] (the "Company"); and
[ ] (the "Indemnitee").
WHEREAS:
A. It is essential to the Company to retain and attract as [supervisory directors / members of the management board / officers / employees] the most capable persons available;
B. Indemnitee is a [supervisory director / member of the management board / officer / employee] of the Company;
C. Article 25 of the Articles of Association of the Company provides for an indemnification of, among others, supervisory board directors and members of the management board of the Company;
D. The Company and the Indemnitee wish to confirm and supplement the indemnification referred to above in C. as follows;
NOW THEREFORE IT IS AGREED AS FOLLOWS:
1. The Company shall indemnify Indemnitee if he was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (together: "Proceedings")( (other than an action by or in the right of the Company) by reason of the fact that he is or was a [supervisory director / member of the management board / officer / employee] of the Company, or is or was serving at the request of the Company as a supervisory di-
rector, member of the management board, officer, director, employee, trustee or agent of another company, a partnership, joint venture, trust or other enterprise or entity, against all expenses (including attorneys' fees), judgements, fines and amounts paid in settlement (together: "Expenses") actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful or outside of his mandate. The termination of any Proceeding by a judgement, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Indemnitee did not act in good faith and not in a manner which he reasonably could believe to be in or not opposed to the best interest of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
2. The Company shall indemnify the Indemnitee if he was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company to procure a judgement in its favour, by reason of the fact that he is or was a [supervisory director / member of the management board / officer/ employee] of the Company, or is or was serving at the request of the Company as a supervisory director, member of the management board, officer, director, employee, trustee or agent of another company, a partnership, joint venture, trust or other enterprise or entity, against all Expenses actually and reasonably incurred by him in connection with such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for gross negligence or wilful misconduct in the performance of his duty to the Company, unless and only to the extent that the court in which such action or proceeding was brought or any other court having appropriate jurisdiction shall determine upon application that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnification against such Expenses which the court in which such action or proceeding was brought or such other court having appropriate jurisdiction shall deem proper.
3. To the extent that the Indemnitee has been successful on the merits or otherwise in defense of any Proceeding, referred to in Articles 1. and 2., or in defense of any claim, issue or matter therein, he shall be indemnified against Expenses actually and reasonably incurred by him in connection therewith.
4. Any indemnification by the Company referred to in Articles 1. and 2. shall (unless ordered by a court) only be made upon a determination that indemnification of the Indemnitee is proper under the circumstances because he had met the applicable standard of conduct set forth in Articles 1. and 2. of this Agreement. Such determination shall be made:
a. by a majority of supervisory directors who are not parties to such action, suit or proceeding, even though less than a quorum, or;
b. if there are no supervisory directors who are not named as parties to such action, suit or proceeding or if the supervisory directors who are not named as parties to such action, suit or proceeding so direct, by independent legal counsel in a written opinion; or
c. by the general meeting of shareholders of the Company .
5. The indemnification provided for by this Agreement shall not be deemed exclusive of any other right to which the Indemnitee may be entitled under the laws of the Netherlands as from time to time amended or under any by-laws, agreement, resolution of the general meeting of shareholders of the Company or of the disinterested members of the supervisory board of the Company or otherwise, both as to actions in his official capacity and as to actions in another capacity while holding such position, and shall continue after the Indemnitee has ceased to be a [supervisory director / member of the management board / officer / employee] and shall also inure to the benefit of the heirs, executors and administrators of the Indemnitee.
6. Expenses incurred by the Indemnitee pursuant to Articles 1. and 2. in any Proceeding shall be paid by the Company in advance as soon as practicable but not later than three business days after receipt of the written request of the Indemnitee provided that Indemnitee shall
(i) affirm in such written request that he acted in good faith and in a manner which he reasonably believed to be (in the case of conduct in his official capacity) in the best interests of the Company or (in all other cases) not opposed to the best interests of the Company and (ii) undertake to repay such amount to the extent that it is ultimately determined that Indemnitee is not entitled to indemnification, and further provided that a determination has been made that the facts then known would not preclude indemnification pursuant to the terms of this Agreement.
7. (a) The Company shall from time to time make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors with coverage for losses from wrongful acts, or to insure the Company's performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance against the protection afforded by such coverage.
(b) Indemnitee hereby releases the Company and its respective authorized representatives from any claims for indemnification hereunder if and to the extent that Indemnitee receives proceeds from any liability insurance policy or other third-party source in payment or reimbursement for such claims. Indemnitee hereby agrees to assign to the Company all proceeds Indemnitee receives under any such insurance policy or third-party agreement to the extent of the amount of indemnification made to Indemnitee under the terms of this Agreement. Finally, Indemnitee shall cause each insurance policy or other third-party agreement by which the Indemnitee may be entitled to payment or reimbursement to provide that the insurance company or the third-party agreement by which the Indemnitee may be entitled to payment or reimbursement to provide that the insurance company or the third party waives all right of recovery by way of subrogation against the Company in connection with any claim for indemnification under this Agreement. If such waiver of subrogation cannot be obtained except with the payment of additional sums in premiums or otherwise, the Indemnitee shall notify the Company of this fact. The Company shall then have ten (10) days after re-
ceiving such notice to agree to pay such additional sums. If a waiver of subrogation rights is not obtainable at any price or if the Company shall fail to agree to pay such additional sums, Indemnitee shall be relieved of the obligation to obtain the waiver of subrogation rights with respect to any particular insurance policy or third-party agreement.
8. Whenever in this Agreement reference is made to the Company, this shall include, in addition to the resulting or surviving company also any constituent company (including any constituent company of a constituent company) absorbed in a consolidation or merger which, if its separate existence had continued, would have had the power to indemnify Indemnitee, so that Indemnitee shall stand in the same position under the provisions of this article with respect to the resulting or surviving company as he would have with respect to such constituent company if its separate existence had continued.
9. Indemnitee shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a [supervisory director / member of the management board]; provided, however, that the foregoing shall not eliminate or limit his liability (1) for any breach of Indemnitee's duty of loyalty to the Company or its stockholders, (2) for acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, (3) for any transaction from which the director derived an improper personal benefit or (4) for personal liability which is imposed by Dutch law, as from time to time amended.
10. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The provisions of this Agreement (including any provision within a single section, paragraph or sentence) shall be severable in accordance with this Article 11. If this Agreement or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, the Company shall nevertheless indemnify Indemnitee as to any Expenses with respect to any Proceedings to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated or by any other applicable law, and this Agreement shall remain enforceable to the fullest extent permitted by law.
11. This Agreement is supplemental to and does not in any respect replace or alter the provisions of Article 25 of the Company's Articles of Association.
12. This Agreement shall be governed by and construed in accordance with the laws of The Netherlands. In relation to any legal action or proceedings arising out of or in connection with this Agreement, the parties to this Agreement irrevocably submit to the jurisdiction of the competent court in Amsterdam, The Netherlands, and its appellate courts.
Signed in [ ] on [ ] 1997.
[Indemnitee]
EXHIBIT 10.2
TABLE OF CONTENTS
CHICAGO BRIDGE & IRON
EMPLOYEE STOCK PURCHASE PLAN (1997)
(Effective April 1, 1997)
ARTICLE I: DEFINITIONS......................................................1
1.01 COMPANY:..........................................................1
1.02 COMPENSATION:.....................................................1
1.03 CONTRIBUTION PERIOD:..............................................1
1.04 INCLUDED EMPLOYEE:................................................1
1.05 MARKET VALUE:.....................................................2
1.06 PARENT:...........................................................2
1.07 PLAN:.............................................................2
1.08 PLAN ADMINISTRATOR:...............................................2
1.09 PARTICIPANT:......................................................2
1.10 PARTICIPATING AFFILIATE:..........................................2
1.11 PURCHASE DATE:....................................................2
ARTICLE II: EFFECTIVE DATE..................................................2
ARTICLE III: PARTICIPATION..................................................2
3.01 PARTICIPATION:....................................................2
3.02 ELECTION TO CONTRIBUTE:...........................................2
3.03 ELECTION OF TYPE OF INVESTMENT:...................................2
3.04 INTEREST ON CONTRIBUTIONS:........................................3
ARTICLE IV: EMPLOYEE STOCK PURCHASE ACCOUNT.................................3
4.01 GRANT OF OPTIONS:.................................................3
4.02 PURCHASE PRICE:...................................................3
4.03 WITHDRAWAL OF EMPLOYEE STOCK PURCHASE ACCOUNT BALANCE:............3
4.04 STOCK AVAILABLE FOR OPTIONS:......................................3
ARTICLE V: LIMITATIONS ON STOCK PURCHASE....................................3
5.01 INELIGIBLE EMPLOYEES:.............................................3
5.02 NONTRANSFERABILITY OF OPTION:.....................................4
5.03 RECAPITALIZATION ADJUSTMENT:......................................4
5.04 NOTICES OF DISPOSITIONS OF STOCK:.................................4
ARTICLE VIII: AMENDMENT OF THE PLAN.........................................4
ARTICLE IX: EXPIRATION OR TERMINATION OF THE PLAN...........................5
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CHICAGO BRIDGE & IRON
EMPLOYEE STOCK PURCHASE PLAN (1997)
(Effective April 1, 1997)
Chicago Bridge & Iron Company, in order to give its employees and those of Participating Affiliates an opportunity to participate in the growth of the Company by investment and reinvestment in the common stock of Chicago Bridge & Iron Company N.V., has established the Chicago Bridge & Iron Employee Stock Purchase Plan (1997).
ARTICLE I: DEFINITIONS
Unless the context clearly indicates otherwise, the following terms when used in this Plan shall have the following meanings:
1.01 COMPANY: Chicago Bridge & Iron Company, a Delaware corporation, and its respective corporate successors, if any.
1.02 COMPENSATION: The total of all wages and salaries, overtime, shift and other premiums and bonuses and other incentive payments paid by the Company or any Participating Affiliate to an employee or former employee with respect to a given period of employment during which the employee is a Participant, but excluding the following:
(b) All payments made by the Company, Parent or any Participating Affiliate for services performed outside the United States which are of a character not customarily made by the Company for services performed within the United States;
(c) All payments identified when made as an allowance for reimbursement of actual or estimated expenses incurred or to be incurred by the recipient of such payments; and
(d) Any income realized from the grant, receipt, modification, relinquishment, exchange, assignments, transfer, sale or other disposition of securities of the Company, Parent or any other Participating Affiliate, or rights or options with respect thereto.
1.03 CONTRIBUTION PERIOD: Either of two periods of each calendar year during which payroll deductions are made under the Plan. The first such Contribution Period shall begin with the start of the pay period which includes January 1 and the second such Contribution Period shall begin with the start of the pay period which includes July 1.
1.04 INCLUDED EMPLOYEE: Any person who is either: a) an employee of the Company, Parent or of a Participating Affiliate employed within the United States, or b) an employee of the Company or a Participating Affiliate employed outside of the United States who is paid from a payroll constituting U.S. source income.
1.05 MARKET VALUE: The closing price reported for a date for shares of the common stock of the Parent traded on the New York Stock Exchange or if such price is not so reported for that date, the value of a share of such common stock on that date as determined in such reasonable manner as the Board of Directors of the Company determines and describes in a written notice sent to all holders of options granted hereunder and affected by that determination.
1.06 PARENT: Chicago Bridge & Iron Company N.V., a Netherlands corporation, or its corporate successor, if any, constituting the parent corporation of the Company.
1.07 PLAN: The Chicago Bridge & Iron Employee Stock Purchase Plan (1997), as from time to time amended.
1.08 PLAN ADMINISTRATOR: The person or committee from time to time designated by the Board of Directors of the Company for the purposes of administering and conclusively construing the Plan.
1.09 PARTICIPANT: An Included Employee for whom there is an account established pursuant to this Plan.
1.10 PARTICIPATING AFFILIATE: Such present or future affiliates and parents of the Company which the Board of Directors of the Company may designate from time to time to participate in this Plan.
1.11 PURCHASE DATE: January 15 and July 15 of each Plan Year or, if either of such dates is not a regular business day, the next following business day.
ARTICLE II: EFFECTIVE DATE
The effective date of this Plan is April 1, 1997.
ARTICLE III: PARTICIPATION
3.01 PARTICIPATION: An Included Employee may elect to start payroll deductions pursuant to Section 3.02.
3.02 ELECTION TO CONTRIBUTE: An election must be in writing and must be made by December 15 to have effect for the first Contribution Period and by June 15 to have effect for the second Contribution Period, and thereafter that election cannot be changed or terminated during that Contribution Period. Each such election shall authorize the Company or Participating Affiliate to withhold an integral percentage from one percent (1%) to up to eight percent (8%) of each payment of Compensation. An election once made shall be continuously applied to that Contribution Period and all subsequent Contribution Periods (except as otherwise provided in Sections 4.03) until the Participant notifies the Plan Administrator, in writing, of the Participant's desire to change or terminate the election. Such notice of change or termination shall be given by December 15 to have effect as of the beginning of the first Contribution Period and by June 15 to have effect as of the beginning of the second Contribution Period.
3.03 ELECTION OF INVESTMENT: Each Participant electing to make contributions to the Plan as provided in Section 3.02 shall at the time of each such election also be deemed to elect to purchase common stock of the Parent under the terms of Articles IV and V.
3.04 INTEREST ON CONTRIBUTIONS: The contributions made by a Participant pursuant to Section 3.02 will draw interest, until disbursed, at the regular savings account (non-time-deposit) rate at an insured financial institution selected by the Board of Directors of the Company to be credited to the Participant's account according to the rules and regulations of the selected institution.
ARTICLE IV: EMPLOYEE STOCK PURCHASE ACCOUNT
4.01 GRANT OF OPTIONS: A Participant who is an Included Employee and who has made an election pursuant to Section 3.02 shall be granted on each January 1 and July 1 on which an election pursuant to Section 3.03 is effective, an option to purchase shares of common stock of the Parent on the Purchase Date next following the applicable Contribution Period. The option so granted shall be automatically exercised provided the Participant has not terminated employment more than three months prior to the applicable Purchase Date and provided a withdrawal pursuant to Section 4.03 has not occurred. Any unused portion of the balance in the Participant's Employee Stock Purchase Account, representing a fractional share, shall be maintained in the account, unless otherwise withdrawn, for purchase of stock at the next Purchase Date subject to the limitations of this Plan. Any unused portion, representing an excess over the amount needed to purchase on the applicable Purchase Date the maximum number of shares allowable under the limitations of Sections 4.02 and 5.01, shall be refunded to such Participant. When employment of the Participant is terminated, the balance in the Participant's Employee Stock Purchase Account not otherwise used to purchase stock shall be refunded to such Participant.
4.02 PURCHASE PRICE: The price of the stock purchased under the option granted
pursuant to Section 4.01 shall be 85% of the Market Value of such stock on the
Purchase Date. The number of shares to which the option applies shall be equal
to the amount in the Employee Stock Purchase Account at the end of the month
preceding the Purchase Date divided by 85% of the Market Value of the stock on
the Purchase Date. The maximum number of shares a Participant may purchase on
each Purchase Date shall be the number purchasable under the limitations of
Section 5.01. No fractional shares may be purchased pursuant to this Plan.
4.03 WITHDRAWAL OF EMPLOYEE STOCK PURCHASE ACCOUNT BALANCE: Any Participant may withdraw all of such Employee Stock Purchase Account balance at any time to and including May 1 of the first Contribution Period of the Plan Year or November 1 of the second Contribution Period of the Plan Year. Upon withdrawal, elections pursuant to Sections 3.02 and 3.03 automatically terminate until reinstated pursuant to said Sections.
4.04 STOCK AVAILABLE FOR OPTIONS: All shares of common stock of the Parent from time to time held in the treasury of the Company or Parent, and authorized but presently unissued shares of common stock of the Parent as approved by the Parent, but in any event limited to 250,000 shares, shall be available for option and sale pursuant to this Plan. Shares allotted for option and sale pursuant to this Plan for which the right to purchase has expired shall be deemed available for reallotment for option and sale in ensuing Contribution Periods and on subsequent Purchase Dates, as if such shares had never been so allotted.
ARTICLE V: LIMITATIONS ON STOCK PURCHASE
5.01 INELIGIBLE EMPLOYEES: No employee shall be granted an option to purchase stock pursuant to this Plan if immediately after that grant the employee owns, or has an option on, stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of
the Parent, the Company or any affiliate thereof, and for purposes of this sentence, the rules of Section 425(d) of the Internal Revenue Code, as from time to time amended, shall apply in determining the stock ownership of an employee. Any stock which an employee may purchase under any outstanding right or option shall be treated as stock owned by such employee for the purpose of this section. No employee shall have or be granted under this Plan any option that will permit the employee's rights or options to purchase stock under all employee stock purchase plans of the Company, its affiliates, and any parent corporation of the Company to accrue at a rate which exceeds twenty-five thousand dollars ($25,000) of Market Value of such stock, determined as of the time such right or option is granted for each calendar year during which such right or option is outstanding.
5.02 NONTRANSFERABILITY OF OPTION: No option to purchase stock pursuant to this Plan shall be transferable by the grantee thereof during the grantee's lifetime, but such an option may be transferred by will or by laws of descent and distribution, which shall include the valid designation of a beneficiary pursuant to uniform procedures prescribed by the Company. Each such option shall be exercisable during the lifetime of the grantee only by the grantee. Certificates for shares of stock purchased pursuant to an option granted under this Plan may, however, be issued in the names of the grantee and any other adult person or persons jointly, with right of survivorship, provided each such person is a member of the grantee's immediate family and provided further that the grantee so requests in writing at or before the time of his purchase of such shares and at the same time informs the Company of the name and address of his co-owner. A grantee's "immediate family" for the purposes of this Section 5.02 shall include only the grantee's spouse, son, daughter, grandson, granddaughter, niece, nephew, father, mother, brother or sister. Certificates for shares purchased after a transfer of an option as provided above in this Section 5.02 may be issued in the name or names of the person or persons so succeeding to the option.
5.03 RECAPITALIZATION ADJUSTMENT: If at any time during the life of this Plan the outstanding common stock of the Parent is augmented by a dividend in such common stock or divided into a greater or consolidated into a lesser number of shares of such common stock, then (A) the number of unissued shares of such common stock which may thereafter be allotted shall be correspondingly increased or decreased, (B) the number of shares of common stock to which any then outstanding options under the Plan relates shall be correspondingly increased or decreased to the extent that shares are available for allotment within the limit provided in Section 4.04, and (C) the purchase price for each share in respect of which any such option is outstanding at the time of such increase or decrease in the number of outstanding shares of common stock of the Parent shall be adjusted in inverse proportion to such increase or decrease in the number of outstanding shares.
5.04 NOTICES OF DISPOSITIONS OF STOCK: Each Participant, or other person, who purchases any stock pursuant to this Plan must promptly notify the Plan Administrator, in writing, if such Participant, or other person, disposes of all or any of that stock within two years after the date on which the Participant was granted the option pursuant to which that purchase was made.
ARTICLE VI: AMENDMENT OF THE PLAN
The Company reserves the right to amend this Plan in any manner, at any time or from time to time, by resolution of its Board of Directors, but except for the purpose of making the Plan meet the requirements of the Internal Revenue Code, as from time to time amended, with respect to employee stock purchase plans, no such amendment shall increase the number of shares of common stock that may be allotted for sale under the Plan or make the definition of the term "Eligible Employee" more restrictive or reduce the purchase price
per share for which Section 4.02 provides or alter or impair any right granted under the Plan without the previous written consent of the holder of that right.
ARTICLE VII: EXPIRATION OR TERMINATION OF THE PLAN
The Plan shall expire on June 30, 2002, unless sooner terminated as provided in this Article. The Company reserves the right to terminate this Plan at any time by resolution of its Board of Directors, and the Plan shall automatically terminate upon the happening of the first to happen of the following events.:
(a) whenever no shares remain to be allotted under the Plan, or
(b) whenever any merger of the Company or Parent into another corporation or any consolidation of the Company or Parent with another corporation, or any transfer of substantially all of the assets of the Company or Parent, or any liquidation of the Company or Parent, becomes effective or takes place unless the corporate successor of the Company or Parent in any such transaction assumes the obligations of the Company under the Plan.
No options shall be granted after the Plan is terminated nor may any stock be purchased pursuant to the Plan subsequent to the termination.
EXHIBIT 10.3
The Company adopted the Annual Incentive Compensation Plan (bonus plan), effective January 1, 1997 on a fiscal year basis. The plan shall be an annual short-term incentive plan. Participants shall consist of the executive officers of the Company and its principal operating subsidiaries, and other designated management employees. The bonus plan shall be based on the annual operating plan of the Company, developed after discussion and analysis of the business plans within the major divisions of the Company. Payment of bonuses shall be based on attaining a specific goal of operating income, and shall be paid following the end of the fiscal year as of a date to be designated by the officers of the Company. Such goal shall be set from year to year, at the beginning of each year, upon management recommendation and approval by the Board, and shall incorporate, in a manner to be determined at the discretion of the Board, a minimum goal of long-term growth in operating income of 15% per year compounded.
"Operating income" shall be computed in the same manner as disclosed in the Company's annual report subject to extraordinary charges or expenses, if any, resulting from the initial public offering of the Company.
The president and CEO, with the approval of the Board, at his discretion may adjust operating income for the calculation of achievement of the goal for extraordinary, non-recurring events beyond the control of the Company which otherwise distorts operating income for this purpose, including, but not limited to, special tax and accounting charges or the acquisition and disposition of businesses.
Participating Chicago Bridge & Iron Company employees shall include all executive officers, senior managers, and selected managers and employees in key positions.
A target bonus amount, expressed either in dollars or as a percent of pay, shall be established for each participating employee at the beginning of each fiscal year based on
position, responsibilities and grade level, as determined in the discretion of the officers of the Company.
Bonuses paid shall be earned from two sources - achievement of the corporate operating income goal and a discretionary portion. A percentage of target bonus opportunity shall be allocated to each bonus source as follows: 70% to the income goal, 30% to the discretionary portion.
Achievement of the Company's operating income goal shall earn 100% of the portion of the target bonus allocated to such goal. No bonus shall be earned unless the actual operating income is at least 75% of the goal. A maximum bonus of 200% of the target will be earned for achievement of 125% of the goal.
The discretionary bonus shall be determined by the management's evaluation of individual performance (the Compensation Committee of the Board, in the case of the CEO).
EXHIBIT 10.4
CHICAGO BRIDGE & IRON
LONG-TERM INCENTIVE PLAN
Chicago Bridge & Iron Company
March 1, 1997
Article 1. Establishment, Objectives, and Duration 1
Article 2. Definitions 1
Article 3. Administration 6
Article 4. Shares Subject to the Plan and Maximum Awards 6
Article 5. Eligibility and Participation 7
Article 6. Stock Options 7
Article 7. Restricted Stock 9
Article 8. Performance Units and Performance Shares 11
Article 9. Performance Measures 12
Article 10. Beneficiary Designation 13
Article 11. Deferrals 13
Article 12. Rights of Employees 13
Article 13. Change in Control 14
Article 14. Amendment, Modification, and Termination 14
Article 15. Withholding 15
Article 16. Indemnification 16
Article 17. Successors 16
Article 18. Legal Construction 16
CHICAGO BRIDGE & IRON LONG-TERM INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1. ESTABLISHMENT OF THE PLAN. Chicago Bridge & Iron Company, a Delaware corporation (hereinafter referred to as the "Company"), a wholly owned subsidiary of Chicago Bridge & Iron Company N.V., a Dutch corporation (hereinafter referred to as the "Parent"), hereby establishes an incentive compensation plan to be known as the "Chicago Bridge & Iron Long-Term Incentive Plan" (hereinafter referred to as the "Plan"), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, Performance Shares and Performance Units.
The Plan shall become effective as of the consummation of the Company's initial public offering (the "Effective Date") and shall remain in effect as provided in Section 1.3 hereof.
1.2. OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize the profitability and growth of the Company through incentives which are consistent with the Company's goals and which link the personal interests of Participants to those of the Company's stockholders; to provide Participants with an incentive for excellence in individual performance; and to promote teamwork among Participants.
The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants who make significant contributions to the Company's success and to allow Participants to share in the success of the Company.
1.3. DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as described in Section 1.1 hereof, and shall remain in effect, subject to the right of the Board of Directors to amend or terminate the Plan at any time pursuant to Article 15 hereof, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1. "AFFILIATE" shall have the meaning ascribed to such term in Rule 12b- 2 of the General Rules and Regulations of the Exchange Act.
2.2. "AWARD" means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, Performance Shares or Performance Units.
2.3. "AWARD AGREEMENT" means an agreement entered into by the Company and each Participant setting forth the terms and provisions applicable to Awards granted under this Plan.
2.4. "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
2.5. "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the Company.
2.6. "CHANGE IN CONTROL" will be deemed to have occurred as of the first day any one (1) or more of the following paragraphs shall have been satisfied:
(a) Any Person (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the Beneficial Owner, directly or indirectly, of securities of the Company or any holding company of the Company having a majority interest in the Company ("Holding Company"), representing twenty-five percent (25%) or more of the combined voting power of the Company's or the Holding Company's then outstanding securities;
(b) During any period of two (2) consecutive years or less (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board, or members of the board of directors or equivalent body of any Holding Company, (and any new Director, whose election by the Company's stockholders was approved by a vote of at least seventy-five percent (75%) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was so approved), cease for any reason to constitute a majority thereof; or
(c) Upon the consummation of (i) any merger or other business combination of the Company or any Holding Company with or into another company puruant to which the stockholders of the Company or any Holding Company, as the case may be, do not own, immediately after the transaction, more than fifty percent (50%) of the voting power and the value of the stock of the company that survives,
or (ii) the sale, exchange or other disposition of all or substantially all the assets of the Company or any Holding Company.
Notwithstanding the foregoing, the Company's initial public offering shall not constitute a Change in Control for the purposes of this Plan.
Notwithstanding the foregoing, any event or transaction which would otherwise constitute a Change in Control (a "Transaction") shall not constitute a Change in Control with respect to a Participant if, in connection with the Transaction, the Participant is an equity investor in the acquiring entity or any of its affiliates (the "Acquiror"). For purposes of the preceding sentence, a Participant shall not be deemed to be an equity investor in the Acquiror by virtue of (i) obtaining beneficial ownership of any equity interest in the Acquiror as a result of the grant to the Participant of an incentive compensation award under one or more incentive plans of the Acquiror (including, but not limited to, the conversion in connection with the Transaction of incentive compensation awards of the Company into incentive compensation awards of the Acquiror), on terms and conditions substantially equivalent to those applicable to other executives of the Company immediately prior to the Transaction, after taking into account normal differences attributable to job responsibilities, title, and the like; (ii) obtaining beneficial ownership of any equity interest in the Acquiror on terms and conditions substantially equivalent to those obtained in the Transaction by all other shareholders of the Company; or (iii) obtaining beneficial ownership of any equity interest in the Acquiror in a manner unrelated to a Transaction.
2.7. "CODE" means the Internal Revenue Code of 1986, as amended from time to time.
2.8. "COMMITTEE" means the Compensation Committee of the Board, as specified in Article 3 herein, or such other Committee appointed by the Board to administer the Plan with respect to grants of Awards.
2.9. "COMPANY" means Chicago Bridge & Iron Company, a Delaware corporation, including any and all Subsidiaries, and any successor thereto as provided in Article 17 herein.
2.10. "DIRECTOR" means any individual who is a member of the Board of Directors of the Company or any Subsidiary or Affiliate.
2.11. "DISABILITY" shall have the meaning ascribed to such term in the CBI Pension Plan, or if such plan ceases to exist, or such Participant is not a participant in that plan, at the discretion of the Committee.
2.12. "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.13. "EMPLOYEE" means any employee of the Company or its Subsidiaries. Directors who are not employed by the Company shall not be considered Employees under this Plan.
2.14. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
2.15. "FAIR MARKET VALUE" shall be determined on the basis of the closing sale price on the principal securities exchange on which the Shares are traded or, if there is no such sale on the relevant date, then on the last previous day on which a sale was reported.
2.15A. "FISCAL YEAR" means the fiscal year of the Company.
2.16. "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares granted under Article 6 herein and which is designated as an Incentive Stock Option and which is intended to meet the requirements of Code Section 422.
2.17. "INSIDER" shall mean an individual who is, on the relevant date, an officer, director or ten percent (10%) beneficial owner of any class of the Company's equity securities that is registered pursuant to Section 12 of the Exchange Act, all as defined under Section 16 of the Exchange Act.
2.18. "NAMED EXECUTIVE OFFICER" means a Participant who, as of the last date of of the taxable year of the Company, is one of the group of "covered employees," as defined in the regulations promulgated under Code Section 162(m), or any successor statute.
2.19. "NONEMPLOYEE DIRECTOR" means an individual who is a member of the Board of Directors of the Company but who is not an Employee of the Company.
2.20. "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase Shares granted under Article 6 herein and which is not intended to meet the requirements of Code Section 422.
2.21. "OPTION" means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6 herein.
2.22. "OPTION PRICE" means the price at which a Share may be purchased by a Participant pursuant to an Option.
2.22A. "OPTIONEE" means the Participant or, if the Participant has died, his or her Beneficiary or other person determined under Section 6.9, entitled to exercise any Option.
2.23. "PARTICIPANT" means an Employee or Director who has outstanding an Award granted under the Plan.
2.24. "PERFORMANCE-BASED EXCEPTION" means the performance-based exception from the tax deductibility limitations of Code Section 162(m).
2.25. "PERFORMANCE SHARE" means an Award granted to a Participant, as described in Article 8 herein.
2.26. "PERFORMANCE UNIT" means an Award granted to a Participant, as described in Article 8 herein.
2.27. "PERIOD OF RESTRICTION" means the period during which the transfer of Shares of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, at its discretion), and the Shares are subject to a substantial risk of forfeiture, as provided in Article 7 herein.
2.28. "PERSON" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) thereof.
2.29. "RESTRICTED STOCK" means an Award granted to a Participant pursuant to Article 8 herein.
2.30. "RETIREMENT" shall have the meaning ascribed to such term in the Company's tax-qualified retirement plan.
2.31. "SHARES" means the shares of common stock of the Company.
2.32. "SUBSIDIARY" means any corporation in which the Company owns directly, or indirectly through subsidiaries, at least fifty percent (50%) of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns at least fifty percent (50%) of the combined equity thereof.
2.33. "SUPERVISORY BOARD" means the Supervisory Board of the Parent, as defined herein.
ARTICLE 3. ADMINISTRATION
3.1. THE COMMITTEE. The Plan shall be administered by the Compensation Committee of the Board, or by any other Committee appointed by the Board, which may be the Compensation Committee of the Parent. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors.
3.2. AUTHORITY OF THE COMMITTEE. Except as limited by law or by the Certificate of Incorporation or Bylaws of the Company, and subject to the provisions herein, the Committee shall have full power to select Employees and Non-Employee Directors who shall participate in the Plan; determine the sizes and types of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; construe and interpret the Plan and any agreement or instrument entered into under the Plan as they apply to Employees; establish, amend, or waive rules and regulations for the Plan's administration as they apply to Employees; and (subject to the provisions of Article 14 herein) amend the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan, as the Plan applies to Employees. As permitted by law, the Committee may delegate its authority as identified herein. However, notwithstanding any other provision contained in this Plan to the contrary, until after the first anniversary of the Effective Date, no Awards of any type may be made except in the form of Nonqualified Stock Options.
3.3. DECISIONS BINDING. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders and resolutions of the Board shall be final, conclusive and binding on all persons, including the Company, its stockholders, Directors, Employees, Participants, and their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1. NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as provided in Section 4.2 herein, the number of Shares hereby reserved for issuance to Participants under the Plan shall be one million, two hundred fifty- one thousand, seven hundred fifty-five (1,251,755). Unless and until the Committee determines that an Award shall not be designed to comply with the Performance-Based Exception, the maximum aggregate number of Shares that may be granted in the form of Stock Options, pursuant to any Award granted in any one fiscal year to any one single Participant shall be two hundred thousand (200,000).
4.2. ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368) or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of Shares which may be delivered under
Section 4.1, in the number and class of and/or price of Shares subject to
outstanding Awards granted under the Plan, and in the Award limits set forth in
subsections 4.1(a), 4.1(b) and 4.1(c), as may be determined to be appropriate
and equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1. ELIGIBILITY. Persons eligible to participate in this Plan include all Employees of the Company, including Employees who are members of the Board, and Non-Employee Directors.
5.2. ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible individuals those to whom Awards shall be granted and shall determine the nature and amount of each Award.
ARTICLE 6. STOCK OPTIONS
6.1. GRANT OF OPTIONS. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee. The date the option is granted shall be the day on which the Committee acts to award a specific number of shares to a Participant, and shall be specified in each Award Agreement.
6.2. AWARD AGREEMENT. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine. The Award Agreement also shall specify whether the Option is intended to be an ISO within the meaning of Code Section 422, or an NQSO whose grant is intended not to fall under the provisions of Code Section 422.
6.3. OPTION PRICE. The Option Price for each grant of an Option under this Plan shall be at least equal to one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted.
6.4. DURATION OF OPTIONS. Each Option granted shall expire at such time as the Committee shall determine at the time of grant; provided, however, that if the Award Agreement does not otherwise specify the expiration date, the Option shall expire on the tenth (10th) anniversary date of its grant.
6.5. EXERCISE OF OPTIONS. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant, but which shall in no event be earlier than the third anniversary of the date the Option is granted.
6.6. PAYMENT. If the Award Agreement does not otherwise specify the manner of exercise, Options granted under this Article 6 shall be exercised by the delivery of a written notice of exercise to the Company substantially in the form of that attached as Exhibit A, completed by the Optionee and delivered during regular business hours to the office of the Seceretary of the Company, or sent by certified mail to the Secretary of the Company, accompanied by a negotiable check or other cash equivalent in full payment for the Shares.
In the discretion of the Committee and as set forth in the Award Agreement, the Option Price upon exercise of any Option may also be payable to the Company in full either: (a) in cash or its equivalent, or (b) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Option Price, or (c) by a combination of (a) and (b).
The Committee also may allow cashless exercise as permitted under Federal Reserve Board's Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law.
Subject to any governing rules or regulations, as soon as practicable after receipt of a written notification of exercise and full payment, the Company shall deliver to the Participant, in the Participant's name, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).
6.7. RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.
6.8. TERMINATION OF EMPLOYMENT. Each Participant's Option Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant's employment with the Company or service as a Director. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination of employment.
6.9. NONTRANSFERABILITY OF OPTIONS.
(a) INCENTIVE STOCK OPTIONS. No ISO granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant or by designation of a Beneficiary in accordance with Article 10.
(b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a Participant's Award Agreement, no NQSO granted under this Article 6 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant's Award Agreement, all NQSOs granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant or by designation of a Beneficiary in accordance with Article 10.
ARTICLE 7. RESTRICTED STOCK
7.1. GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock to Participants in such amounts as the Committee shall determine.
7.2. RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be evidenced by a Restricted Stock Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock granted, and such other provisions as the Committee shall determine.
7.3. TRANSFERABILITY. Except as provided in this Article 7, the Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Award Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Restricted
Stock Award Agreement. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant or by a Beneficiary designated in accordance with Article 10.
7.4. OTHER RESTRICTIONS. The Committee may impose such other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock, restrictions based upon the achievement of specific performance goals (Company- wide, divisional, and/or individual), time-based restrictions on vesting following the attainment of the performance goals, and/or restrictions under applicable Federal or state securities laws.
The Company shall retain the certificates representing Shares of Restricted Stock in the Company's possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the applicable Period of Restriction.
7.5. VOTING RIGHTS. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares.
7.6. DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may be credited with regular cash dividends paid with respect to the underlying Shares while they are so held. The Committee may apply any restrictions to the dividends that the Committee deems appropriate. Without limiting the generality of the preceding sentence, if the grant or vesting of Restricted Shares granted to a Named Executive Officer is designed to comply with the requirements of the Performance-Based Exception, the Committee may apply any restrictions it deems appropriate to the payment of dividends declared with respect to such Restricted Shares, such that the dividends and/or the Restricted Shares maintain eligibility for the Performance-Based Exception.
7.7. TERMINATION OF EMPLOYMENT. Each Restricted Stock Award Agreement shall set forth the extent to which the Participant shall have the right to receive unvested Restricted Shares following termination of the Participant's employment with the Company or service as a Director. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares of Restricted Stock issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of employment; provided, however that, except in the cases of terminations connected with a Change in Control and terminations by reason of death or Disability, the vesting of Shares of Restricted Stock which qualify for the Performance-Based Exception and which are held by Named Executive Officers shall occur at the time they otherwise would have, but for the employment termination.
ARTICLE 8. PERFORMANCE UNITS AND PERFORMANCE SHARES
8.1. GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan, Performance Units and/or Performance Shares may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee.
8.2. VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units/Shares that will be paid out to the Participant. For purposes of this Article 8, the time period during which the performance goals must be met shall be called a "Performance Period."
8.3. EARNING OF PERFORMANCE UNITS/SHARES. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Shares shall be entitled to receive payout on the number and value of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.
8.4. FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/ SHARES. Payment of earned Performance Units/Shares shall be made in a single lump sum following the close of the applicable Performance Period. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Performance Units/Shares in the form of cash or in Shares (or in a combination thereof) which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period. Such Shares may be granted subject to any restrictions deemed appropriate by the Committee.
At the discretion of the Committee, Participants may be entitled to receive any dividends declared with respect to Shares which have been earned in connection with grants of Performance Units and/or Performance Shares which have been earned, but not yet distributed to Participants (such dividends shall be subject to the same accrual, forfeiture, and payout restrictions as apply to
dividends earned with respect to Shares of Restricted Stock, as set forth in
Section 7.6 herein). In addition, Participants may, at the discretion of the
Committee, be entitled to exercise their voting rights with respect to such
Shares.
8.5. TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT. Unless determined otherwise by the Committee and set forth in the Participant's Award Agreement, in the event the employment or service as a Director of a Participant is terminated by reason of death, Disability, or Retirement during a Performance Period, the Participant shall receive a payout of the Performance Units/Shares which is prorated, as specified by the Committee in its discretion.
Payment of earned Performance Units/Shares shall be made at a time specified by the Committee in its sole discretion and set forth in the Participant's Award Agreement. Notwithstanding the foregoing, with respect to Named Executive Officers who retire during a Performance Period, payments shall be made at the same time as payments are made to Participants who did not terminate employment or service during the applicable Performance Period.
8.6. TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a Participant's employment or service terminates for any reason other than those reasons set forth in Section 8.5 herein, all Performance Units/Shares shall be forfeited by the Participant to the Company unless determined otherwise by the Committee, as set forth in the Participant's Award Agreement.
8.7. NONTRANSFERABILITY. Except as otherwise provided in a Participant's Award Agreement, Performance Units/Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or by designation of a Beneficiary in accordance with Article 10. Further, except as otherwise provided in a Participant's Award Agreement, a Participant's rights under the Plan shall be exercisable during the Participant's lifetime only by the Participant or the Participant's legal representative.
ARTICLE 9. PERFORMANCE MEASURES
Unless and until the Committee proposes for shareholder vote and shareholders approve a change in the general performance measures set forth in this Article 9, the attainment of which may determine the degree of payout and/or vesting with respect to Awards to Named Executive Officers which are designed to qualify for the Performance-Based Exception, the performance measure(s) to be used for purposes of such grants shall be chosen from among net income (either before or after taxes), share price, earnings per share, operating income, return on assets, return on equity, return on capital or investments, total shareholder return, or economic value added.
The Committee shall have the discretion to adjust the determinations of the degree of attainment of the preestablished performance goals; provided, however, that Awards which are designed to qualify for the Performance-Based Exception, and which are held by Named Executive Officers, may not be adjusted upward (the Committee shall retain the discretion to adjust such Awards downward).
In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing performance measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards which shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).
ARTICLE 10. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid, and to exercise any Stock Option or succeed to the ownership of any Restricted Stock as provided in this Plan, in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant's lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate.
ARTICLE 11. DEFERRALS
The Committee may permit or require a Participant to defer such Participant's receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option, the lapse or waiver of restrictions with respect to Restricted Stock, or the satisfaction of any requirements or goals with respect to Performance Units/Shares. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals.
ARTICLE 12. RIGHTS OF EMPLOYEES
12.1. EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company.
12.2. PARTICIPATION. No Employee or Director shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.
ARTICLE 13. CHANGE IN CONTROL
13.1. TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a Change in Control, unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges:
(a) Any and all Options granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term;
(b) Any restriction periods and restrictions imposed on Restricted Shares shall lapse;
(c) The target payout opportunities attainable under all outstanding Awards of Restricted Stock, Performance Units and Performance Shares shall be deemed to have been fully earned for the entire Performance Period(s) as of the effective date of the Change in Control. The vesting of all Awards denominated in Shares shall be accelerated as of the effective date of the Change in Control, and there shall be paid out in cash to Participants within thirty (30) days following the effective date of the Change in Control a pro rata amount based upon an assumed achievement of all relevant performance goals and upon the length of time within the Performance Period which has elapsed prior to the Change in Control.
13.2. TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL PROVISIONS. Notwithstanding any other provision of this Plan or any Award Agreement provision, the provisions of this Article 13 may not be terminated, amended, or modified on or after the date of a Change in Control to affect adversely any Award theretofore granted under the Plan without the prior written consent of the Participant with respect to said Participant's outstanding Awards; provided, however, the Board of Directors, upon recommendation of the Committee, may terminate, amend, or modify this Article 14 at any time and from time to time prior to the date of a Change in Control.
ARTICLE 14. AMENDMENT, MODIFICATION, AND TERMINATION
14.1. AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part; provided, however, that no amendment which requires shareholder approval in order for the Plan to continue to comply with Rule 16b-3 under the Exchange Act, including any successor to such Rule, shall be effective
unless such amendment shall be approved by the requisite vote of shareholders of the Company entitled to vote thereon.
14.2. ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.3 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan; provided that no such adjustment
shall be authorized to the extent that such authority would be inconsistent with
the Plan's meeting the requirements of Section 162(m) of the Code, as from time
to time amended.
14.3. AWARDS PREVIOUSLY GRANTED. No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award.
14.4. COMPLIANCE WITH CODE SECTION 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Committee determines that such compliance is not desired with respect to any
Award or Awards available for grant under the Plan, then compliance with Code
Section 162(m) will not be required. In addition, in the event that changes are
made to Code Section 162(m) to permit greater flexibility with respect to any
Award or Awards available under the Plan, the Committee may, subject to this
Article 14, make any adjustments it deems appropriate.
ARTICLE 15. WITHHOLDING
15.1. TAX WITHHOLDING. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.
15.2. SHARE WITHHOLDING. With respect to withholding required upon the exercise of Options, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of Awards granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction.
All such elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
ARTICLE 16. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgement in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
ARTICLE 17. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
ARTICLE 18. LEGAL CONSTRUCTION
18.1. GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.
18.2. SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
18.3. REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
18.4. SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions under this Plan are intended to comply with all applicable conditions or Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee.
18.5. GOVERNING LAW. To the extent not preempted by federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Illinois.
EXHIBIT 10.5
CHICAGO BRIDGE & IRON COMPANY
DEFERRED COMPENSATION PLAN
ARTICLE I
ESTABLISHMENT, OBJECTIVES AND DURATION
ARTICLE II
DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized:
Blue Chip Fund
Balanced Fund
Equity Income Fund
Equity Index
New Horizons
Prime Reserve
Spectrum Income
Spectrum Growth
International Stock
combined voting power of all classes of stock, or any other entity (including but not limited to partnerships and joint ventures) in which the Parent owns, directly or indirectly through the Company or Subsidiaries, at least fifty percent (50%) of the capital or profits interest.
PARTICIPATION
ARTICLE IV
DEFERRED COMPENSATION
Amounts deferred under Section 4.1 will be credited to an Account for the Participant at such time or times as the Salary, Bonus or Directors' Fees would otherwise have been paid to the Participant in cash.
following Plan Year. If a Participant does not change his or her current year's election within the election period for the following year, his or her current year's election will continue in effect for the following year. Every deferral election under this Plan shall be effective only with respect to Salary, Bonus and Directors' Fees not yet earned as of the date of the election.
As of any Change Date, a Participant may change the designation or allocation of Measurement Funds to determine income (or loss) on future credits of deferred compensation, or may change the existing allocation of his or her Account among Measurement Funds, by submitting a revised election form to the Plan Administrator before the Change Date on which it is to become effective.
For purposes of determining income (or loss), a Participant's deferred
compensation shall be deemed to have been invested in Measurement Funds as soon
as reasonably practicable after the date as of which they are credited under
Section 4.1, and in all events by the fifteenth (15th) business day of the month
after the month in which they are credited under Section 4.1. For purposes of
determining income (or loss), a Participant's Account shall be deemed to have
been reinvested in the newly-designated Measurement Funds as soon as reasonably
practicable after the Change Date, and in all events by the fifteenth (15th)
business day of the month beginning with the Change Date.
as of any intervening quarterly Valuation Date. The value of a Participant's
Account, and the applicable Measurement Funds, as of the applicable Valuation
Date, shown on any such statement shall be conclusive and binding on both the
Company and the Participant absent bad faith or manifest error unless the
Participant brings error to the attention of the Plan Administrator by filing a
claim for clarification of his or her future rights to benefits pursuant to
Section 7.3 within ninety (90) days after receiving that statement.
ARTICLE V
VESTING
ARTICLE VI
PAYMENT OF BENEFITS
In either case the lump sum payment or the first installment payment shall be made in January of the calendar year following the calendar year in which the Participant's employment terminates, and any
remaining installment payments shall be made in January of each successive year until payments are completed.
(a) Directly to such minor or other person;
(b) To the legal guardian or conservator of such minor or other person; or
(c) To the spouse, parent, brother, sister, child or other relative of such minor or other person for the use of such minor or other person.
The Plan Administrator shall not be required to see to the application of any distribution so made to any of such persons, but the receipt therefor shall be a full discharge of the liability of the Plan, the Plan Administrator, the Company, and the Trustee to such minor or other person.
ARTICLE VII
ADMINISTRATION
(a) To construe and interpret the Plan, determine the application of the Plan to situations where such application is unclear or disputable, and make equitable adjustments for any mistakes or errors made in the administration of the Plan;
(b) To determine all questions arising in the administration of the Plan, including the power to determine the rights of Participants and their beneficiaries and the amount of their respective benefits;
(c) To adopt such rules, regulations and forms as it may deem necessary for the proper and efficient administration of the Plan consistent with its purposes;
(d) To enforce the Plan in accordance with its terms and the rules, regulations and forms adopted by the Plan Administrator;
(e) To take such action and establish such procedures as it deems necessary or appropriate to coordinate deferrals and benefits under this Plan with the Incentive Program, the Long-Term Incentive Plan, the CBIC Excess Benefit Plan, or the Trust;
(f) To instruct the Trustee regarding payments from the Plan and to provide, amend, and supplement from time to time a schedule of payments to be made from the Trust for purposes of the Plan;
(g) To employ such counsel, auditors, actuaries, or other specialists (who may be counsel, auditors, actuaries or other specialists for the Company) and to engage such clerical or other services to the extent such services are not provided by the Company;
(h) To delegate such of its powers and authorities to such person or persons, with his, her, its or their consent, as the Plan Administrator may appoint; and
(i) To do all other things the Plan Administrator deems necessary or desirable for the advantageous administration of the Plan and to make the Plan fully effective in accordance with its terms and intent.
each claim and give the person making the claim (a "Claimant") written notice of the disposition of the claim within 90 days after the claim is filed. If the Plan Administrator denies a claim, the notice of denial shall be in writing, shall contain the specific reason or reasons for the denial of the claim, shall contain a specific reference to the pertinent Plan provisions upon which the denial is based, shall contain a description of any additional material or information necessary for the claimant to perfect the claim along with an explanation why such material or information is necessary, and shall contain an explanation of the Plan's claims review procedures.
Within 60 days after receipt by the Claimant of a written notice of denial of a claim, the Claimant may file a written request with the Board for a full and fair review of the denial of the claim for benefits. In connection with a claimant's appeal of the denial of the benefit, the Claimant may review pertinent documents and may submit issues and comments in writing. The Board shall deliver to the Claimant a written decision on the claim promptly, but not later than sixty days after the Claimant's request for review. Such decision shall be written in a manner calculated to be understood by the Claimant, shall include specific reasons for the decision, and shall contain specific references to the pertinent Plan provisions upon which the decision is based. The decision of the Board shall be final, conclusive and binding on all persons.
ARTICLE VIII
MISCELLANEOUS
Notwithstanding anything in this Plan to the contrary, upon termination of the Plan the Company may in its sole discretion pay all Account balances to the Participants (or Beneficiaries) entitled thereto in a single lump sum.
and Administration. Any notice, or any check in payment of benefits, that this Plan requires or permits a Participant to receive will be properly given and received if sent to a Participant who is an Employee by regular interoffice distribution channels; or sent to any Participant or Beneficiary by first class mail, postage paid and properly addressed, to the last known residence address of the Participant or Beneficiary appearing on the records of the Company.
IN WITNESS WHEREOF the Company has caused this Chicago Bridge & Iron Company Deferred Compensation Plan to be executed by an authorized officer this _____ day of _____, 1997.
CHICAGO BRIDGE & IRON COMPANY
By:
EXHIBIT 10.6
Chicago Bridge & Iron Management
Defined Contribution Stock Incentive Plan
This Plan shall be known as the Chicago Bridge & Iron Management Defined Contribution Stock Incentive Plan (the "Plan"). The object of the Plan is to provide certain select management employees of Chicago Bridge & Iron Company N.V. and its subsidiaries ("CBI") with an ownership interest in the equity of CBI. Chicago Bridge & Iron Company or a holding company the principal assets of which are the shares of Chicago Bridge & Iron Company.
The Plan is not intended to be qualified under Section 401(a) of the Internal Revenue Code (the "Code").
ARTICLE I
(I) when any "person" or "group" of persons (as such terms are used in Section 13 of the Exchange Act), other than Praxair, Inc., the Company or any majority-owned subsidiary of either Praxair or the Company, becomes the "beneficial owner" (as such term is used in Section 13 of the Exchange Act) of 50% or more of either (x) the total number of the common shares of the Company
1a
then outstanding or (y) the voting power of all of the voting securities of the Company then outstanding; or
(ii) upon the consummation of (A) any merger or other business combination of the Company with or into another company pursuant to which the stockholders of the Company do not own, immediately after the transaction, more than 50% of the voting power and the value of the stock of the company that survives, or (B) the sale, exchange or other disposition of all or substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred by reason of any public offering of the equity securities of the Company, so long as, immediately following such transfer or the consummation of such offering, no person or group (as such terms are used in Section 13 of the Exchange Act) other than Praxair or one of its majority owned subsidiaries owns, directly or indirectly, more than 25% of the Company's or the Holding Corporation's equity securities. At any time one or more classes of the equity securities of the Company are Publicly Traded, a "Change of Control" shall mean:
(i) when any "person" or "group" of persons (as such terms are used in Section 13 of the Exchange Act), other than Praxair or the Company or any majority owned subsidiary of Praxair or the Company, becomes the "beneficial owner" (as such term is used in Section 13 of the Exchange Act) of 25% or more of the total voting power of the Company's outstanding securities;
(ii) upon the consummation of (A) any merger or other business combination of the company with or into another company pursuant to which the stockholders of the Company as the case may be, do not own, immediately after
2a
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
3a
4a
Any determination of whether a Participant is Totally Disabled shall be made under rules uniformly applied to all Participants.
ARTICLE II
Each Employee designated by the Committee shall be a Participant in the Plan from the date on which he is so designated until the earlier of (i) his Termination of Employment or (ii) the date he receives a distribution of all of the Stock in his Stock Account.
ARTICLE III
The Employer shall establish and contribute to the Trust [1,017,552] shares of Stock on or immediately following the Effective Date. The Employer may contribute additional shares of Stock from time to time at its sole discretion. Stock contributions
5a
shall initially be credited to the Unallocated Stock Account, unless the Committee shall otherwise direct that any such Stock shall be allocated directly to the Stock Account (s) of one or more Participants.
ARTICLE IV
6a
account) shall, as to forefeitures, be allocated during such Plan Year to the successor of the Participant whose Stock has been forfeited, in such amount as the Committee shall deem appropriate in its sole discretion, and any remaining forfeited Stock and all unallocated contributions and such dividend distributions shall be allocated among the Stock Accounts of each Participant who is an Employee of the Employer on the last day of such Plan Year in the proportion that each Participant's Stock Account bears to the total of all Participants' Stock Accounts.
ARTICLE V
7a
reclassification, reorganization, merger, consolidation, recapitalization or otherwise, the Stock credited to any Stock Account (including the Unallocated Stock Account) shall be appropriately adjusted to reflect such event(s) and the rights of each Participant to any new, additional, or different shares of stock or securities resulting from such event(s). If and when any event(s) described in the preceding sentence occur, all Plan provisions shall apply to such new, additional, or different shares or securities.
ARTICLE VI
8a
marketable securities valued at the time of such Change of Control transaction, and the value of each Participant's Stock Account shall be distributed to the Participant (with the value of the Stock so based on the Change of Control Price) as soon as practicable following such Change in Control with the payment to be made in the same form and amount of consideration used to purchase the Stock from the Trust.
ARTICLE VII
ARTICLE VIII
9a
whom must be a member of the Board of the Employer. Each member of the Committee
shall serve at the will of the Board and without compensation. Any member of the
committee may resign by giving written notice to the Board not less than thirty
(30) days before the effective date of his resignation. Any member of the
Committee may be removed, with or without cause, at any time by the Board. The
Board shall fill vacancies in the Committee as soon as is reasonably possible
after a vacancy occurs and, until a new appointment is made, the remaining
members shall have full authority to act.
10a
Plan and to determine all questions that shall arise thereunder, and shall also have all the powers elsewhere in the Plan conferred upon it.
ARTICLE IX
11a
shares of Stock it holds on, and subject to, the same terms and conditions. This right shall be exercised by the Company by delivering a written notice (a "Drag- Along Notice") to the Trustee and each Participant, stating that the Company intends to exercise such rights, the name and address of the 100% Buyer, the per share amount and form of consideration expected to be received for such shares and the terms and conditions of payment of such consideration and all other material terms and conditions of such transfer. If such a Drag-Along Notice is delivered, the Trustee must transfer all of the shares of Stock held pursuant to the Plan, regardless of whether credited to a Participant's Stock Account or the Unallocated Stock Account on the terms and conditions described above, so long as all other shareholders of the Company transfer all of their shares of Stock to the 100% Buyer.
12a
ARTICLE X
The Board reserves the right at any time and from time to time to modify, alter, amend or terminate the Plan or the Trust Agreement but no such action adversely affect the rights of any Participant or reduce or otherwise impair the rights of a Participant in
13a
respect of Stock allocated to his Stock Account. No modification or amendment of the Plan may be made which would cause or permit any part of the assets of the Trust Fund to be used for, or diverted to, purposes other than for the exclusive benefit of Participants or their Beneficiaries, or which would cause any part of the assets of the Trust Fund to revert to or become the property of an Employer.
ARTICLE XI
14a
15a
IN WITNESS WHEREOF, and as evidence of the adoption of this Plan effective as of _____________, 1997 by the Company, it has caused the same to be signed by its duly authorized officers this ____ day of _____________, 1997.
BY:______________________________
16a
EXHIBIT 10.7
CHICAGO BRIDGE & IRON COMPANY
EXCESS BENEFIT PLAN
ARTICLE I
ESTABLISHMENT, OBJECTIVES AND DURATION
ARTICLE II
DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized:
The Plan Administrator may maintain such other subaccounts within any Account as the Plan Administrator deems necessary or desirable.
Blue Chip Fund Balanced Fund Equity Income Fund Equity Index New Horizons Prime Reserve Spectrum Income Spectrum Growth International Stock
PARTICIPATION
under the terms of the Savings Plan. Accordingly, in order to be able to receive Matching Contribution Credits for any Plan Year, the Participant must have elected to make the maximum Elective Deferrals under Section 402(g) of the Code or permitted under the terms of the Savings Plan for such Plan Year. The calculation of whether the Participant has elected to make the required maximum Elective Deferrals under the Savings Plan will be made as of the beginning of the applicable Plan Year.
3.3 The Company shall advise each eligible Employee selected for participation of his or her eligibility and afford him or her the opportunity to participate. An eligible Employee shall become a Participant upon returning the appropriate participation forms to the Plan Administrator in accordance with Sections 4.3 and 6.1.
ARTICLE IV
COMPANY CREDITS
(a) Three percent (3%) of the Participant's Compensation.
(b) The matching contribution actually made for the Participant under the Savings Plan for the Plan Year (after applying the limitations of Code SS SS 401(a)(17), 401(m), and 415)).
(c) The sum of the Participant's Elective Deferrals under the Savings Plan plus his or her Salary Deferral under the Chicago Bridge & Iron Company Deferred Compensation Plan.
Matching Contribution Credits shall be credited to the Participant's Matching Contribution Subaccount as of the date (or dates) that matching contributions are credited to Participants' accounts under the Savings Plan.
(a) An amount equal to the percentage of compensation (as defined in the Savings Plan) at which Company discretionary contributions for the Plan Year are allocated to the accounts of Savings Plan participants who are not Mghly Compensated Employees, applied to the Participant's Compensation for the Plan Year (without regard to limitations of Code SS SS 401(a)(17) and 415); and
(b) The discretionary contribution, if any, actually made for the Participant under the Savings Plan for the Plan Year (after applying the limitations of Code SS 401(a)(17) and 415).
If the Savings Plan provides an allocation of discretionary contributions to participants in the Savings Plan who have not elected to make Elective Deferrals under the Savings Plan, then, notwithstanding anything in this Plan, a Discretionary Contribution Credit shall be given to each otherwise eligible Participant under this Plan without regard to the condition of Section 3.2. Discretionary Contribution Credits shall be credited to the Participant's Discretionary Contribution Subaccount as of the date that the discretionary contributions are credited to participants' accounts under the Savings Plan.
As of any Change Date, a Participant may change the designation or allocation of Measurement Funds to determine income (or loss) on future credits to his or her Account, or may change the existing allocation of his or her Account among Measurement Funds, by submitting a revised election form to the Plan Administrator before the Change Date on which it is to become effective.
For purposes of determining income (or loss), a Participant's Matching and
Discretionary Contribution Credits shall be deemed to have been invested in
Measurement Funds as soon as reasonably practicable after the date as of which
they are credited under Sections 4.1 or 4.2, and in all events by the fifteenth
(15th) business day of the month after the month in which they are
determinable for crediting under Sections 4.1 or 4.2. For purposes of determining income (or loss), a Participant's Account shall be deemed to have been reinvested in the newly-designated Measurement Funds as soon as reasonably practicable after the Change Date, and in all events by the fifteenth (15th) business day of the month beginning with the Change Date.
ARTICLE V
VESTING
ARTICLE VI
PAYMENT OF BENEFITS
In either case the lump sum payment or the first installment payment shall be made in January of the calendar year following the calendar year in which the Participant's employment terminates, and any remaining installment payments shall be made in January of each successive year until payments are completed. The distribution option elected shall apply uniformly to the entire balance of the Participant's Account, including both the Matching Contribution Subaccount and the Discretionary Contribution Subaccount (if any).
Participant's election to the contrary, the Participant's Account (or such portion) shall be distributed in a single lump sum as soon as practicable. If for any reason, at any time after a Participant's employment terminates, the amount of any annual installment payable to a Participant or Beneficiary is less than $5,000, then notwithstanding anything in this Plan or any Participant's election to the contrary, each annual installment amount shall be $5,000 and installments shall continue only until the Account is exhausted or the rule of the preceding sentence takes effect. If for any reason the distributes of benefits under this Plan is an estate, the Plan Administrator in its sole discretion may pay to the estate the entire balance of the Account that is distributable to the estate in a single lump sum.
(a) Directly to such minor or other person.
(b) To the legal guardian or conservator of such minor or other person; or
(c) To the spouse, parent, brother, sister, child or other relative of such minor or other person for the use of such minor or other person.
The Plan Administrator shall not be required to see to the application of any distribution so made to any of such persons, but the receipt therefor shall be a full discharge of the liability of the Plan, the Plan Administrator, the Company, and the Trustee to such minor or other person.
ARTICLE VII
ADMINISTRATION
(a) To construe and interpret the Plan, determine the application of the Plan to situations where such application is unclear or disputable, and make equitable adjustments for any mistakes or errors made in the administration of the Plan;
(b) To determine all questions arising in the administration of the Plan, including the power to determine the rights of Participants and their beneficiaries and the amount of their respective benefits;
(c) To adopt such rules, regulations and forms as it may deem necessary for the proper and efficient administration of the Plan consistent with its purposes;
(d) To enforre the Plan in accordance with its terms and the rules, regulations and forms adopted by the Plan Administrator;
(e) To take such action and establish such procedures as it deems necessary or appropriate to coordinate deferrals and benefits under this Plan with the Savings Plan, the CBIC Deferred Compensation Plan, or the Trust;
(f) To instruct the Trustee regarding payments from the Plan and to provide, amend, and supplement from time to time a schedule of payments to be made from the Trust for purposes of the Plan;
(g) To employ such counsel, auditors, actuaries, or other specialists (who may be counsel, auditors, actuaries or other specialists for the Company) and to engage such clerical or other services to the extent such services are not provided by the Company;
(h) To delegate such of its powers and authorities to such person or persons, with his, her, its or their consent, as the Plan Administrator may appoint; and
(i) To do all other things the Plan Administrator deems necessary or desirable for the advantageous administration of the Plan and to make the Plan fully effective in accordance with its terms and intent.
Within 60 days after receipt by the Claimant of a written notice of denial of a claim, the Claimant may file a written request with the Board for a full and fair review of the denial of the claim for benefits. In connection with a claimant's appeal of the denial of the benefit, the Claimant may review pertinent documents and may submit issues and conunents in writing. The Board shall deliver to the Claimant a written decision on the claim promptly, but not later than sixty days after the Claimant's request for review. Such decision shall be written in a manner calculated to be understood by the Claimant, shall include specific reasons for the decision, and shall contain specific references to the pertinent Plan provisions upon which the decision is based. The decision of the Board shall be final, conclusive and binding on all persons.
ARTICLE VIII
MISCELLANEOUS
assets so held in trust shall remain the general assets of the Company, which is the grantor under the Trust. The rights of Participants and their Beneficiaries under this Plan and the Trust shall be exclusively unsecured contractual rights. No Participant or Beneficiary shall have any right, title or interest whatsoever in the Trust.
Notwithstanding anything in this Plan to the contrary, upon termination of the Plan the Company may in its sole discretion pay all Account balances to the Participants (or Beneficiaries) entitled thereto in a single lump sum.
this Plan will be properly done if done in writing over the signature of the Company's Vice President - Human Resources and Administration.
IN WITNESS WHEREOF the Company has caused this Chicago Bridge & Iron Company Excess Benefit Plan to be executed by an authorized officer this ____ day of _________, 1997.
CHICAGO BRIDGE & IRON COMPANY
By:
EXHIBIT 10.8
FORM OF
CHICAGO BRIDGE & IRON
SUPPLEMENTAL EXECUTIVE DEATH
BENEFITS PLAN
CHICAGO BRIDGE & IRON SUPPLEMENTAL EXECUTIVE DEATH BENEFITS PLAN
1. INTRODUCTION
This document sets forth the terms of the Chicago Bridge & Iron Supplemental Executive Death Benefits Plan, a plan sponsored by Chicago Bridge & Iron Company, a Delaware corporation, for Selected Key Executives of the Company, its subsidiaries and affiliates. This document, along with the Insurance Policy issued to the Executive or his designee under the Plan, the Assignment Form, the Plan Participation Form and the life insurance application documents described herein constitute the official Plan documents.
2. PLAN PURPOSE
The purpose of the Plan is to encourage Selected Key Executives, who have rendered and will render in the future valuable services to the Company, its subsidiaries and affiliates, to continue in employment by providing an insured death benefit with respect to the Executive before and after retirement.
3. EFFECTIVE DATE
April 1, 1997
4. DEFINITIONS
"Annual Premium" means the amount of consideration determined annually by the Insurance Company for an Insurance Policy issued under the Plan. For Plan purposes, if necessary, the Annual Premium shall be separated into two component parts: (i) the "Basic Annual Premium" shall be the part of the Annual Premium for standard risk life insurance coverage; and (ii) the "Extra Premium" shall be the part of the Annual Premium, if any, required for a life insurance risk determined by the Insurance Company to be substandard.
"Assignment" or "Assignment Form" means a written agreement between the Executive and the Rabbi Trust, whereby the Executive assigns certain Insurance Policy rights and interests to the Rabbi Trust, in accordance with the terms of the Plan documents.
"Beneficiary(ies)" means the individual(s) or entity(ies) designated by the Executive or his designee to be the beneficiary of certain Death Benefit Proceeds payable under the Insurance Policy subject to the terms of the Plan documents.
"Group Life Insurance Plan" means that employee benefit plan sponsored by the Company that provides group life insurance benefits to certain salaried employees of the Company, its subsidiaries and affiliates, as it may hereinafter be amended, and including any successor plan(s).
"Long Term Disability Plan" means that employee benefit plan sponsored by the Company that provides disability benefits to certain salaried employees of the Company, its subsidiaries and affiliates, as it may be hereinafter amended, and including any successor plan(s).
"Change in Control" shall mean the occurrence at any time of any of the following events:
(a) Any "person" as defined under The Securities Exchange Act of 1934, as amended ("the Act"), (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the "beneficial owner" (as defined in the Act), directly or indirectly, of securities of the Company or any holding company of the Company having a majority interest in the Company ("Holding Company"), representing twenty-five percent (25%) or more of the combined voting power of the Company's or the Holding Company's then outstanding securities;
(b) During any period of two (2) consecutive years or less (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board, or members of the equivalent body of any Holding Company, (and any new Director, whose election by the Company's stockholders was approved by a vote of at least seventy-five percent (75%) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was so approved, as may be the case), cease for any reason to constitute a majority thereof; or
(c) Upon the consummation of (i) any merger or other business combination of the Company or any Holding Company with or into another company pursuant to which the stockholders of the Company or any Holding Company, as the case may be, do not own, immediately after the transaction, more than fifty percent (50%) of the voting power and the value of the stock of the company that survives, or (ii) the sale, exchange or other disposition of all or substantially all the assets of the Company or any Holding Company.
Notwithstanding the foregoing, any event or transaction which would otherwise constitute a Change of Control (a "Transaction") shall not constitute a Change of Control with respect to a Participant or Beneficiary if, in connection with the Transaction, the
Participant or Beneficiary is an equity investor in the acquiring entity or any of its affiliates (the "Acquiror"). For purposes of the preceding sentence, a Participant or Beneficiary shall not be deemed to be an equity investor in the Acquiror by virtue of (i) obtaining beneficial ownership of any equity interest in the Acquiror as a result of the grant to the Participant of an incentive compensation award under one or more incentive plans of the Acquiror (including, but not limited to, the conversion in connection with the Transaction of incentive compensation awards of the Company into incentive compensation awards of the Acquiror), on terms and conditions substantially equivalent to those applicable to other executives of the Company immediately prior to the Transaction, after taking into account normal differences attributable to job responsibilities, title, and the like; (ii) obtaining beneficial ownership of any equity interest in the Acquiror on terms and conditions substantially equivalent to those obtained in the Transaction by all other shareholders of the Company; or (iii) obtaining beneficial ownership of any equity interest in the Acquiror in a manner unrelated to a Transaction.
"Corporate Capital Interest" means, at the earliest of the
following to occur, the cumulative amount of Annual Premiums paid by
the Rabbi Trust for an Insurance Policy, less the cumulative amount of
Imputed Income attributed to the Executive with respect to that
Insurance Policy, plus whichever of the following is applicable: (i)
the amount, if any, at the conclusion of the Normal Premium Period, by
which the Insurance Policy's remaining cash value exceeds the
projected amount of cash value for that Insurance Policy necessary,
based on conservative, actuarial funding assumptions as determined at
the time by the Plan Administrator, to provide the Executive or his
designee with an Insurance Policy that will provide the Scheduled
Death Benefit Amount without the necessity of any further payment of
Annual Premiums by the Rabbi Trust, the Executive or his designee;
(ii) the amount, if any, in the event the Executive dies before the
Corporate Capital Interest is otherwise recovered, by which the Death
Benefit Proceeds of the Insurance Policy exceed the Scheduled Death
Benefit Amount for the Executive at the time of death; or (iii) the
amount, if any, in the event of the insolvency of the Company, the
termination of the Plan pursuant to Section 12, or the termination of
the Executive's employment for any reason other than death or
Retirement, by which the Insurance Policy's remaining actual cash
value exceeds an estimated cash value determined by the Plan
Administrator, provided that the estimated cash value shall be equal
to that amount of cash value which would have accumulated in the
Insurance Policy had Annual Premiums been paid based upon: (a) the
Executive's actual Salary progression rather than the assumed Salary
progression utilized by the Company in determining funding of the
Insurance Policy; and (b) the actual earnings performance of the
Insurance Policy rather than the earnings assumptions attributed to
the Insurance Policy utilized by the Company in determining the
funding of the Insurance Policy. At all times, the amount of the
Corporate Capital Interest shall be determined by the Company, and
such determination shall be binding upon the Insurance Company and any
person or entity having an ownership or beneficial interest in the
Insurance Policy. The Corporate Capital Interest shall be reduced by
policy loans, if any (including interest thereon), made by the Rabbi
Trust from the Insurance Policy.
"Company" means Chicago Bridge & Iron Company, a Delaware corporation, and its successors and assigns.
"Death Benefit" or "Death Benefit Proceeds" means the amount of proceeds paid, or to be paid, at the death of the Executive by the Insurance Company under an Insurance Policy.
"Executive" or "Selected Key Executive" (collectively "Executives" or "Selected Key Executives") means: (i) an actively employed executive of the Company, or one of its subsidiaries or affiliates, nominated by an Officer of the Company, and approved by the Chairman of the Board of Directors of the Company, to be eligible to participate in the Plan; or (ii) a retired Executive of the Company, or one of its subsidiaries or affiliates, who was participating in the Plan at the date of Retirement.
"Imputed Income" means that amount of annual income imputed to
the Executive equal to the lower of (i) the one-year term insurance
premium rate prescribed by the Internal Revenue Service or (ii) the
Insurance Company's alternate term insurance premium rate, with either
(i) or (ii), as applicable, multiplied by the Scheduled Death Benefit
Amount provided to the Executive under the Plan at the time such
imputed income is determined.
"Insurance Company" means the life insurance company(ies) selected by the Company to issue Insurance Policies pursuant to the Plan.
"Insurance Policy" means the life insurance policy, together with additional policy benefits and riders, if any, issued by the Insurance Company pursuant to the Plan. Unless otherwise required by the Plan, Insurance Policy terms used herein shall have the same meaning as in the Insurance Policy.
"Normal Premium Period" means that time period during which the
Rabbi Trust will pay Annual Premiums, subject to the limits on the
amount of Annual Premiums to be paid by the Rabbi Trust set forth in
Section 15, to the Insurance Company for an Insurance Policy issued
pursuant to the Plan. The Normal Premium Period will extend from the
date the first Annual Premium is paid until the later to occur of
either: (i) the date the Executive reaches age sixty-five (65); or
(ii) the date the cumulative amount of Annual Premiums paid by the
Rabbi Trust and, if applicable, the cumulative amount of Extra
Premiums paid by the Executive or his designee pursuant to Section 15,
create sufficient cash value under the Insurance Policy, after taking
into account the recovery of the Corporate Capital Interest by the
Rabbi Trust, so that the Scheduled Death Benefit Amount can be
sustained without further payment of Annual Premiums by the Rabbi
Trust, the Executive or his designee, provided that this period shall
generally not be more than fifteen (15) years.
"Plan" means the Chicago Bridge & Iron Supplemental Executive Death Benefits Plan.
"Plan Participation Form" means a writing wherein the Executive is designated as being eligible to participate in the Plan, and whereby the Executive acknowledges such designation and the terms and conditions of the Plan.
"Rabbi Trust" means the Chicago Bridge & Iron Benefit Restoration Trust, a trust established by the Company for the purpose of providing funds for certain employee benefits and compensation.
"Retirement" means retirement under the CBI Pension Plan, or if an Executive is not or did not participate in that plan, the attainment of both at least age 55 and ten (10) years of credited service with the Company.
"Salary" means: (i) in the case of an Executive paid on the basis of a weekly base salary, the Executive's base weekly salary expressed in terms of United States dollars, or the currency in which the Executive is normally paid, multiplied by fifty-two (52); or (ii) in the case of an Executive paid on any basis other than a weekly base salary, the aggregate of the Executive's base salary expressed in terms of United States dollars, or the currency in which the Executive is normally paid, received each pay period, multiplied by the number of pay periods normally occurring during a calendar year.
"Scheduled Death Benefit Amount" means that amount of life insurance which is set forth in Appendix A and is to be provided to the Executive pursuant to the Plan.
Definitions of other terms are as provided below in the text of the Plan.
5. Eligibility
Selected Key Executives nominated by an Officer of the Company and approved by the Chairman of the Board of Directors of the Company are eligible to participate in the Plan as indicated herein.
6. PARTICIPATION
Participation begins on the date an Insurance Policy under the Plan is issued on the life of the Executive to the Executive or his designee and all other Plan documents are completed by the Executive to the satisfaction of the Plan Administrator and the Insurance Company. Participation in the Plan by an Executive will not cause that Executive's participation in the Group Life Insurance Plan to terminate.
7. PLAN OPERATION
The Plan is a "split dollar" life insurance program. The Executive or his designee shall be the owner of an Insurance Policy on the Executive's life issued by the Insurance Company, for which the Company, through the Rabbi Trust, shall pay the Annual Premiums for the duration of the Normal Premium Period. The Company, through the Rabbi Trust, shall retain an economic interest in both the cash value and Death Benefit Proceeds of the Insurance Policy documented by the Assignment Form. Except as otherwise provided in the Plan, the Executive shall not be responsible for payment of Annual Premiums, but under United States tax laws in effect on the effective date of the Plan, the Executive shall be responsible for paying income tax on the Imputed Income attributed to the Executive's participation in the Plan until the Rabbi Trust recovers the Corporate Capital Interest and cancels the Assignment Form. Executives who are not covered by United States income tax laws shall be responsible for income tax or other tax consequences under applicable laws of other countries.
The Scheduled Death Benefit Amount provided to the Executive shall be a multiple of the Executive's Salary. The amount of the Executive's multiple is set forth in Exhibit A.
If applicable, at the conclusion of the Normal Premium Period, the Rabbi Trust shall cease paying Annual Premiums and, under the Assignment Form, shall recover from the Insurance Policy's cash value the Corporate Capital Interest. The aggregate amount of Annual Premiums paid by the Rabbi Trust shall be scheduled with the intent to produce sufficient cash value so that after the Rabbi Trust recovers the Corporate Capital Interest and cancels the Assignment Form, the Executive or his designee will own the Insurance Policy providing the Scheduled Death Benefit Amount without payment of any further Annual Premiums. The Executive or his designee may continue the Scheduled Death Benefit Amount from the Insurance Policy or withdraw all or part of the remaining cash value at any point after the Rabbi Trust has recovered the Corporate Capital Interest, although such withdrawing of cash value shall void the guarantee under Section 8. In the event the Executive dies before the Corporate Capital Interest is recovered, the Rabbi Trust shall recover the Corporate Capital Interest from the Death Benefit Proceeds attributable to the Executive's Insurance Policy pursuant to the Assignment Form.
8. GUARANTEE OF BENEFITS
The funding of the Plan is intended to create sufficient cash values in the Insurance Policy at the conclusion of the Normal Premium Period so that the Scheduled Death Benefit Amount will be available under the Insurance Policy until the Executive's death, based upon conservative, actuarial assumptions as determined from time to time by the Plan Administrator.
However, in the event the Death Benefit Proceeds actually paid to the Beneficiary under the Insurance Policy are not at least equal to the Scheduled Death Benefit Amount, or, if applicable, the Reduced Death Benefit as provided in Section 15, an additional payment will be made from the Rabbi Trust to the Beneficiary. The amount of this additional payment from the Rabbi Trust will be the difference between the Scheduled Death Benefit Amount, or Reduced Death Benefit, whichever is applicable, and the Death Benefit Proceeds actually paid to the Beneficiary under the Insurance Policy, adjusted so that the total net after tax amount payable to the Beneficiary, both from the Insurance Policy and the Rabbi Trust, after taking into account the assumed liability of the Beneficiary to pay income taxes on the additional payment from the Rabbi Trust, equals the Scheduled Death Benefit Amount, or Reduced Death Benefit, as the case may be, under the Insurance Policy.
For purposes of determining assumed income taxes under this Section, the highest marginal personal United States Federal Income Tax rate for married individuals filing jointly in effect at the date of the Executive's death will be used.
It is the intent of the Plan to guarantee the Scheduled Death Benefit Amount only insofar as such guarantee is described in this Section, and there is no other guarantee concerning the cash value or any other Death Benefit Proceeds under the Insurance Policy at any time. Furthermore, the guarantee under this Section shall be void and of no effect in the event the Executive or his designee withdraws any part of the cash value or dividends payable under the Insurance Policy following recovery of the Corporate Capital Interest and cancellation of the Assignment Form. In the event the Executive or his designee obtains a loan under the Insurance Policy which has not been completely repaid at the date of the Executive's death, the guarantee provided by this Section shall be reduced by the amount of any such loan and any unpaid interest thereon.
The guarantee under this Section shall not apply in the event the Insurance Company, during the two year contestability period that begins with the date of issue of the Insurance Policy, rescinds the Insurance Policy or denies a claim thereunder on the basis of a misstatement in Insurance Company applications, or in the event the Insurance Company denies or limits a claim where the Executive dies by suicide within one year from the date of issue of the Insurance Policy.
9. SCHEDULED DEATH BENEFIT AMOUNT
The Executive's Scheduled Death Benefit Amount is set forth in Appendix A.
10. COMPANY PARTICIPATION IN FUNDING OF PLAN
Subject to the terms of the Plan, the Company, through the Rabbi Trust, will pay Annual Premiums for Insurance Policies issued pursuant to the Plan until the earliest to occur of the following:
. The termination of the Normal Premium Period.
. The Executive's death.
. The Executive's termination from employment by reason other than death or Retirement, provided the Executive's termination is not reasonably related to or as a result of a Change in Control.
Upon the earliest to occur of these events, the Rabbi Trust will withdraw the Corporate Capital Interest and terminate the Assignment against the Insurance Policy. Prior to such withdrawal, the Rabbi Trust may borrow against the Insurance Policy to the extent of the Corporate Capital Interest.
If the Executive is living after the Rabbi Trust withdraws the Corporate Capital Interest, the Executive or his designee will own the Insurance Policy free of any interest on the part of the Company or the Rabbi Trust and may then exercise without restriction all the rights available under the Insurance Policy, although the exercise of such rights may affect the guarantee provided under Section 8.
11. SECURITY
The Company will ensure that the Rabbi Trust, on each date on which the Rabbi Trust evaluates its obligations, has sufficient assets to provide funding equal to the net present value (utilizing a discount rate equal to the Insurance Company's then current dividend rate minus 100 basis points) of future Annual Premiums for Insurance Policies issued to Executives under the Plan and against which the Rabbi Trust holds an Assignment Form payable for the next ten (10) years (hereinafter the "Security Fund"). In the case of a decision by the Company to terminate or amend the Plan pursuant to Section 12, or if the Company fails or refuses to ensure that the Rabbi Trust has sufficient assets available to meet funding obligations pursuant to the Plan, the Security Fund shall be used
by the Rabbi Trust to pay Annual Premiums on the Insurance Policies to the extent and in the amount available.
In the case of the insolvency of the Company, the Rabbi Trust
would be subject to the claims of the Company's creditors (which would
include participants in the Plan) and funds in the Rabbi Trust
(including the Security Fund) may not be available to pay future
Annual Premiums or to meet the guarantee to participants under Section
8. The amount of the Corporate Capital Interest in the Insurance
Policies would also be subject to the claims of the Company's
creditors. The interests of the Executive under the Insurance Policy
in excess of the Corporate Capital Interest, however, generally should
not be subject to the claims of the Company's creditors.
Accordingly, in the case of the insolvency of the Company (as that term is defined in the Rabbi Trust) the Rabbi Trust will recover from the Insurance Policy the Corporate Capital Interest, to the extent allowed by law, terminate the Assignment of the Insurance Policy and have no further obligations under this Plan. The Executive or his designee may thereafter elect to maintain the Insurance Policy by assuming responsibility for paying Annual Premiums. If the Executive or his designee elects to maintain the Insurance Policy, he will deal directly with the Insurance Company.
12. RIGHT TO TERMINATE OR AMEND
The Company reserves the right to terminate the Plan if the
Company, in its sole discretion, determines that changes in the U.S.
tax laws or other laws, or other government action or events beyond
the control of the Executive or the Company adversely and materially
affect the Plan. If the Plan is terminated and the Company has
instituted at the time of termination of the Plan a comparable
replacement plan providing benefits, security and a guarantee to all
Executives not less than the benefits, security and guarantee provided
under the Plan, the Rabbi Trust may recover the Corporate Capital
Interest from the Insurance Policies and the guarantee provided under
Section 8 of the Plan shall be void and of no further force and
effect.
If the Plan is terminated and a comparable replacement plan has not been instituted at the time of termination of the Plan, to the extent outlined in Section 11 payment of future Annual Premiums will be made from the Rabbi Trust from the Security Fund. The Rabbi Trust will thereafter recover the Corporate Capital Interest upon the earliest to occur of the following: (a) the date on which funds in the Security Fund are exhausted; or (b) the date on which the Company's obligations to pay Annual Premiums pursuant to Section 10 ceases.
Subsequent to termination of the Plan, the Company may institute, at any time, a comparable replacement plan providing benefits, security and a guarantee to all Executives not less than the benefits, security and guarantee previously provided by the Plan, in which
event the Rabbi Trust may recover the Corporate Capital Interest upon institution of the replacement plan, and the guarantee previously provided under Section 8 of the Plan and surviving the prior termination shall be void and of no further force and effect.
In the event the Company does not institute a comparable
replacement plan, as previously defined, the guarantee provided in
Section 8 shall survive termination of the Plan.
Following termination of the Plan and recovery of the Corporate Capital Interest, the Executive or his designee will thereafter have the option of surrendering his share of the Insurance Policy for its remaining cash value or making Annual Premium payments, if required, directly to the Insurance Company in order to maintain the Insurance Policy.
The Company may amend the Plan at any time, provided that no amendment shall reduce or eliminate the obligation of the Rabbi Trust to make payments of the guarantee of benefits as described in the Plan, and that any amendment to reduce or eliminate the obligation to provide the Security Fund shall be prospective in application only. No amendment shall reduce the benefits in effect for Executives before the amendment without the prior written consent of the Executives affected by the amendment whose Scheduled Death Benefit Amounts in the aggregate represent at least 51% of the total amount of Scheduled Death Benefit Amounts then provided to them. Amendments to the Plan shall be made by a written instrument signed by the Plan Administrator. The Plan Administrator will inform Executives affected by the amendment in writing of the amendment to the Plan.
13. TERMINATION OF EMPLOYMENT
If the Executive's employment is terminated for any reason other than death or Retirement, and the Executive's termination is not reasonably related to or as a result of a Change in Control of the Company, the Rabbi Trust will withdraw the Corporate Capital Interest and terminate the Assignment. The Executive or his designee may thereafter maintain the Insurance Policy by assuming responsibility for paying Annual Premiums. If the Executive or his designee elects to maintain the Insurance Policy, he will deal directly with the Insurance Company. Thereafter, neither the Company nor the Rabbi Trust shall have further responsibility to such Executive for any of the benefits or the guarantee of benefits provided under the Plan.
If the employment of an Executive is terminated and is reasonably related to or as a result of a Change in Control of the Company, Annual Premiums will be paid by the Rabbi Trust to the extent of the Security Fund as provided in Section 11.
14. DISABILITY
If the Executive becomes disabled and, as a result, becomes eligible for benefits from the CBI Long-Term Disability Plan, the Executive will be treated as being actively employed for purposes of this Plan and subject to the terms of this Plan. If an Executive who is receiving benefits from the CBI Long Term Disability Plan retires under the CBI Pension Plan, the Executive will be deemed retired for purposes of this Plan.
15. UNDERWRITING
In order to participate in the Plan and be issued an Insurance Policy under the Plan, the Executive will be required to provide medical evidence of insurability satisfactory to the Insurance Company. This medical evidence will include taking a physical examination.
If the Insurance Company, based upon the medical evidence obtained, issues an Insurance Policy on the Executive's life that will require the payment of an Extra Premium, the Rabbi Trust will pay that portion of the Extra Premium that does not exceed 40% of the Basic Annual Premium. The Executives affected by the requirement for an Extra Premium will be so notified.
If the cost of the Extra Premium exceeds 40% of the Basic Annual Premium, the following three (3) options will be available to the Executive or his designee:
. Pay that portion of the Extra Premium that exceeds 40% of the Basic Annual Premium in order to maintain an Insurance Policy that will provide the Scheduled Death Benefit Amount;
. Accept a Death Benefit equal to the amount of Death Benefit the Basic Annual Premium and that portion of the Extra Premium that does not exceed 40% of the Basic Annual Premium would purchase (herein the "Reduced Death Benefit"). If the Executive elects to accept a Reduced Death Benefit, the obligation to provide the Scheduled Death Benefit Amount and the guarantee under Section 8 shall be limited to the amount of the Reduced Death Benefit; or
. Remain a participant in the Group Life Insurance Plan, and not participate in the Plan.
If the Insurance Company determines that the Executive is uninsurable, the Executive will remain a participant in the Group Life Insurance Plan, and will not be a participant in this Plan.
Benefit changes brought about by changes in Salary will be handled as follows :
. Except as provided below, adjustments will be made to the Scheduled Death Benefit Amount provided by the Insurance Policy at the same time that the Salary change is effective and, in general, these adjustments will not require medical evidence.
. Where any Salary increase in any calendar year causes an increase in the Scheduled Death Benefit Amount in excess of 8%, medical evidence of insurability may be required for the portion of the Scheduled Death Benefit Amount increase exceeding 8%. If an Executive is found uninsurable based on medical evidence for the portion of the Scheduled Death Benefit Amount increase exceeding 8%, the Scheduled Death Benefit Amount increase for that year will be limited to that amount not exceeding 8%.
If the Insurance Company determines that an Extra Premium will be required on the Scheduled Death Benefit Amount increase, the Rabbi Trust will pay that portion of the Extra Premium that does not exceed 40% of the Basic Annual Premium applicable to the increase in Scheduled Death Benefit Amount. If the Extra Premium exceeds 40% of the Basic Annual Premium required for the Scheduled Death Benefit Amount increase, the options set forth previously in this Section will be available to the Executive.
16. ENROLLMENT PROCEDURES
To participate in the Plan, the Executive must:
. Sign a Plan Participation Form.
. Designate who will apply for and be the owner of the Insurance Policy to be issued, if other than the Executive.
. Complete any required Insurance Company applications and cooperate in providing the Insurance Company with medical evidence of insurability.
. Designate a Beneficiary under the Insurance Policy.
. Sign an Assignment Form.
17. PLAN ADMINISTRATION
Unless otherwise designated in writing by the Company's Vice President of Human Resources or officer of equivalent duties, the Plan Administrator ("Plan Administrator") will be the Company's Manager of Employee Benefits or person of equivalent duties, who shall have control over the administration and interpretation of the Plan. To the extent not limited otherwise in this Plan, the Plan Administrator shall have full and absolute discretion to construe, interpret and apply the terms of the Plan, and decisions of the Plan Administrator shall be final and binding on all parties to the fullest extent permitted by law. The Plan Administrator will have all power needed to carry out his duties, and as he deems necessary or advisable, may adopt rules and regulations relating to the Plan, may delegate administrative responsibilities to advisors or other persons, and may rely on information or opinions of legal counsel or experts.
The Insurance Company under the Plan is , unless such
other Insurance Company is selected by the Company. The Insurance
Company shall be responsible for all matters relating to any Insurance
Policy.
The trustee of the Rabbi Trust is .
18. CLAIMS PROCEDURE
For all benefits to be paid by the Insurance Policy, the claims procedure will be the claims procedure established by the Insurance Company. In any other case, a written claim must be filed with the Plan Administrator or the Trustee of the Rabbi Trust. The Plan Administrator or the Trustee of the Rabbi Trust, as applicable, will fully and fairly review all claims and provide a final written decision within sixty (60) days of the date the claim is received by the Plan Administrator or the Trustee.
The Plan Administrator is designated as the agent to receive service of legal process on behalf of the Plan.
19. NO RELATION BETWEEN PLAN AND CONTINUED EMPLOYMENT
Nothing in this Plan and/or any actions taken under it shall be construed or interpreted as a contract of employment giving the Executive a right to be retained as an employee of the Company for any period of time, or to restrict the right of the Company or the Executive to terminate employment at any time for any reason, or to give the Executive a right to continued employment in a capacity eligible to participate in the Plan.
20. RULES OF CONSTRUCTION
As used in this Plan and where appropriate, the singular shall include the plural, and vice versa, and the masculine shall include the feminine, and vice versa.
21. STATEMENT OF ERISA RIGHTS
Executives are entitled to certain rights and protection under the Employee Retirement Income Security Act of 1974 ("ERISA"). ERISA imposes duties upon the people who are responsible for the operation of the Plan. The people who operate the Plan, called "fiduciaries" of the Plan, have a duty to do so prudently and in the interest of Executives and their beneficiaries and designees. The Company may not fire or otherwise discriminate against the Executive in any way to prevent him from obtaining Plan benefits to which he is entitled or from exercising his rights under ERISA. If a claim for a benefit is denied in whole or in part, the Executive must receive a written explanation of the reason for the denial. The Executive has the right to have the Plan reviewed and his claim reconsidered. Under ERISA, there are steps to enforce the above rights. For instance, if a claim for benefits is denied or ignored, in whole or in part, the Executive may file suit in a state or federal court. If it should happen that Plan fiduciaries misuse the Plan's money, or if the Executive is discriminated against for asserting his rights, he may seek assistance from the U.S. Department of Labor, or may file suit in a federal court. The court will decide who should pay court costs and legal fees, for example, if it finds that the Executive's claim is frivolous. If there are any questions about this statement or the Executive's rights under ERISA, contact the Plan Administrator or the nearest Area Office of the U.S. Labor-Management Service Administration, Department of Labor.
22. CONTROLLING LAW
To the extent not controlled by federal law, the Plan shall be interpreted according to the laws of the State of Illinois.
CHICAGO BRIDGE & IRON SUPPLEMENTAL EXECUTIVE DEATH BENEFITS PLAN
APPENDIX A
Executive Name:__________________________________
Date:_________________________________________
Your Scheduled Death Benefit Amount under the Plan is:
Pre-Retirement 2 1/2 x Salary at Date of Death
Post-Retirement 1 1/2 x Salary at Date of Retirement
EXHIBIT 10.9
[LETTERHEAD OF PRAXAIR, INC.]
February 26, 1997
Mr. Gerald M. Glenn
President and Chief Executive Officer
Chicago Bridge & Iron Company BUSINESS CONFIDENTIAL
1501 North Division Street
Plainfield, IL 60544-8929
Dear Gerald,
This letter is to formalize Praxair's offer to you and your management team, and your acceptance of the position as president and chief executive officer of Chicago Bridge & Iron Company (CB&I).
The clarification is as follows, and replaces and supersedes all prior agreements concerning the subject matter of this letter.
Praxair is in the process of selling its interest in CB&I, either through a public offering or a private sale to a third party.
a) In the event that all or part of the shares of common stock of CB&I owned by Praxair are sold in a public offering, Praxair shall cause for you and the members of your management team to receive (in accordance with the Management Plan to be adopted by the Board of Directors) shares of common stock in CB&I over and above the shares held by Praxair (Additional Shares). The value of the amount of Additional Shares (using the initial public offering price) shall equal the value of a percentage of the total Enterprise Value as set forth below:
Enterprise Value $250mm $300mm $350mm Percentage Share 6% 7% 8% Incentive Value 15mm 21mm 28mm |
For each $50 million in Enterprise Value over $350 million, the amount of percentage share for you and management shall increase by 1%. For values less than $250mm, the amount of percentage share for you and management shall decrease by 1%. Pro-rating shall, in any event, occur in between the actual Enterprise Value and the last preceding named increment.
For example, if "Enterprise Value" equals $290mm, the percentage share would equal 6.8% and the Incentive Value would equal $19.72mm, totaling 986,000 Additional Shares (assuming a per share price of $20).
Your share of the Additional Shares shall be one half of those shares and the remaining one half shall be available for members of your management team, as shown in the attached "Schedule A".
In the event of a public offering, Enterprise Value shall be defined as follows:
Enterprise Value equals the total value of all of the shares of common stock issued (including, but not limited to, shares issued to you and your management team pursuant to this letter) at the price the shares are sold in the initial public offering as if all the shares of common stock were sold at such time, less a fixed amount of Thirteen million, six hundred thousand dollars ($13,600,000) representing all costs and fees paid by Praxair to third parties (other than employees of CB&I) in connection with the initial public offering (including, but not limited to, the cost of reorganization of CB&I as a Dutch holding company), plus a fixed amount of Fifty-five million dollars ($55,000,000) representing debt to be paid, plus a cash dividend of Five million dollars ($5,000,000), minus a fixed amount of Seven million dollars ($7,000,000), representing the value of excess cash.
b) In the event that all or part of the shares held by Praxair are sold in a private sale to a third party, Praxair shall pay to you a cash incentive fee, the amount of which shall be determined as follows:
Enterprise Value $250mm $300mm $350mm Percentage Share 3.0% 3.5% 4.0% Incentive Fee 7.5mm 10.5mm 14mm |
For each $50mm in Enterprise Value over $350 million, the amount of the Incentive Fee shall increase by 0.5%. For values less than $250mm, the amount of the Incentive Fee shall decrease by 0.5%. Pro-rating shall, in any event, occur for values in between the actual Enterprise Value and the last preceding named increment.
For example, if "Enterprise Value" equals $290mm, the percentage share would equal 3.4% and the value of the cash payment for the Incentive Fee would equal $9.86mm.
There will be no cash Incentive Fee for members of your management team other than as provided in the separate "Success Fee and Severance Compensation Agreement" letter dated February 26, 1997, other than may be, or may have been, agreed to in another agreement.
In the event of a private sale, Enterprise Value shall be defined as follows:
Enterprise Value equals the total consideration paid by the Buyer to Praxair (giving full value for any part of the consideration not in cash including, but not limited to, debt assumed by the Buyer), less out of pocket costs and fees paid to third parties (other than
employees of CB&I) in connection with the sale (including, but not limited to, the reorganization of CB&I as a Dutch holding company or otherwise), plus the value of any cash extracted by Praxair since January 1, 1997, including, but not limited to, a dividend in a fixed amount of Five million dollars ($5,000,000), and less any liability of CB&I that Praxair assumes including, but not limited to, inter-company debt.
Payment to Gerald M. Glenn shall be made within ten (10) days of the closing of the private sale.
As it related to your 1997 Annual Incentive, we have agreed that the Target Payout Range is 75% of your base pay.
If you are in agreement with this clarification, please execute a copy of this letter and return to me.
Sincerely,
/s/ E. G. Hotard
EGH:cl
|
cc: J.A. Clerico
J.F.X. Fusaro
Agreed and Accepted
/s/ Gerald M. Glenn - -------------------------------------- Gerald M. Glenn President and Chief Executive Officer |
Percentage of
Enterprise Value
----------------
T.J. Wiggins 0.75%
T.L. Aldinger 0.75%
R.H. Wolfe 0.25%
S.M. Duffy 0.125%
C.D. Bassett 0.125%
G.M. Galdo 0.0625%
Approximate 45 other management participants *
|
(*) To be allocated by G.M. Glenn at his sole and complete discretion. The total of Enterprise Value allocated to the approximate 45 participants when added to the percentage of Enterprise Value already allocated to the six (6) named executives will be equal to one half (1/2) of the total percentage share.
Chicago Bridge & Iron Company 1501 North Division Street Plainfield, Illinois 60544-8984
August 26, 1996
Mr. Timothy Wiggins
4866 Deer Ridge Drive North
Carmel, IN 46033
Dear Tim:
I am pleased to modify our offer to you for the position of Vice President and Chief Financial Officer of the Chicago Bridge & Iron Company located in Plainfield, Illinois.
Your base salary in this position will be $220,000 per year. In addition, in 1996, you will be eligible for an incentive bonus based on performance. While this amount is discretionary in nature, you will be guaranteed a minimum payment of $30,000.
In addition to a base salary and bonus, you will be eligible to participate in the programs listed below. As we have discussed, many of these programs are currently under development and specific details are not yet available. However, the information listed below is intended to provide a conceptual framework for this offer of employment.
For the year 1997, you will participate in a yet to be determined short-term incentive compensation program with a targeted bonus of not less than 25% of base pay. Target bonus is defined as the level of bonus payout which results from average company and individual performance.
You will be eligible to receive a restricted stock grant based on the enterprise value realized by Praxair, Inc. from an initial pubic offering of the Chicago Bridge & Iron Company. The amount of the grant will be three quarters (3/4) of one (1) percent (.75%) of the enterprise value received by Praxair. An example of the calculation:
Value Realized by Praxair Minimum Value of Grant
--------------------------- ----------------------
200 Million $1,500,000
250 Million $1,875,000
300 Million $2,225,000
|
This significant reward is intended to recognize the importance of your individual contribution to a successful initial public offering initiative. These restricted shares will become vested to you, free of any restrictions, on the third anniversary of the grant date subject to your continued employment through that date.
In the event of a sale of Chicago Bridge & Iron which results in your termination, or a significant reduction in your level of responsibility, during your first two (2) years following the transaction, you will be eligible to receive a lump sum payment equal to $1,000,000.00. This payment will be made to you within thirty (30) days of your separation.
In the event that Praxair, Inc. chooses to pursue a disposition alternative other than the sale or Initial Public Offering of the Chicago Bridge & Iron Company, Praxair will design a compensation vehicle which will provide a value equivalent to the restricted stock you would have received from an I.P.O.
You will be eligible to participate in the Chicago Bridge & Iron relocation program which includes a home purchase provision. Details of this program have been faxed to you for review.
As an exception to Policy, you will receive the following executive benefits:
. Four (4) weeks of paid vacation annually.
. Use of a company owned vehicle (American-made, full size sedan i.e., Buick or equivalent) or an automobile allowance of $500.00 per month.
. We will work with you to obtain a preexisting condition waiver from our health care plan in order to provide coverage for Brian's impending surgery.
. The company will provide a country club membership and dues to facilitate your business entertainment needs.
. Effective on your start date, you will become a member of the Interim Board of Directors for CB&I. The Board is comprised of Praxair and CB&I employees and was established to provide for the effective management of the business prior to a sale or I.P.O.
The make up of the Board after an I.P.O. has not been determined. However, should it be decided that the Board will have more than one internal member, I will recommend that you be selected for that position.
Under separate cover, you have received materials which describe the benefit programs in which you will be eligible to participate. As discussed, these programs are in transition and you will be advised of any new or revised plans as information becomes available.
This offer is contingent upon successful completion of a company required drug test which must be taken prior to your start date. Please contact my office as soon as possible to schedule this test. I look forward to your affirmative response no later than Friday, August 30. If you have any questions regarding this offer, please do not hesitate to call.
Sincerely,
/s/ Gerald M. Glenn ------------------- Gerald M. Glenn Chief Executive Officer & President |
cc: Stephen Duffy
Enclosures
ACCEPTED: /s/ Timothy Wiggins
----------------------
Mr. Timothy Wiggins
|
Chicago Bridge & Iron Company 1501 North Division Street Plainfield, Illinois 60544-8984
November 7, 1996
Mr. Robert H. Wolfe
3373 Faring Road
Mountain Brook, AL 35223
Dear Bob:
I am pleased to modify our offer to you for the position of Vice President and General Counsel of the Chicago Bridge & Iron Company located in Plainfield, Illinois.
Your base salary in this position will be $175,000 per year. In addition, in 1996, you will be eligible for an incentive bonus based on performance. While the amount is discretionary in nature, you will be guaranteed a minimum payment of $5,000.00.
In addition to a base salary and bonus, you will be eligible to participate in the programs listed below. Many of these programs are currently under development and specific details are not yet available. However, the information listed below is intended to provide a conceptual framework for this offer of employment.
For the year 1997, you will participate in a yet to be determined short-term incentive compensation program with a targeted bonus of net less than 25% of base pay. Target bonus is defined as the level of bonus payout which results from average company and individual performance.
You will be eligible to receive a restricted stock grant based on the enterprise value realized by Praxair, Inc., from an initial public offering of the
Chicago Bridge & Iron Company. The amount of the grant will be one quarter (1/4) of one (1) percent (.25%) of the enterprise value received by Praxair. An example of the calculation:
Value Realized by Praxair Minimum Value of Grant
--------------------------- ----------------------
200 Million $500,000
250 Million $625,000
300 Million $750,000
|
This significant reward is intended to recognize the importance of your individual contribution to a successful initial public offering initiative. These restricted shares will become vested to you, free of any restrictions, on the third anniversary of the grant date subject to your continued employment through that date.
In the event of a sale of Chicago Bridge & Iron which results in your termination, a reduction in pay or benefits, relocation of over 50 miles, or a significant reduction in your level of responsibility or job status, during your first two (2) years following the transaction, you will be eligible to receive a lump sum payment equal to $750,000. This payment will be made to you within thirty (30) days of your separation.
In the event that Praxair, Inc. chooses to pursue a disposition alternative other than an Initial Public Offering, Praxair will design a compensation vehicle which will provide incentive to maximize their value realization. You will be a participant in the program.
You will be eligible to participate in the Chicago Bridge & Iron relocation program which includes a home purchase provision. Details of this program are enclosed for your review.
As an exception to Policy, you will receive the following executive benefits:
. Use of a company owned vehicle (American-made, full-size sedan, i.e., Buick or equivalent) or an automobile allowance of $500.00 per month.
Also enclosed are materials which describe the benefit programs in which you will be eligible to participate. As discussed, these programs are in transition and you will be advised of any new or revised plans as information becomes available.
This offer is contingent upon successful completion of a company required drug test which must be taken prior to your start date. Please contact my office as soon as possible to schedule this test. I look forward to your affirmative response no later than November 11, 1996. If you have any questions regarding this offer, please do not hesitate to call.
Sincerely,
/s/ Gerald M. Glenn ------------------------ Gerald M. Glenn Chief Executive Officer & President |
cc: Stephen Duffy
Enclosures
ACCEPTED: /S/ ROBERT H. WOLFE
-------------------
Robert H. Wolfe
|
[LETTERHEAD OF PRAXAIR, INC.]
October 9, 1996
Mr. C. David Bassett
815 Jonesville Road
Simpsonville, SC 29681
Dear David:
The following letter has been revised to reflect our discussions regarding your offer of employment.
I am pleased to offer you the position of Vice President Engineering, Fabrication and Logistics for the Chicago Bridge & Iron Company located in Plainfield, Illinois.
Your base salary in this position will be $100,000 per year. This rate recognizes the fact that you will devote approximately 60% of normal business hours to this position. As discussed, should your involvement require significant additional hours (above the 1,200 hour range) those additional hours will be compensated at the rate of $75.00 per hour. Furthermore, in 1996, you will be eligible for an incentive bonus based on performance. While this amount is discretionary in nature, you will be guaranteed a minimum payment of $15,000.
In addition to a base salary and bonus, you will be eligible to participate in the programs listed below. As we have discussed, many of these programs are currently under development and specific details are not yet available. However, the information listed below is intended to provide a conceptual framework for this offer of employment.
For the year 1997, you will participate in a yet to be determined short- term incentive compensation program with a targeted bonus of not less than 40% of base pay. Target bonus is defined as the level of bonus payout which results from average company and individual performance.
You will be eligible to receive a restricted stock grant based on the enterprise value realized by Praxair, Inc. from an initial public offering of the Chicago Bridge & Iron Company. The amount of the grant will be one eighth of one (1) percent or .0125 of the enterprise value received by Praxair. An example of the calculation:
Value Realized by Praxair Minimum Value of Grant
------------------------- ----------------------
200 Million $250,000
250 Million $312,500
300 Million $375,000
|
Mr. C. David Bassett October 9, 1996 Page Two |
This significant reward is intended to recognize the importance of your individual contribution to a successful initial public offering initiative. These restricted shares will become vested to you, free of any restrictions, January 1, 1999.
. It is understood that you will retain your principal residence in South Carolina. During your employment you will be provided with an appropriate two bedroom apartment in the Chicago area, as well as the use of a company provided automobile. In addition, you will be provided with round-trip air fare to your home location on an as needed basis (not to exceed two trips per month).
. You will be eligible to receive a pre-existing condition waiver from our Health Care Plan for expenses related to your medical condition (adult diabetes). Normal coverage will apply.
Enclosed are materials which describe the benefit programs in which you will be eligible to participate. As discussed, these programs are in transition and you will be advised of any new or revised plans as information becomes available.
This offer is contingent upon successful completion of a company required drug test which must be taken prior to your start date. Please contact my office as soon as possible to schedule this test. I look forward to your affirmative response no later than Tuesday, October 15. If you have any questions regarding this offer, please do not hesitate to call.
Sincerely,
/s/ Gerald M. Glenn Gerald M. Glenn Chief Executive Officer & President |
cc: Stephen Duffy
Enclosures
ACCEPTED: /s/ C. David Bassett
----------------------
Mr. C. David Bassett
Oct. 14, 1996
|
EXHIBIT 10.10
January 31, 1997
Mr. Thomas L. Aldinger
501 Devon Drive
Burr Ridge, IL 60521
Dear Mr. Aldinger:
Chicago Bridge & Iron Company (the "Company") is a wholly owned subsidiary of Praxair, Inc. (the "Parent"). The Parent is contemplating the possible direct or indirect sale of all or a substantial part of its interests in the Company. The Company recognizes that members of senior management may become concerned about the effect of such action on their job and financial security. The Company considers the maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its Parent. Accordingly, the Board of Directors of the Company has determined to enter into this agreement (your "Agreement") to provide you with severance benefits in the event your employment with the Company terminates following a Change of Control (as defined below) under certain circumstances.
The purpose of entering into this Agreement is to induce you to remain in the employ of the Company pending and after any direct or indirect sale by the Parent of the Company or an intermediate holding corporation to which the Parent has transferred the majority of the Company's stock, measured by either or both vote and value (the "Holding Corporation") to an unrelated third party or the consummation of an initial public offering ("IPO") for the Company's stock or the stock of the Holding Corporation. Therefore, in consideration of your continued employment with the Company under these circumstances, the Company and you agree as follows:
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.
(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
(B) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants in accordance with the principles of Section 280G of the Code.
(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.
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.
(i) when any "person" or "group" of persons (as such terms are used in Section 13 of the Exchange Act), other than the Parent, the Holding Corporation, the Company or any majority-owned subsidiary of either the Parent, the Holding Corporation or the Company, becomes the "beneficial owner" (as such term is used in Section 13 of the Exchange Act) of 50% or more of either (x) the total number of the common shares of the Holding Corporation or the Company then outstanding or (y) the voting power of all of the voting securities of the Holding Corporation or the Company then outstanding; or
(ii) upon the consummation of (A) any merger or other business combination of the Company or the Holding Corporation with or into another company pursuant to which the stockholders of the Company or the Holding Corporation, as the case may be, do not own, immediately after the transaction, more than 50% of the voting power and the value of the stock of the company that survives, or (B) the sale, exchange or other disposition of all or substantially all of the assets of the Company or the Holding Corporation.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have
occurred by reason of a transfer of the Company's stock to the Holding
Corporation or any public offering of the equity securities of the Company or
Holding Corporation, so long as, immediately following such transfer or the
consummation of such offering, no person or group (as such terms are used in
Section 13 of the Exchange Act) other than the Parent or one of its majority
owned subsidiaries owns, directly or indirectly, more than 25% of the Company's
or the Holding Corporation's equity securities.
(i) when any "person" or "group" of persons (as such terms are used in Section 13 of the Exchange Act), other than the Parent, the Holding Corporation, the Company or any majority owned subsidiary of the Parent, the Holding Corporation or the Company, becomes the "beneficial owner" (as such term is used in Section 13 of the Exchange Act) of 25% or more of the total voting power of the Company's or the Holding Corporation's outstanding securities;
(ii) upon the consummation of (A) any merger or other business combination of the Company or the Holding Corporation with or into another company pursuant to which the stockholders of the Company or the Holding Corporation as the case may be, do not own, immediately after the transaction, more than 50% of the voting power and the value of the stock of the Company that survives, or (B) the sale, exchange or other disposition of all or substantially all of the assets of the Company or the Holding Corporation; or
(c) "Qualifying Termination" means the termination of your employment with the Company and any of its subsidiaries by which you are employed (i) by the Company or any such subsidiary for any reason other than your willful misconduct or gross negligence in the performance of your duties as an employee which results in a material detriment to the Company or the Holding Corporation or (ii) by you within 180 days following the occurrence of any of the following events (without your prior written consent):
(A) any significant reduction in your positions, duties, titles, responsibilities and status with the Company and its subsidiaries from those in effect immediately prior to such Change of Control;
(B) a reduction in your base salary, a reduction in your annual bonus opportunity or a material reduction in the aggregate value of your participation in the Company's employee benefits programs, as each was in effect immediately prior to such Change of Control; or
(C) your principal place of employment is moved to a location more than 50 miles from your principal place of employment immediately prior to such Change of Control or you are required in the performance of your duties to travel to an extent substantially more burdensome than your travel obligations immediately prior to such Change of Control.
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
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.
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.
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:
FULL AND FINAL RELEASE
Thomas L. Aldinger (hereinafter "EMPLOYEE"), in exchange for sufficient consideration, on behalf of himself, his family, his heirs and assigns, irrevocably and unconditionally releases Chicago Bridge & Iron Company, any parent corporations, any subsidiary corporations, any affiliated entities whether or not incorporated, the employees, agents, officers, directors, and shareholders of all such entities and any person or entity which may succeed to the rights and liabilities of such persons or entities by assignment or otherwise (hereinafter "CBI"), from all claims, controversies, liabilities, demands, causes of action, debts, obligations, promises, acts, agreements, rights of contribution and/or indemnification, and damages of whatever kind or nature, whether known or unknown, suspected or unsuspected, foreseen or unforeseen, liquidated or contingent, actual or potential, joint or individual, that he has had or now has, based on any and all aspects of EMPLOYEE'S employment with CBI or his separation from that employment, including, but not limited to, all claims arising under the Age Discrimination in Employment Act; Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Equal Pay Act; the Americans with Disabilities Act; the Employee Retirement Income Security Act of 1974; or any federal, state or local laws or regulations relating to employment or benefits associated with employment, any and all claims for breach of express or implied contract or the covenant of good faith and fair dealing (whether written or oral), all claims for retaliation or violation of public policy, breach of promise, detrimental reliance or tort (e.g., intentional infliction of emotional distress, defamation, assault, battery, false imprisonment, wrongful termination, interference with contractual or advantageous relationship, etc.), whether based on common law or otherwise; claims for emotional distress, mental anguish, personal injury, loss of consortium, and any and all claims that may be asserted on EMPLOYEE'S behalf by others. The foregoing list is meant to be illustrative rather than inclusive. This release does not preclude EMPLOYEE from seeking to obtain any benefits to which he may be entitled under any employee welfare benefit plan or retirement or profit sharing plan sponsored by CBI, but his entitlement to such benefits, if any, will be determined in accordance with the plan documents.
If I initiate or participate in any legal action in violation of this release, CBI may reclaim any amounts paid in respect of my termination, without waiving the release granted herein, and terminate any benefits or payments that are due to me, in addition to any other remedies. This release shall be construed in accordance with the laws of the State of Illinois, applicable to contracts made and entirely to be performed therein.
EMPLOYEE ACKNOWLEDGES AND AGREES THAT THIS RELEASE IS A FULL AND FINAL BAR TO ANY AND ALL CLAIM(S) OF ANY TYPE THAT HE MAY NOW HAVE AGAINST CBI. EMPLOYEE FURTHER ACKNOWLEDGES THAT HE HAS BEEN GIVEN FORTY-FIVE (45) DAYS TO CONSIDER WHETHER TO EXECUTE THIS RELEASE, THAT HE HAS SEVEN (7) DAYS TO RESCIND THIS RELEASE AFTER ITS EXECUTION, WHICH SHALL BE EFFECTED BY WRITTEN NOTICE TO CBI DELIVERED WITHIN SUCH SEVEN (7) DAY PERIOD, AND THAT HE HAS BEEN ADVISED THAT HE SHOULD SPEAK WITH COUNSEL REGARDING THE SIGNIFICANCE OF THIS RELEASE.
Dated:____________________ Signed:_____________________
January 31, 1997
Mr. Charles D. Bassett
815 Jonesville Road
Simpsonville, SC 29681
Dear Mr. Bassett:
Chicago Bridge & Iron Company (the "Company") is a wholly owned subsidiary of Praxair, Inc. (the "Parent"). The Parent is contemplating the possible direct or indirect sale of all or a substantial part of its interests in the Company. The Company recognizes that members of senior management may become concerned about the effect of such action on their job and financial security. The Company considers the maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its Parent. Accordingly, the Board of Directors of the Company has determined to enter into this agreement (your "Agreement") to provide you with severance benefits in the event your employment with the Company ter-minates following a Change of Control (as defined below) under certain circumstances.
The purpose of entering into this Agreement is to induce you to remain in the employ of the Company pending and after any direct or indirect sale by the Parent of the Company or an intermediate holding corporation to which the Parent has transferred the majority of the Company's stock, measured by either or both vote and value (the "Holding Corporation") to an unrelated third party or the consummation of an initial public offering ("IPO") for the Company's stock or the stock of the Holding Corporation. Therefore, in consideration of your continued employment with the Company under these circumstances, the Company and you agree as follows:
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.
(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
(B) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants in accordance with the principles of Section 280G of the Code.
(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.
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.
(a) Change of Control When the Company or the Holding Corporation is Not Public. At any time that neither the Company nor the Holding Corporation has any equity securities registered under Section 12 of the Exchange Act, a "Change of Control" shall be deemed to have taken place
(i) when any "person" or "group" of persons (as such terms are used in Section 13 of the Exchange Act), other than the Parent, the Holding Corporation, the Company or any majority-owned subsidiary of either the Parent, the Holding Corporation or the Company, becomes the "beneficial owner" (as such term is used in Section 13 of the Exchange Act) of 50% or more of either (x) the total number of the common shares of the Holding Corporation or the Company then outstanding or (y) the voting power of all of the voting securities of the Holding Corporation or the Company then outstanding; or
(ii) upon the consummation of (A) any merger or other business combination of the Company or the Holding Corporation with or into another company pursuant to which the stockholders of the Company or the Holding Corporation, as the case may be, do not own, immediately after the transaction, more than 50% of the voting power and the value of the stock of the company that survives, or (B) the sale, exchange or other disposition of all or substantially all of the assets of the Company or the Holding Corporation.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have
occurred by reason of a transfer of the Company's stock to the Holding
Corporation or any public offering of the equity securities of the Company or
Holding Corporation, so long as, immediately following such transfer or the
consummation of such offering, no person or group (as such terms are used in
Section 13 of the Exchange Act) other than the Parent or one of its majority
owned subsidiaries owns, directly or indirectly, more than 25% of the Company's
or the Holding Corporation's equity securities.
(i) when any "person" or "group" of persons (as such terms are used in Section 13 of the Exchange Act), other than the Parent, the Holding Corporation, the Company or any majority owned subsidiary of the Parent, the Holding Corporation or the Company, becomes the "beneficial owner" (as such term is used in Section 13 of the Exchange Act) of 25% or more of the total voting power of the Company's or the Holding Corporation's outstanding securities;
(ii) upon the consummation of (A) any merger or other business combination of the Company or the Holding Corporation with or into another company pursuant to which the stockholders of the Company or the Holding Corporation as the case may be, do not own, immediately after the transaction, more than 50% of the voting power and the value of the stock of the Company that survives, or (B) the sale, exchange or other disposition of all or substantially all of the assets of the Company or the Holding Corporation; or
(c) "Qualifying Termination" means the termination of your employment with the Company and any of its subsidiaries by which you are employed (i) by the Company or any such subsidiary for any reason other than your willful misconduct or gross negligence in the performance of your duties as an employee which results in a material detriment to the Company or the Holding Corporation or (ii) by you within 180 days following the occurrence of any of the following events (without your prior written consent):
(A) any significant reduction in your positions, duties, titles, responsibilities and status with the Company and its subsidiaries from those in effect immediately prior to such Change of Control;
(B) a reduction in your base salary, a reduction in your annual bonus opportunity or a material reduction in the aggregate value of your participation in the Company's employee benefits programs, as each was in effect immediately prior to such Change of Control; or
(C) your principal place of employment is moved to a location more than 50 miles from your principal place of employment immediately prior to such Change of Control or you are required in the performance of your duties to travel to an extent substantially more burdensome than your travel obligations immediately prior to such Change of Control.
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
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.
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.
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:
FULL AND FINAL RELEASE
Charles D. Bassett (hereinafter "EMPLOYEE"), in exchange for sufficient consideration, on behalf of himself, his family, his heirs and assigns, irrevocably and unconditionally releases Chicago Bridge & Iron Company, any parent corporations, any subsidiary corporations, any affiliated entities whether or not incorporated, the employees, agents, officers, directors, and shareholders of all such entities and any person or entity which may succeed to the rights and liabilities of such persons or entities by assignment or otherwise (hereinafter "CBI"), from all claims, controversies, liabilities, demands, causes of action, debts, obligations, promises, acts, agreements, rights of contribution and/or indemnification, and damages of whatever kind or nature, whether known or unknown, suspected or unsuspected, foreseen or unforeseen, liquidated or contingent, actual or potential, joint or individual, that he has had or now has, based on any and all aspects of EMPLOYEE'S employment with CBI or his separation from that employment, including, but not limited to, all claims arising under the Age Discrimination in Employment Act; Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Equal Pay Act; the Americans with Disabilities Act; the Employee Retirement Income Security Act of 1974; or any federal, state or local laws or regulations relating to employment or benefits associated with employment, any and all claims for breach of express or implied contract or the covenant of good faith and fair dealing (whether written or oral), all claims for retaliation or violation of public policy, breach of promise, detrimental reliance or tort (e.g., intentional infliction of emotional distress, defamation, assault, battery, false imprisonment, wrongful termination, interference with contractual or advantageous relationship, etc.), whether based on common law or otherwise; claims for emotional distress, mental anguish, personal injury, loss of consortium, and any and all claims that may be asserted on EMPLOYEE'S behalf by others. The foregoing list is meant to be illustrative rather than inclusive. This release does not preclude EMPLOYEE from seeking to obtain any benefits to which he may be entitled under any employee welfare benefit plan or retirement or profit sharing plan sponsored by CBI, but his entitlement to such benefits, if any, will be determined in accordance with the plan documents.
If I initiate or participate in any legal action in violation of this release, CBI may reclaim any amounts paid in respect of my termination, without waiving the release granted herein, and terminate any benefits or payments that are due to me, in addition to any other remedies. This release shall be construed in accordance with the laws of the State of Illinois, applicable to contracts made and entirely to be performed therein.
EMPLOYEE ACKNOWLEDGES AND AGREES THAT THIS RELEASE IS A FULL AND FINAL BAR TO ANY AND ALL CLAIM(S) OF ANY TYPE THAT HE MAY NOW HAVE AGAINST CBI. EMPLOYEE FURTHER ACKNOWLEDGES THAT HE HAS BEEN GIVEN FORTY-FIVE (45) DAYS TO CONSIDER WHETHER TO EXECUTE THIS RELEASE, THAT HE HAS SEVEN (7) DAYS TO RESCIND THIS RELEASE AFTER ITS EXECUTION, WHICH SHALL BE EFFECTED BY WRITTEN NOTICE TO CBI DELIVERED WITHIN SUCH SEVEN (7) DAY PERIOD, AND THAT HE HAS BEEN ADVISED THAT HE SHOULD SPEAK WITH COUNSEL REGARDING THE SIGNIFICANCE OF THIS RELEASE.
Dated:____________________ Signed:_____________________
January 31, 1997
Mr. Stephen M. Duffy
15117 Ginger Creek Lane
Orland Park, IL 60462
Dear Mr. Duffy:
Chicago Bridge & Iron Company (the "Company") is a wholly owned subsidiary of Praxair, Inc. (the "Parent"). The Parent is contemplating the possible direct or indirect sale of all or a substantial part of its interests in the Company. The Company recognizes that members of senior management may become concerned about the effect of such action on their job and financial security. The Company considers the maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its Parent. Accordingly, the Board of Directors of the Company has determined to enter into this agreement (your "Agreement") to provide you with severance benefits in the event your employment with the Company ter-minates following a Change of Control (as defined below) under certain circumstances.
The purpose of entering into this Agreement is to induce you to remain in the employ of the Company pending and after any direct or indirect sale by the Parent of the Company or an intermediate holding corporation to which the Parent has transferred the majority of the Company's stock, measured by either or both vote and value (the "Holding Corporation") to an unrelated third party or the consummation of an initial public offering ("IPO") for the Company's stock or the stock of the Holding Corporation. Therefore, in consideration of your continued employment with the Company under these circumstances, the Company and you agree as follows:
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.
(A) all "parachute payments" in excess of the "base amount" (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the good faith judgment of the Company's independent certified public accountants appointed prior to the Change of Control or tax coun-sel selected by such Accountants (the "Accountants"), the Company has a reasonable basis to conclude that such Covered Payments (in whole or in part) represent reasonable compensation for personal services actually rendered (within
the meaning of Section 280G(b)(4)(B) of the Code) in excess of the "base amount," or such "parachute payments" are otherwise not subject to such Excise Tax, and
(B) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants in accordance with the principles of Section 280G of the Code.
(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.
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.
(i) when any "person" or "group" of persons (as such terms are used in Section 13 of the Exchange Act), other than the Parent, the Holding Corporation, the Company or any majority-owned subsidiary of either the Parent, the Holding Corporation or the Company, becomes the "beneficial owner" (as such term is used in Section 13 of the Exchange Act) of 50% or more of either (x) the total number of the common shares of the Holding Corporation or the Company then outstanding or (y) the voting power of all of the voting securities of the Holding Corporation or the Company then outstanding; or
(ii) upon the consummation of (A) any merger or other business combination of the Company or the Holding Corporation with or into another company pursuant to which the stockholders of the Company or the Holding Corporation, as the case may be, do not own, immediately after the transaction, more than 50% of the voting power and the value of the stock of the company that survives, or (B) the sale, exchange or other disposition of all or substantially all of the assets of the Company or the Holding Corporation.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have
occurred by reason of a transfer of the Company's stock to the Holding
Corporation or any public offering of the equity securities of the Company or
Holding Corporation, so long as, immediately following such transfer or the
consummation of such offering, no person or group (as such terms are used in
Section 13 of the Exchange Act) other than the Parent or one of its majority
owned subsidiaries owns, directly or indirectly, more than 25% of the Company's
or the Holding Corporation's equity securities.
(i) when any "person" or "group" of persons (as such terms are used in Section 13 of the Exchange Act), other than the Parent, the Holding Corporation, the Company or any majority owned subsidiary of the Parent, the Holding Corporation or the Company, becomes the "beneficial owner" (as such term is used in Section 13 of the Exchange Act) of 25% or more of the total voting power of the Company's or the Holding Corporation's outstanding securities;
(ii) upon the consummation of (A) any merger or other business combination of the Company or the Holding Corporation with or into another company pursuant to which the stockholders of the Company or the Holding Corporation as the case may be, do not own, immediately after the transaction, more than 50% of the voting power and the value of the stock of the Company that survives, or (B) the sale, exchange or other disposition of all or substantially all of the assets of the Company or the Holding Corporation; or
(c) "Qualifying Termination" means the termination of your employment with the Company and any of its subsidiaries by which you are employed (i) by the Company or any such subsidiary for any reason other than your willful misconduct or gross negligence in the performance of your duties as an employee which results in a material detriment to the Company or the Holding Corporation or (ii) by you within 180 days following the occurrence of any of the following events (without your prior written consent):
(A) any significant reduction in your positions, duties, titles, responsibilities and status with the Company and its subsidiaries from those in effect immediately prior to such Change of Control;
(B) a reduction in your base salary, a reduction in your annual bonus opportunity or a material reduction in the aggregate value of your participation in the Company's employee benefits programs, as each was in effect immediately prior to such Change of Control; or
(C) your principal place of employment is moved to a location more than 50 miles from your principal place of employment immediately prior to such Change of Control or you are required in the performance of your duties to travel to an extent substantially more burdensome than your travel obligations immediately prior to such Change of Control.
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
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.
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.
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:
FULL AND FINAL RELEASE
Stephen M. Duffy (hereinafter "EMPLOYEE"), in exchange for sufficient consideration, on behalf of himself, his family, his heirs and assigns, irrevocably and unconditionally releases Chicago Bridge & Iron Company, any parent corporations, any subsidiary corporations, any affiliated entities whether or not incorporated, the employees, agents, officers, directors, and shareholders of all such entities and any person or entity which may succeed to the rights and liabilities of such persons or entities by assignment or otherwise (hereinafter "CBI"), from all claims, controversies, liabilities, demands, causes of action, debts, obligations, promises, acts, agreements, rights of contribution and/or indemnification, and damages of whatever kind or nature, whether known or unknown, suspected or unsuspected, foreseen or unforeseen, liquidated or contingent, actual or potential, joint or individual, that he has had or now has, based on any and all aspects of EMPLOYEE'S employment with CBI or his separation from that employment, including, but not limited to, all claims arising under the Age Discrimination in Employment Act; Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Equal Pay Act; the Americans with Disabilities Act; the Employee Retirement Income Security Act of 1974; or any federal, state or local laws or regulations relating to employment or benefits associated with employment, any and all claims for breach of express or implied contract or the covenant of good faith and fair dealing (whether written or oral), all claims for retaliation or violation of public policy, breach of promise, detrimental reliance or tort (e.g., intentional infliction of emotional distress, defamation, assault, battery, false imprisonment, wrongful termination, interference with contractual or advantageous relationship, etc.), whether based on common law or otherwise; claims for emotional distress, mental anguish, personal injury, loss of consortium, and any and all claims that may be asserted on EMPLOYEE'S behalf by others. The foregoing list is meant to be illustrative rather than inclusive. This release does not preclude EMPLOYEE from seeking to obtain any benefits to which he may be entitled under any employee welfare benefit plan or retirement or profit sharing plan sponsored by CBI, but his entitlement to such benefits, if any, will be determined in accordance with the plan documents.
If I initiate or participate in any legal action in violation of this release, CBI may reclaim any amounts paid in respect of my termination, without waiving the release granted herein, and terminate any benefits or payments that are due to me, in addition to any other remedies. This release shall be construed in accordance with the laws of the State of Illinois, applicable to contracts made and entirely to be performed therein.
EMPLOYEE ACKNOWLEDGES AND AGREES THAT THIS RELEASE IS A FULL AND FINAL BAR TO ANY AND ALL CLAIM(S) OF ANY TYPE THAT HE MAY NOW HAVE AGAINST CBI. EMPLOYEE FURTHER ACKNOWLEDGES THAT HE HAS BEEN GIVEN FORTY-FIVE (45) DAYS TO CONSIDER WHETHER TO EXECUTE THIS RELEASE, THAT HE HAS SEVEN (7) DAYS TO RESCIND THIS RELEASE AFTER ITS EXECUTION, WHICH SHALL BE EFFECTED BY WRITTEN NOTICE TO CBI DELIVERED WITHIN SUCH SEVEN (7) DAY PERIOD, AND THAT HE HAS BEEN ADVISED THAT HE SHOULD SPEAK WITH COUNSEL REGARDING THE SIGNIFICANCE OF THIS RELEASE.
Dated:____________________ Signed:_____________________
January 31, 1997
Mr. Timothy J. Wiggins
2505 Hanford Lane
Aurora, IL 60504
Dear Mr. Wiggins:
Chicago Bridge & Iron Company (the "Company") is a wholly owned subsidiary of Praxair, Inc. (the "Parent"). The Parent is contemplating the possible direct or indirect sale of all or a substantial part of its interests in the Company. The Company recognizes that members of senior management may become concerned about the effect of such action on their job and financial security. The Company considers the maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its Parent. Accordingly, the Board of Directors of the Company has determined to enter into this agreement (your "Agreement") to provide you with severance benefits in the event your employment with the Company ter-minates following a Change of Control (as defined below) under certain circumstances.
The purpose of entering into this Agreement is to induce you to remain in the employ of the Company pending and after any direct or indirect sale by the Parent of the Company or an intermediate holding corporation to which the Parent has transferred the majority of the Company's stock, measured by either or both vote and value (the "Holding Corporation") to an unrelated third party or the consummation of an initial public offering ("IPO") for the Company's stock or the stock of the Holding Corporation. Therefore, in consideration of your continued employment with the Company under these circumstances, the Company and you agree as follows:
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.
(A) all "parachute payments" in excess of the "base amount" (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the good faith judgment of the Company's independent certified public accountants appointed prior to the Change of Control or tax coun-sel selected by such Accountants (the "Accountants"), the Company has a reasonable basis to conclude that such Covered Payments (in whole or in part) represent reasonable compensation for personal services actually rendered (within
the meaning of Section 280G(b)(4)(B) of the Code) in excess of the "base amount," or such "parachute payments" are otherwise not subject to such Excise Tax, and
(B) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants in accordance with the principles of Section 280G of the Code.
(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.
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.
(i) when any "person" or "group" of persons (as such terms are used in Section 13 of the Exchange Act), other than the Parent, the Holding Corporation, the Company or any majority-owned subsidiary of either the Parent, the Holding Corporation or the Company, becomes the "beneficial owner" (as such term is used in Section 13 of the Exchange Act) of 50% or more of either (x) the total number of the common shares of the Holding Corporation or the Company then outstanding or (y) the voting power of all of the voting securities of the Holding Corporation or the Company then outstanding; or
(ii) upon the consummation of (A) any merger or other business combination of the Company or the Holding Corporation with or into another company pursuant to which the stockholders of the Company or the Holding Corporation, as the case may be, do not own, immediately after the transaction, more than 50% of the voting power and the value of the stock of the company that survives, or (B) the sale, exchange or other disposition of all or substantially all of the assets of the Company or the Holding Corporation.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have
occurred by reason of a transfer of the Company's stock to the Holding
Corporation or any public offering of the equity securities of the Company or
Holding Corporation, so long as, immediately following such transfer or the
consummation of such offering, no person or group (as such terms are used in
Section 13 of the Exchange Act) other than the Parent or one of its majority
owned subsidiaries owns, directly or indirectly, more than 25% of the Company's
or the Holding Corporation's equity securities.
(i) when any "person" or "group" of persons (as such terms are used in Section 13 of the Exchange Act), other than the Parent, the Holding Corporation, the Company or any majority owned subsidiary of the Parent, the Holding Corporation or the Company, becomes the "beneficial owner" (as such term is used in Section 13 of the Exchange Act) of 25% or more of the total voting power of the Company's or the Holding Corporation's outstanding securities;
(ii) upon the consummation of (A) any merger or other business combination of the Company or the Holding Corporation with or into another company pursuant to which the stockholders of the Company or the Holding Corporation as the case may be, do not own, immediately after the transaction, more than 50% of the voting power and the value of the stock of the Company that survives, or (B) the sale, exchange or other disposition of all or substantially all of the assets of the Company or the Holding Corporation; or
(iii) if, during any period of two years or less, individuals who at the beginning of such period constituted the Board of Directors of the Company or the Holding Corporation, as the case may be, cease for any reason to constitute at least a majority thereof; provided that any new director who is elected to, or nominated for election to, the Board of Directors with the approval of at least 75% of the directors then still in office who were directors at the beginning of the period shall be treated as though having been a director at the beginning of such period.
(c) "Qualifying Termination" means the termination of your employment with the Company and any of its subsidiaries by which you are employed (i) by the Company or any such subsidiary for any reason other than your willful misconduct or gross negligence in the performance of your duties as an employee which results in a material detriment to the Company or the Holding Corporation or (ii) by you within 180 days following the occurrence of any of the following events (without your prior written consent):
(A) any significant reduction in your positions, duties, titles, responsibilities and status with the Company and its subsidiaries from those in effect immediately prior to such Change of Control;
(B) a reduction in your base salary, a reduction in your annual bonus opportunity or a material reduction in the aggregate value of your participation in the Company's employee benefits programs, as each was in effect immediately prior to such Change of Control; or
(C) your principal place of employment is moved to a location more than 50 miles from your principal place of employment immediately prior to such Change of Control or you are required in the performance of your duties to travel to an extent substantially more burdensome than your travel obligations immediately prior to such Change of Control.
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
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.
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.
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:
FULL AND FINAL RELEASE
Timothy J. Wiggins (hereinafter "EMPLOYEE"), in exchange for sufficient consideration, on behalf of himself, his family, his heirs and assigns, irrevocably and unconditionally releases Chicago Bridge & Iron Company, any parent corporations, any subsidiary corporations, any affiliated entities whether or not incorporated, the employees, agents, officers, directors, and shareholders of all such entities and any person or entity which may succeed to the rights and liabilities of such persons or entities by assignment or otherwise (hereinafter "CBI"), from all claims, controversies, liabilities, demands, causes of action, debts, obligations, promises, acts, agreements, rights of contribution and/or indemnification, and damages of whatever kind or nature, whether known or unknown, suspected or unsuspected, foreseen or unforeseen, liquidated or contingent, actual or potential, joint or individual, that he has had or now has, based on any and all aspects of EMPLOYEE'S employment with CBI or his separation from that employment, including, but not limited to, all claims arising under the Age Discrimination in Employment Act; Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Equal Pay Act; the Americans with Disabilities Act; the Employee Retirement Income Security Act of 1974; or any federal, state or local laws or regulations relating to employment or benefits associated with employment, any and all claims for breach of express or implied contract or the covenant of good faith and fair dealing (whether written or oral), all claims for retaliation or violation of public policy, breach of promise, detrimental reliance or tort (e.g., intentional infliction of emotional distress, defamation, assault, battery, false imprisonment, wrongful termination, interference with contractual or advantageous relationship, etc.), whether based on common law or otherwise; claims for emotional distress, mental anguish, personal injury, loss of consortium, and any and all claims that may be asserted on EMPLOYEE'S behalf by others. The foregoing list is meant to be illustrative rather than inclusive. This release does not preclude EMPLOYEE from seeking to obtain any benefits to which he may be entitled under any employee welfare benefit plan or retirement or profit sharing plan sponsored by CBI, but his entitlement to such benefits, if any, will be determined in accordance with the plan documents.
If I initiate or participate in any legal action in violation of this release, CBI may reclaim any amounts paid in respect of my termination, without waiving the release granted herein, and terminate any benefits or payments that are due to me, in addition to any other remedies. This release shall be construed in accordance with the laws of the State of Illinois, applicable to contracts made and entirely to be performed therein.
EMPLOYEE ACKNOWLEDGES AND AGREES THAT THIS RELEASE IS A FULL AND FINAL BAR TO ANY AND ALL CLAIM(S) OF ANY TYPE THAT HE MAY NOW HAVE AGAINST CBI. EMPLOYEE FURTHER ACKNOWLEDGES THAT HE HAS BEEN GIVEN FORTY-FIVE (45) DAYS TO CONSIDER WHETHER TO EXECUTE THIS RELEASE, THAT HE HAS SEVEN (7) DAYS TO RESCIND THIS RELEASE AFTER ITS EXECUTION, WHICH SHALL BE EFFECTED BY WRITTEN NOTICE TO CBI DELIVERED WITHIN SUCH SEVEN (7) DAY PERIOD, AND THAT HE HAS BEEN ADVISED THAT HE SHOULD SPEAK WITH COUNSEL REGARDING THE SIGNIFICANCE OF THIS RELEASE.
Dated:____________________ Signed:_____________________
January 31, 1997
Mr. Robert H. Wolfe
732 Fairfield Court
Westmont, IL 60559
Chicago Bridge & Iron Company (the "Company") is a wholly owned subsidiary of Praxair, Inc. (the "Parent"). The Parent is contemplating the possible direct or indirect sale of all or a substantial part of its interests in the Company. The Company recognizes that members of senior management may become concerned about the effect of such action on their job and financial security. The Company considers the maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its Parent. Accordingly, the Board of Directors of the Company has determined to enter into this agreement (your "Agreement") to provide you with severance benefits in the event your employment with the Company ter-minates following a Change of Control (as defined below) under certain circumstances.
The purpose of entering into this Agreement is to induce you to remain in the employ of the Company pending and after any direct or indirect sale by the Parent of the Company or an intermediate holding corporation to which the Parent has transferred the majority of the Company's stock, measured by either or both vote and value (the "Holding Corporation") to an unrelated third party or the consummation of an initial public offering ("IPO") for the Company's stock or the stock of the Holding Corporation. Therefore, in consideration of your continued employment with the Company under these circumstances, the Company and you agree as follows:
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.
(A) all "parachute payments" in excess of the "base amount" (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the good faith judgment of the Company's independent certified public accountants appointed prior to the Change of Control or tax coun-sel selected by such Accountants (the "Accountants"), the Company has a reasonable basis to conclude that such Covered Payments (in whole or in part) represent reasonable compensation for personal services actually rendered (within
the meaning of Section 280G(b)(4)(B) of the Code) in excess of the "base amount," or such "parachute payments" are otherwise not subject to such Excise Tax, and
(B) the value of any non-cash benefits or any deferred payment or benefit shall be deter-mined by the Accountants in accordance with the principles of Section 280G of the Code.
(A) Federal income taxes at the highest applicable marginal rate of Federal income tax-ation for the calendar year in which the Tax Reimbursement Payment is to be made, and
(B) any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the Tax Reimbursement Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year.
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.
(i) when any "person" or "group" of persons (as such
terms are used in Section 13 of the Exchange Act), other than the
Parent, the Holding Corporation, the Company or any majority-owned
subsidiary of either the Parent, the Holding Corporation or the
Company, becomes the "beneficial owner" (as such term is used in
Section 13 of the Exchange Act) of 50% or more of either (x) the
total number of the common shares of the Holding Corporation or the
Company then outstanding or (y) the voting power of all of the voting
securities of the Holding Corporation or the Company then
outstanding; or
(ii) upon the consummation of (A) any merger or other business combination of the Company or the Holding Corporation with or into another company pursuant to which the stockholders of the Company or the Holding Corporation, as the case may be, do not own, immediately after the transaction, more than 50% of the voting power and the value of the stock of the company that survives, or (B) the sale, exchange or other disposition of all or substantially all of the assets of the Company or the Holding Corporation.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have
occurred by reason of a transfer of the Company's stock to the Holding
Corporation or any public offering of the equity securities of the Company or
Holding Corporation, so long as, immediately following such transfer or the
consummation of such offering, no person or group (as such terms are used in
Section 13 of the Exchange Act) other than the Parent or one of its majority
owned subsidiaries owns, directly or indirectly, more than 25% of the Company's
or the Holding Corporation's equity securities.
(i) when any "person" or "group" of persons (as such terms are used in Section 13 of the Exchange Act), other than the Parent, the Holding Corporation, the Company or any majority owned subsidiary of the Parent, the Holding Corporation or the Company, becomes the "beneficial owner" (as such term is used in Section 13 of the Exchange Act) of 25% or more of the total voting power of the Company's or the Holding Corporation's outstanding securities;
(ii) upon the consummation of (A) any merger or other business combination of the Company or the Holding Corporation with or into another company pursuant to which the stockholders of the Company or the Holding Corporation as the case may be, do not own, immediately after the transaction, more than 50% of the voting power and the value of the stock of the Company that survives, or (B) the sale, exchange or other disposition of all or substantially all of the assets of the Company or the Holding Corporation; or
(iii) if, during any period of two years or less, individuals who at the beginning of such period constituted the Board of Directors of the Company or the Holding Corporation, as the case may be, cease for any reason to constitute at least a majority thereof; provided that any new director who is elected to, or nominated for election to, the Board of Directors with the approval of at least 75% of the directors then still in office who were directors at the beginning of the period shall be treated as though having been a director at the beginning of such period.
(c) "Qualifying Termination" means the termination of your employment with the Company and any of its subsidiaries by which you are employed (i) by the Company or any such subsidiary for any reason other than your willful misconduct or gross negligence in the performance of your duties as an employee which results in a material detriment to the Company or the Holding Corporation or (ii) by you within 180 days following the occurrence of any of the following events (without your prior written consent):
(A) any significant reduction in your positions, duties, titles, responsibilities and status with the Company and its subsidiaries from those in effect immediately prior to such Change of Control;
(B) a reduction in your base salary, a reduction in your annual bonus opportunity or a material reduction in the aggregate value of your participation in the Company's employee benefits programs, as each was in effect immediately prior to such Change of Control; or
(C) your principal place of employment is moved to a location more than 50 miles from your principal place of employment immediately prior to such Change of Control or you are required in the performance of your duties to travel to an extent substantially more burdensome than your travel obligations immediately prior to such Change of Control.
Notwithstanding anything else contained herein to the contrary, a Qualifying
Termination shall not be deemed to have occurred by reason of (i) your death,
(ii) any termination of your employment due to your inability to perform the
duties of your position for a period of at least 180 days on account of any
physical or mental impairment, or (iii) your voluntary retirement at or after
your normal retirement date under any of the Company's employee pension plans in
which you participate.
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.
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.
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:
FULL AND FINAL RELEASE
If I initiate or participate in any legal action in violation of this release, CBI may reclaim any amounts paid in respect of my termination, without waiving the release granted herein, and terminate any benefits or payments that are due to me, in addition to any other remedies. This release shall be construed in accordance with the laws of the State of Illinois, applicable to contracts made and entirely to be performed therein.
EMPLOYEE ACKNOWLEDGES AND AGREES THAT THIS RELEASE IS A FULL AND FINAL BAR TO ANY AND ALL CLAIM(S) OF ANY TYPE THAT HE MAY NOW HAVE AGAINST CBI. EMPLOYEE FURTHER ACKNOWLEDGES THAT HE HAS BEEN GIVEN FORTY-FIVE (45) DAYS TO CONSIDER WHETHER TO EXECUTE THIS RELEASE, THAT HE HAS SEVEN (7) DAYS TO RESCIND THIS RELEASE AFTER ITS EXECUTION, WHICH SHALL BE EFFECTED BY WRITTEN NOTICE TO CBI DELIVERED WITHIN SUCH SEVEN (7) DAY PERIOD, AND THAT HE HAS BEEN ADVISED THAT HE SHOULD SPEAK WITH COUNSEL REGARDING THE SIGNIFICANCE OF THIS RELEASE.
Dated:____________________ Signed:_____________________
EXHIBIT 10.11
SEPARATION AGREEMENT (the "Agreement") dated as of January 1, 1997 between Praxair, Inc., a Delaware corporation ("Praxair") and Chicago Bridge & Iron Company, a Delaware corporation ("CB&I").
WHEREAS, in 1996 Praxair acquired all of the outstanding shares of CBI Industries, and CB&I became an indirect subsidiary of Praxair; and
WHEREAS, upon the filing of a Certificate of Ownership and Merger with the Secretary of State of Delaware on December 19, 1996, CBI Industries was merged with and into Praxair; and
WHEREAS, Praxair intends to sell some or all of its interest in CB&I, and, in anticipation of such sale, Praxair and CB&I desire to define their respective rights and obligations with respect to the assumption of liabilities and indemnification;
NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein and other good, valuable and sufficient consideration, the receipt of which is hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:
(a) As used in this Agreement, the following terms shall have the meanings set forth below:
"CB&I Companies" shall mean CB&I and its direct and indirect subsidiaries, and any other entities (including any corporations, partnerships, trusts or joint ventures) in which they or any of them now hold or heretofore held a direct or indirect equity or similar ownership interest, including, but not limited to, those subsidiaries and entities listed on Schedule 1 hereto, but excluding MQS Inspection, Inc., Cooperheat, Inc. and Ershigs, Inc.
"CB&I Group" shall mean the CB&I Companies and their directors, officers, employees, agents, consultants, representatives, successors, transferees, or assignees.
"Claims and Liabilities" shall mean any and all actual or alleged claims, liabilities, obligations, losses, costs, expenses, litigations, proceedings, fines, taxes, levies, imposts, duties, deficiencies, assessments, charges, penalties, allegations, demands, damages (including, but not limited to, actual, punitive or consequential, foreseen or unforeseen, known or unknown damages), settlements or judgments of any kind or nature whatsoever, regardless of when they arose or arise or whether the facts on which they are based occurred prior or subsequent to the Separation Date, and regardless of where or against whom they are asserted or determined or whether they are asserted or determined prior or subsequent to the Separation Date, and regardless of whether they are known or unknown, fixed or contingent, asserted or unasserted, including, but not limited to, those with respect to environment (including, but not limited to, the outdoor or indoor environment, soil, groundwater, surface water, air and noise emissions, and the generation, disposal, discharge, release or threatened release of any hazardous, toxic, or dangerous substance, chemical, waste, material, or constituent that could give rise to liability), health, safety, personal injury, death, property damage, employment, those arising out of contracts, product liability, warranty, merchantability or fitness for any particular purpose of goods, conformity of goods to contractual requirements or any other breach or violation of any obligation or requirement.
"Internal Costs" shall mean salaries and reasonable allocated overhead attributable to employees of an Indemnitee (as defined in Section 4(a) below), to the extent such salaries and allocated overhead are attributable to time spent by such employees in assisting the Indemnitor (as defined in Section 4(a) below) in carrying out its indemnification obligations hereunder.
"Praxair Companies" shall mean Praxair and its direct and indirect subsidiaries, and any other entities (including any corporations, partnerships, trusts or joint ventures) in which they or any of them hold or heretofore held any direct or indirect equity or similar ownership interest (including, but not limited to, CBI Industries and its affiliates (other than the CB&I Companies) before the merger of CB&I Industries with and into Praxair) but excluding the CB&I Companies. "Praxair Companies" shall include but not be limited to MQS Inspection, Inc., Cooperheat, Inc. and Ershigs, Inc.
"Praxair Group" shall mean the Praxair Companies and any of such entities' directors, officers, employees, agents, consultants, representatives, successors, transferees, or assignees.
"Separation Date" shall mean January 1, 1997.
"Service Agreements" shall mean the agreements and arrangements listed on Schedule 1 hereto.
"Third Party Proceeding" shall mean any of the following which are subject to a Notice of Claim as defined in Section 4(b) hereof: any claim asserted by a third party, any litigation or proceeding brought by a third party, and any third party allegation or demand.
(a) Except as otherwise provided herein (including, but not limited to
Section 5 hereof) or in the Service Agreements, upon, from and after the
Separation Date, CB&I shall, without any further responsibility or liability of
or recourse to the Praxair Group, absolutely and irrevocably assume, retain and
be solely liable and responsible for any and all Claims and Liabilities arising
out of or relating to ownership, operations, business, activities, or assets of
the CB&I Companies (the "CB&I Liabilities").
(b) CB&I shall indemnify each member of the Praxair Group for, and shall hold each member of the Praxair Group harmless from, any and all CB&I Liabilities (including, but not limited to, reasonable fees and expenses of counsel, but excluding Internal Costs) of any kind or nature whatsoever.
(c) CB&I shall indemnify the Praxair Group for, and shall hold each of them harmless from, any and all Claims and Liabilities (excluding Internal Costs) which may arise out of any violation of this Agreement by CB&I.
(d) If any event shall occur or circumstances shall exist which would entitle a member of the Praxair Group to indemnification or reimbursement hereunder, any proceeds recovered or recoverable by such member or any of its parents, subsidiaries or affiliates (other than the CB&I Group) from any third party (including, but not limited to, any insurance company) with respect thereto shall be assigned to CB&I, and any
claims or rights with respect to such proceeds shall be subrogated to CB&I (to the extent such proceeds are actually recovered from such third party). Notwithstanding the foregoing, except as otherwise provided in the Service Agreements, amounts expended by any member of the Praxair Group for self insurance costs whether through fronting vehicles or otherwise shall not be assigned to CB&I, and such costs shall be remain as a claim for indemnification against CB&I. The relevant members of the Praxair Group shall use reasonable efforts to effect any such recovery and otherwise effectively to secure for CB&I the benefit of any such rights to such proceeds.
(a) Except as otherwise provided herein including but not limited to
Section 5 hereof or in the Service Agreements, upon, from and after the
Separation Date, Praxair shall, without any further responsibility or liability
of or recourse to the CB&I Group, absolutely and irrevocably assume, retain and
be solely liable and responsible for any and all Claims and Liabilities arising
out of or relating to the ownership, operations, business, activities or assets
of the Praxair Group (collectively, the "Praxair Liabilities").
(b) Praxair shall indemnify the CB&I Group for, and shall hold each member of the CB&I Group harmless from, any and all Praxair Liabilities (including, but not limited to, reasonable fees and expenses of counsel, but excluding Internal Costs) of any kind or nature whatsoever.
(c) Praxair shall indemnify the CB&I Companies for, and shall hold each of them harmless from, any and all Claims and Liabilities (excluding Internal Costs) which may arise out of any violation of this Agreement by Praxair.
(d) If any event shall occur or circumstances shall exist which would entitle a member of the CB&I Group to indemnification or reimbursement hereunder, any proceeds recovered or recoverable by such member or any of its parents, subsidiaries or affiliates (other than the Praxair Companies) from any third party (including, but not limited to, any insurance company) with respect thereto shall be assigned to Praxair, and any claims or rights with respect to such proceeds shall be subrogated to Praxair (to the extent such proceeds are actually recovered from such third party). Notwithstanding the foregoing, except as otherwise provided in the Service Agreements,
amounts expended by any member of the CB&I Group for self insurance costs whether through fronting vehicles or otherwise shall not be assigned to Praxair, and such costs shall be remain as a claim for indemnification against Praxair. The relevant members of the CB&I Group shall use reasonable efforts to effect any such recovery and otherwise effectively to secure for Praxair the benefit of any such rights to such proceeds.
(a) Notwithstanding anything contained herein to the contrary, a member of the CB&I Group or the Praxair Group that may otherwise be entitled to indemnification or reimbursement thereunder (the "Indemnitee") with respect to any Claims and Liabilities (an "Indemnifiable Claim") shall not be entitled to indemnification or reimbursement hereunder with respect to such Indemnifiable Claim unless the Indemnitee gives to the party who may be obligated for such indemnification or reimbursement (the "Indemnitor") written notice of such Indemnifiable Claim (a "Notice of Claim") promptly after the Indemnitee has obtained actual knowledge of such Claims and Liabilities and has determined that it has given or could give rise to claim for indemnification or reimbursement under Section 2 or 3 hereof; provided, however, that a failure to give or a delay in giving such Notice of Claim shall only release the Indemnitor from its obligations under Section 2 or 3 hereof, as the case may be, to the extent of any prejudice to the Indemnitor attributable to such failure or delay. Each Notice of Claim shall set forth in reasonable detail the nature and any particulars of the Indemnifiable Claim described therein. The Indemnitor shall, within thirty (30) days after its receipt of a Notice of Claim, either (i) satisfy its obligations under Section 2 or 3 hereof, as the case may be, with respect to such Indemnifiable Claim or (ii) object to any request for indemnification hereunder by giving written notice of such objection to the Indemnitee (which objection shall be resolved in accordance with Section 6); provided, however, that, unless the parties shall have otherwise agreed or Indemnitee is required by court order or similar process to pay or incur any Claims and Liabilities, so long as the Indemnitor is in good faith (i) defending such Indemnifiable Claim pursuant to Section 4(b) hereof, (ii) performing its obligations under Section 4(c) hereof, or (iii) objecting to such Indemnifiable Claim in accordance with the procedures set forth in Section 6 hereof, its obligations with respect thereto under Section 2 or 3 hereof, as the case may be, shall have been met; it being
understood that this proviso will not prevent indemnification or reimbursement for out-of-pocket costs, fees and expenses previously incurred with respect to which the Indemnitee is entitled to indemnification or reimbursement by the Indemnitor hereunder.
in good faith as provided herein, or in the circumstances contemplated by the second sentence of this Section 4(b) after notice to the Indemnitor specifying such failure and giving Indemnitor a reasonable opportunity to cure the same, the Indemnitee shall have the right, but not the obligation, to defend, contest, assert crossclaims or counterclaims or otherwise protect against such Third Party Proceeding and to make any compromise or settlement thereof and shall be entitled to recover from the Indemnitor, and to be indemnified by the Indemnitor for, the entire cost thereof, including, without limitation, legal expenses, disbursements and all amounts paid as a result of such Third Party Proceeding or any compromise or settlement hereof, but excluding any allocation for costs relating to in-house personnel. If the Indemnitor fails to defend against a Third Party Proceeding, the Indemnitee has the right to do whatever it deems appropriate to defend itself and may settle such Third Party Proceeding on such terms as it deems appropriate; provided that in doing so the Indemnitee acts in good faith and not in collusion with such third party. Notwithstanding the foregoing, in no event may an Indemnitee settle the Third Party Proceeding if such settlement includes an assignment to the third party of the Indemnitee's rights under this Agreement. The parties hereto agree that with respect to any Third Party Proceeding for which an Indemnitor is required to provide legal counsel (or reimbursement therefor) pursuant to this section, an Indemnitor shall only be responsible for the fees and expenses of one firm to represent all entities of the Indemnitee party to such Third Party Proceeding.
(c) Except as otherwise set forth in the Service Agreements, the
Indemnitor, upon the request of or after consultation with the Indemnitee,
shall have the right and obligation, in good faith and at its own expense, to
cure, remediate, mitigate, remedy or otherwise handle any event or circumstance
which gives rise to an Indemnifiable Claim (other than a Third Party
Proceeding), including events and circumstances which can be cured, remediated,
mitigated or remedied through the expenditure of money and events and
circumstances which give rise to an Indemnifiable Claim which can be measured in
terms of money. Such right and obligation shall include, without limitation,
(i) the right to investigate any such event or circumstance, and (ii) the right
and obligation to cure, mitigate, remediate, remedy and otherwise handle any
such event or circumstance on such terms and conditions and by such means as the
Indemnitor may reasonably determine, after consultation with the Indemnitee,
whose consent to such terms, conditions, and means shall
not be unreasonably withheld. The Indemnitor shall promptly inform the Indemnitee of all material developments related to any such event or circumstance. So long as the Indemnitor is in good faith performing its obligations under this Section 4(c), the Indemnitee shall at all times, at the expense of the Indemnitor with respect to third-party charges, cooperate in all reasonable ways with, make its and their relevant files and records available for inspection and copying by, make its and their employees reasonably available to and allow the Indemnitor reasonable access to its and their properties (including for the purpose of invasive testing and remediation) and otherwise render reasonable assistance to the Indemnitor upon request. If the Indemnitor fails to perform its obligations under this Section 4(c), the Indemnitee shall have the right, but not the obligation, upon notifying the Indemnitor in writing to take the actions which the Indemnitor would have had the right to take in connection with the performance of such obligations and, if the Indemnitee is entitled to indemnification hereunder in respect of the event or circumstance as to which the Indemnitee takes such actions, then the Indemnitor shall also indemnify the Indemnitee for all of the legal, accounting and other costs, fees and expenses reasonably and actually incurred in connection therewith, but excluding any allocation for costs relating to in-house personnel.
Notwithstanding anything contained herein to the contrary, each party
shall use, and shall cause its subsidiaries to use, all reasonable efforts to
mitigate any and all Claims and Liabilities in respect of which it may be
entitled to indemnification or reimbursement hereunder. In addition, subject to
Section 10(d), this Agreement and the Service Agreements shall constitute the
only agreements between the parties hereto with regard to indemnification and
the other matters covered hereby, and no party shall, for any reason or under
any legal theory, be liable to any other party or any other person entitled to
indemnification or reimbursement, for special, indirect, incidental or
consequential damages incurred or sustained by any such other party or person
whether arising under contract, tort (including negligence), strict liability or
other theory of law, except with respect to wilful misconduct or gross
negligence of a party and except to the extent incurred or sustained by a third
party and sought to be recovered against such other party or person entitled to
indemnification.
(b) Praxair or CB&I (each a "Party") may commence proceedings hereunder by delivering a written notice to the other Party providing a reasonable description of the Dispute to the other (the "Demand").
(c) Promptly following a Demand, the Dispute shall be referred to representatives of the parties for decision, each party being represented by a senior executive officer who has no direct operational responsibility for the matters contemplated by this Agreement (the "Representatives"). The Representatives shall promptly meet in a good faith effort to resolve the dispute. If the Representatives do not agree upon a decision within thirty (30) calendar days after reference of the matter to them, each of Praxair and CB&I shall be free to exercise the remedies available to them at law.
Except as provided in the Service Agreements, each party hereto agrees to refrain from using in any manner, and to use its best efforts to keep confidential, any and all information and data concerning the business of the other party or its affiliates which it has received, or which it may in the performance of this Agreement or any of the Service Agreements receive in the future, except to the extent that such party can demonstrate that the information (a) is generally available to the public as evidenced by prior written publication through no act or failure to act by it, (b) was already known to it on a non-confidential basis on the date of receipt as evidenced by written and dated records made by it prior to such date of receipt (provided that this exception shall only apply from and after the sale by Praxair of some or all of its interest in CB&I and only with respect to records made after such sale by the receiving party in the conduct of its business in the
ordinary course), or (c) is disclosed to it on a non-confidential basis by a third party not having a confidential relationship with said other party with respect to such information. Notwithstanding the foregoing, each of the parties hereto shall be free to disclose any such information or data to the extent and only to the extent (a) required by applicable law, and (b) during the course of or in connection with any litigation, governmental investigation, arbitration or other proceeding based upon or in connection with the subject matter of this Agreement. Prior to any disclosure pursuant to the preceding sentence, the disclosing party shall be required to give reasonable prior notice to the other party to this Agreement of such intended disclosure and, if requested by such party, to use its best efforts at such other party's expense to obtain a protective order or similar protection for such other party.
In accordance with its then current record retention policy, both Praxair and CB&I shall (a) retain records, documents, accounting data and other information relating to the businesses of the Praxair Group and the CB&I Group, respectively; and (b) give to the other reasonable access to such records, documents, accounting data and other information and to its personnel (insuring their cooperation) and premises, for the purpose of the review of such information in connection with any claim or dispute under, with respect to or indemnifiable under this Agreement.
Any notices or communications permitted or required hereunder shall be deemed sufficiently given if hand-delivered, or sent (i) postage prepaid by registered or certified mail return receipt requested, or (ii) by telecopy, to the respective parties as set forth below, or to such other address as any party may notify the other of in writing:
if to CB&I, to: Chicago Bridge & Iron Company
1501 North Division Street
Plainfield, Illinois 60544
Attn: General Counsel
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if to Praxair, to: Praxair, Inc.
39 Old Ridgebury Road
Danbury, Connecticut 06817-0001
Attn: General Counsel
|
Notices sent by registered or certified mail shall be deemed delivered on the fourth day after deposit in the U.S. mail and notices sent by telecopy shall be deemed given on the day of transmission provided that a duplicate copy is sent on the same day by first class U.S. mail.
(a) No person other than the members of the CB&I Group or the Praxair Group shall be or be deemed to be a third party beneficiary of this Agreement.
(b) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to its conflicts of laws rules or principles. Any action to enforce, or which arises out of or is in any way related to, any of the provisions of this Agreement shall be brought and prosecuted in such court or courts located within the State of New York as may be provided by law. The parties consent to the jurisdiction of such court or courts and to service of process by registered mail, return receipt requested, or such other manner as may be provided by law.
(c) This Agreement constitutes the entire understanding of the parties and cancels and supersedes all previous agreements and understandings, oral or written, between the parties with respect to the subject matter hereof.
(d) Notwithstanding anything to the contrary in this Agreement, this Agreement shall not apply to any loss, cost, expense or other liability which is the subject of any of the Service Agreements, any contract or arrangement with respect to products, materials or services purchased by any Praxair company or any CB&I company from the other, or any other written agreement or arrangement or course of dealing between the parties with respect to their inter-company accounts (including but not limited to, inter-company advances, loans, dividends, and other similar matters) in existence as of the date hereof; and nothing in this Agreement shall limit, expand or otherwise affect any of the respective rights and obligations of the parties under the foregoing.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed and delivered by its duly authorized representatives as of the day and year first written above.
PRAXAIR, INC.
By /s/Robert F.X. Fusaro
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Title Attorney-in-Fact
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|
CHICAGO BRIDGE & IRON COMPANY
By /s/Robert H. Wolfe
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Title Vice President
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|
SCHEDULE 1
1. Cooperheat Separation Agreement
2. MQS Separation Agreement
3. Ershigs Separation Agreement
4. Argentina Separation Provisions
5. Tax Disaffiliation Agreement
6. Employee Benefits Agreement
7. Registration Rights Agreement
8. Chicago Bridge & Iron Company Promissory Note in original principal amount of $55 million
9. Cash Management Operating Agreement
10. Insurance Agreement
11. Patent Arrangements
12. Support Agreement
13. Management fee letters, dated February 27, 1997
EXHIBIT 10.12
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AMENDED AND RESTATED TAX DISAFFILIATION AGREEMENT, dated as of by and between Praxair, Inc., a Delaware corporation having its principal offices at 39 Old Ridgebury Road, Danbury, Connecticut 06810-5113 ("PX") and Chicago Bridge & Iron Company, a Delaware corporation having its principal offices at 1501 North Division Street, Plainfield, Illinois 60544 ("Old CBIC") and BIMV, Inc., a Delaware corporation to be renamed Chicago Bridge & Iron Company ("New CBIC").
WHEREAS, Old CBIC was a wholly-owned subsidiary of, and a member of the affiliated group under Section 1504 of the Internal Revenue Code of 1986 as amended ("Section 1504") of CBI Industries, Inc., a Delaware corporation ("Industries"); and
WHEREAS, on January 12, 1996 PX acquired a majority of the common stock of Industries and as a result Industries and its subsidiaries (including Old CBIC) became members of PX's affiliated group under Section 1504; and
WHEREAS, in December 1996 Industries was merged into PX; and
WHEREAS, PX's wholly-owned subsidiary, Chi Bridge Holdings, a Delaware corporation ("Holdings") owns all the outstanding shares of Old CBIC, and
Whereas, Old CBIC has declared a distribution of its Domestic Stock (as defined in the Assignment Agreement #5) to Holdings; and
Whereas, Holdings owns all of the outstanding capital stock of New CBIC and makes an additional capital contribution of certain assets to New CBIC (as defined in the Contribution and Assumption Agreement #6); and
WHEREAS, PX intends to cause Chi Bridge to divest all or a majority of its interest in New CBIC; and, as a consequence, New CBIC and the New CBIC subsidiaries will no longer be members of PX's affiliated group under Section 1504; and
WHEREAS, PX and New CBIC desire to set forth their rights and
obligations with respect to taxes due for periods both before and after the date
on which New CBIC ceases to be a member of Praxair's affiliated group under
Section 1504.
NOW THEREFORE, for and in consideration of the premises and the mutual covenants herein, the parties hereto agree as follows:
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For the purpose of this Agreement,
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the term "tax" or "taxes" is used, whether modified or not, it shall include penalties, fines, additions to tax and interest thoreon.
(a) PX and New CBIC acknowledge that the Tax Sharing Practice requires New CBIC in the case of consolidated, combined, unitary or similar tax returns to pay to PX the amount of taxes on, or measured by income, for which Old CBIC would be liable if it filed such a return as the common parent (or similar agent) for its affiliated (or similar) group, except that
(i) dividends or Deemed Dividends from Old CBIC's foreign Subsidiaries are not includible in income of Old CBIC or any Subsidiaries of Old CBIC;
(ii) New CBIC is liable for that proportion of the consolidated alternative minimum tax liability of the affiliated group of which PX or Industries is the common parent that the alternative minimum taxable income of Old CBIC and its Subsidiaries (determined under the terms of the Tax Sharing Practice as modified by this Article II) bears to the consolidated alternative minimum taxable income of the affiliated group of which PX or Industries is the common parent;
(iii) New CBIC is liable for that proportion of environmental tax liability, as defined in and pursuant to Code Section 59A, of the affiliated group of which PX is the common parent that the modified alternative
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minimum taxable income of Old CBIC and its Subsidiaries (determined under the terms of the Tax Sharing Practice as modified by this Article II) bears to the consolidated modified alternative minimum taxable income of the affiliated group of which PX or Industries is the common parent;
(iv) PX pays New CBIC thirty five percent (35%) of any net
operating losses or capital losses of Old CBIC (determined under
the terms of the Tax Sharing Practice as modified by this Article
II) which actually reduce the amount of tax liability of the
affiliated group of which PX or Industries is the common parent;
(v) PX pays New CBIC for any general business credits (as defined in Code Section 38) of Old CBIC (determined under the terms of the Tax Practice as modified by this Article II) that actually reduce the tax liability of the affiliated group of which PX or Industries is the common parent; and
(vi) minimum tax credit (as defined in Code Section 53) is allocated to New CBIC in the same proportion as the allocation of consolidated alternative minimum tax liability; and
(vii) Old CBIC's taxable income shall not include any item of income arising out of (A) any disposition or other transfer of MQS Inspections, Inc., Cooperheat, Inc. or Ershigs, Inc., (B) any disposition or other transfer in connection with the Reorganization, as defined in the Form S-1 Registration Statement of Chicago Bridge & Iron Company N.V., as amended or (C) New CBIC's ceasing to be a member of a consolidated, combined, unitary or similar tax group as a result of the Transfer; and
(viii) PX shall receive the tax benefit related to Industries restricted stock and stock options held by the employees of Old CBIC and its Subsidiaries.
(b) Subject to the provisions of Article 7, PX, with cooperation of New CBIC, shall initially determine the amount owed to PX or New CBIC under the Tax Sharing Practice as modified by this Article II for the last two Periods Before Transfer within 30 (thirty) calendar days after the filing of the tax returns that include those periods, based upon the tax shown as due on PX tax returns as originally filed and taking into account any prior estimated taxes paid by either. PX and New CBIC acknowledge that PX and Old CBIC have made quarterly estimated payments pursuant to the Tax Sharing Practices through the Date of Transfer. If such payment exceed Old CBIC's liability pursuant to the Tax Sharing Practice with respect to any applicable Period Before Transfer, PX shall refund such excess to New CBIC. After returns are filed by PX or Industries with respect to any Period Before Transfer, Sections 2.02, 2.03, 2.04, 2.06 and 3.01 shall be the sections of this Agreement governing the consequences of adjustments to such returns.
(c) Except as set forth in this Section 2.01(c), any and all prior tax sharing agreements or practices between Old CBIC or any of its Subsidiaries with PX or Industries or any of their Subsidiaries, shall be terminated with respect to New CBIC
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and its Subsidiaries as of the Date of Transfer and, from and after the Date of Transfer, neither New CBIC or any of its Subsidiaries nor PX or any of its Subsidiaries shall have any further rights or liabilities thereunder. The Tax Sharing Practice as described in Section 2.01 (a) shall continue in effect as set forth in Sections 2.01(b), 2.02(c) and 2.04(b) of this Agreement. Nothing in this Section 2.01(c) shall be construed to terminate the Separation Agreement.
(a) in the case of any Period Before Transfer;
(i) any liability for federal income taxes caused by a (A) computational error in reporting items of income, gain, loss, deduction or credit (such as an unintentional erroneous exclusion of an item of income or a double inclusion of the same item of deduction) of Old CBIC or its Subsidiaries for federal income tax purposes, (B) Timing Adjustments with respect to the CB&I Companies, whether operated by Old CBIC or its Subsidiaries, (C) disallowance of research and development credits for federal income tax purposes claimed by Old CBIC or its Subsidiaries (after giving effect to any deduction for research and development expenses allowed, if any, as a direct result of the disallowance of such research and development credits) to the extent such credits were actually utilized in a consolidated tax return filed by PX or Industries;
(ii) any liability for state or local taxes on or measured by income caused by an item described in (a)(i)(A) or (B) above if for purposes of such tax a consolidated, combined or unitary return that included Old CBIC or a Subsidiary of Old CBIC and PX (or Industries) or a subsidiary of PX (or Industries) was filed;
(iii) any liability with respect to separate returns for state or local taxes on or measured by income filed by PX (or Industries) or any of PX (or Industries) Subsidiaries to the extent caused by a Timing Adjustment with respect to the CB&I Companies (such as the disallowance of a deduction claimed by PX (or Industries) or any of PX (or Industries) Subsidiary that is available to New CBIC or a New CBIC Subsidiary in a Period After Transfer);
(iv) any sales, use, property, transfer, value added, excise and similar taxes with respect to the CB&I Companies;
(v) any payroll taxes with respect to employees of Old CBIC and its Subsidiaries;
(vi) any liability for taxes attributable to fraudulent acts of Old CBIC or any Old CBIC Subsidiaries, or an employee of the CB&I Companies while acting as an employee of the CB&I Companies; and
(vii) any liability for taxes in foreign jurisdictions incurred by any foreign Subsidiaries of Old CBIC.
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(b) in the case of any Periods After Transfer, any liabilities of New CBIC and its Subsidiaries for taxes; and
(c) in the case of the last two Periods Before Transfer, the amount (if any) owed by New CBIC under the Tax Sharing Practice as modified by Section 2.01 and Section 2.01(b).
The foregoing liabilities of New CBIC as set forth in paragraphs (a) through (c) above (hereinafter referred to as "New CBIC Retained Tax Liabilities") shall apply regardless of when they arose or arise or whether the facts on which they are based occurred prior or subsequent to the Transfer and regardless of where or against whom they are asserted or determined or whether they are asserted or determined prior or subsequent to the Transfer and regardless of whether they are known or unknown, fixed or contingent, accrued or unaccrued, asserted or unasserted. Provided, however, that New CBIC shall have no liability pursuant to this Section 2.02, except to the extent arising out of adjustments determined as a result of an audit or other official examination made by a taxing authority.
(a) New CBIC shall be entitled to any refunds, credits, losses, deductions or other tax items in favor of Old CBIC or a Subsidiary of Old CBIC or attributable to the CB&I Companies which are related to or associated with New CBIC Retained Tax Liabilities and are received by PX or its Subsidiaries other than refunds of taxes on, or measured by, income for periods for which Old CBIC or the Subsidiary of Old CBIC was included in a consolidated, combined or unitary return that included PX (or Industries) or a Subsidiary of PX (or Industries). The amount of any refund due New CBIC for any Period Before Transfer shall be determined through a recalculation of New CBIC Retained Tax Liabilities under the principles of Section 2.02. With respect to taxes on, or measured by, income for Periods Before Transfer for which consolidated, combined or unitary returns that included Old CBIC or a Subsidiary of Old CBIC and PX (or Industries) or a Subsidiary of PX (or Industries) were filed, New CBIC shall be entitled to any refund of taxes, without regard to actual receipt by PX, attributable to (i) a computational error in reporting items of income, gain, loss, deduction or credit (such as an unintentional erroneous double inclusion of the same item of income or an exclusion of an item of deduction) of Old CBIC or its Subsidiaries, (ii) a Reverse Timing Adjustment with respect to the CB&I Companies, whether operated by Old CBIC or its Subsidiaries, or (iii) any increase in research and development credits for federal income tax purposes of Old CBIC or its Subsidiaries (after giving effect to any deduction for research and development expenses disallowed, if any, as a direct result of the increase of the allowance of such research and development credits). New CBIC shall be entitled to any refund of taxes of New CBIC or its Subsidiaries for any Period After Transfer.
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(b) Except as otherwise provided in Section 2.03(a) or 3.01, PX shall have the sole and exclusive right to receive, retain and use all refunds, credits, losses, deductions or other tax items associated with or related to taxes for Periods Before Transfer regardless of when or by whom they are received, regardless of when or in favor of whom they arise or arose, regardless of whether the facts on which they are based occurred before or after the Transfer, regardless of whether they are attributable to carrybacks or otherwise, and regardless of whether they are determined prior or subsequent to the Date of Transfer.
(a) any liability for taxes of PX and Subsidiaries or of Old CBIC and its Subsidiaries for Periods Before Transfer other than the New CBIC Retained Tax; Liabilities;
(b) in the case of the last two Periods Before Transfer, the amount (if any) owed by PX and its Subsidiaries other than Old CBIC and Old CBIC Subsidiaries' liability under the Tax Sharing Practice and Section 2.01(b);
(c) any liability for taxes attributable to fraudulent acts of PX or Industries or any Subsidiary of PX or Industries, or to any employees thereof; except to the extent such acts result from or are done by any employee of the CB&I Companies or are based upon information provided by any employee of the CB&I Companies; and
(d) in the case of any Periods After Transfer, any liabilities of PX and its Subsidiaries for taxes;
(e) any tax liability arising out of any of the events described in Section 2.01(a)(vii); and
(f) any transactional tax liability generated by the transfer of the interest of CMP Holdings B.V. held by New CBIC's wholly owned subsidiary CBI Na-Con, Inc.
The foregoing tax liabilities of PX as set forth in paragraphs (a) through (e) above (hereinafter referred to as "PX Retained Tax Liabilities") shall apply regardless of when they arose or arise or whether the facts on which they are based occurred subsequent to the Transfer and regardless of where or against whom they are asserted or determined or whether they are asserted or determined prior or subsequent to the Transfer and regardless of whether they are known or unknown, fixed or contingent, accrued or unaccrued, asserted or unasserted.
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liability of New CBIC or Old CBIC or a Subsidiary of New CBIC for a taxable year that begins on or before and ends after the Date of the Transfer, the determination shall be made by assuming that New CBIC or Old CBIC or their Subsidiaries had a taxable year which ended at the close of the Date of the Transfer, except that exemptions, allowances or deductions that are calculated on an annual basis shall be apportioned on a time basis.
(a) If PX and its Subsidiaries (including for these purposes Old CBIC and its Subsidiaries) or if Industries and its Subsidiaries (including for these purposes
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Old CBIC and its Subsidiaries) have a federal consolidated net operating loss, capital loss, excess foreign tax paid or other unused credits for a Period Before Transfer, the amount of any carryover of such item that is apportioned to New CBIC or a Subsidiary of New CBIC for a Period After Transfer shall be determined in accordance with Treasury Regulations section 1.1502-79 or any similar provisions of state or local law. If New CBIC or a Subsidiary of New CBIC is permitted pursuant to this Section 3.02 to carry over any net operating losses, tax credits or similar items from a Period Before Transfer to Periods After Transfer for which PX has previously given credit to, or paid, Old CBIC or Old CBIC has previously received the benefit thereof, under the Tax Sharing Practice as modified hereby, New CBIC shall reimburse PX in the amount of such previous credit or payment (or benefit)
(b) New CBIC and its Subsidiaries shall carryover their share of consolidated unused minimum tax credits for any Period Before Transfer determined by the proportion that the alternative minimum taxable income of Old CBIC and its Subsidiaries (determined as though Old CBIC filed a consolidated federal income tax return as the common parent of an affiliated group) bears to the consolidated alternative minimum taxable income of the affiliated group of which PX or Industries is the common parent (the "Formula").
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prior to the filing of the tax return to which the payment relates). Other payments under Sections 2.02 and 2.04 shall be due not later than twenty (20) business days after receipt of notice of a Final Determination that the indemnified party is liable for an indemnified cost. Payments under Sections 2.03, 3.01 and 3.02 shall be due not later than twenty (20) business days after the applicable benefit is realized by refund or otherwise.
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its obligations under Article IV on time and to file accurate and timely income tax returns that the other is required to file under Article IV.
When PX is the intended recipient:
Praxair, Inc.
Director of Taxes
39 Old Ridgebury Road
Danbury, Connecticut O6810-5113
Telecopy No. (203) 837-2559
When New CBIC is the intended recipient:
Chicago Bridge & Iron Company
Director of Taxes
1501 North Division Street
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Plainfield, Illinois 60544
Telecopy No. (815) 439-4040
A party may designate a new name or a new address to which notices required or permitted to be given pursuant to this Agreement shall thereafter be transmitted by giving written notice to that effect to the other party. Each notice transmitted in the manner described in this Section 9.02 shall be deemed to have been given, received and become effective for all purposes at the time it shall have been (i) delivered to the addressee as indicated by the return receipt (if transmitted by mail), the receipt of the messenger (if transmitted by personal delivery) or the answer back or call back (if transmitted by telecopier or other electronic means) or (ii) presented for delivery to the addressee as so indicated during normal business hours, if such delivery shall have been refused for any reason.
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IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement.
PRAXAIR, INC.
CHICAGO BRIDGE & IRON CO.
taxdisaf.sam/wfm
EXHIBIT 10.13
AGREEMENT, dated as of January 1, 1997, by and between PRAXAIR, INC., a Delaware corporation (hereinafter referred to as "Praxair") and CHICAGO BRIDGE & IRON COMPANY, a Delaware corporation (hereinafter referred to as "Bridge"). (Bridge and all its subsidiaries are hereinafter referred to as the "Bridge Group.")
W I T N E S S E T H:
WHEREAS, as a result of an Agreement and Plan of Merger among Praxair, PX Acquisition Corporation and CBI Industries, Inc., a Delaware corporation, ("CBI Industries"), dated as of December 22, 1995, Praxair acquired all of the common stock of CBI Industries, and Bridge became an indirect subsidiary of Praxair; and
WHEREAS, upon the filing of a Certificate of Ownership and Merger with the Secretary of State of Delaware on December 19, 1996, CBI Industries was merged with and into Praxair; and
WHEREAS, Praxair intends to sell some or all of its interest in Bridge, and, in anticipation of such sale, Praxair and Bridge desire to define their respective rights and obligations with respect to certain employee benefit plans and liabilities;
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein and other good, valuable and sufficient consideration, the receipt of which is hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:
1. (a) Effective as of the January 1, 1997 (hereinafter the "Effective Date"), Praxair will assume sponsorship of the CBI Pension Plan, and have sole responsibility for making required contributions to such Plan. Bridge shall, and shall cause its United States subsidiaries to, continue to participate in the CBI Pension Plan. Neither Bridge nor any of its United States subsidiaries may cease such participation without Praxair's express written approval. Bridge will pay to Praxair, with respect to the benefits under the CBI Pension Plan, the principal sum of seventeen million two hundred seventy thousand dollars ($17,270,000.00), plus interest accrued from the Effective Date at the rate of seven and one-half percent (7 1/2%) per annum. Subject to Paragraph 9(a) of this Agreement, such payments shall constitute Bridge's total and sole obligation with respect to CBI Pension Plan and its related trust for all present and future benefits accrued under the CBI Pension Plan for any participant and all costs and expenses related thereto. The principal shall be paid in twelve annual payments commencing on December 1, 1997 and continuing on each December 1st until and including December 1, 2008. Each such payment shall consist of a principal repayment of one million four hundred thirty-nine thousand one hundred sixty-six dollars and sixty-six cents ($1,439,166.66), plus all interest accrued to the date of such payment.
(b) Praxair shall have sole authority to administer and amend the CBI Pension Plan, and to manage the assets thereof; provided, however, that (unless such amendment is required by law) no amendment shall be made which affects the benefits of Bridge Group employees without the consent of Bridge, which consent shall not unreasonably be withheld. Bridge shall not be, and shall not be deemed to be, either the plan administrator, a contributing sponsor or a named fiduciary for any purpose under the CBI Pension Plan.
2. (a) Praxair will retain sole responsibility for retiree life and medical benefits for individuals who retired with an immediate entitlement to such benefits from CBI Industries or its affiliates prior to the Effective Date ("Retiree Benefits"). Bridge will pay to Praxair, with respect to the Retiree Benefits, the principal sum of twenty-one million four hundred thousand dollars ($21,400,000.00), plus interest accrued from the Effective Date at the rate of seven and one-half percent (7 1/2%) per annum. Subject to Paragraph 9(a) of this Agreement, the sum of such payments, plus the payment of the amounts set forth in Schedule 2(b) hereto, shall constitute Bridge's total and sole obligation with regard to the Retiree Benefits for all present and future benefits accrued under the Retiree Benefits for any participant and all costs and expenses related thereto. The principal shall be paid in twelve annual payments, commencing on December 1, 1997 and continuing on each December 1st until and including December 1, 2008. Each such payment shall consist of a principal repayment of one million seven hundred eighty-three thousand three hundred thirty three dollars and thirty-three cents ($1,783,333.33), plus all interest accrued to the date of such payment.
(b) During calendar year 1997, Bridge shall provide administrative services with respect to the Retiree Benefits. Effective 1998, and continuing thereafter, Praxair shall have responsibility for providing such services. Bridge's compensation for providing such services for 1997, and Praxair's compensation for providing such services for 1998, shall be deemed for purposes of this Agreement to be equal, and neither party shall owe the other with respect to the provision of such services during those two years. Commencing in 1999, Bridge shall pay Praxair for its share of such services. Although such services will be provided by Praxair for a protracted period of time, the parties have agreed that Bridge shall pay Praxair for its share of such services for the entire time they are provided by Praxair, but that such payments shall be paid to Praxair by Bridge over a period extending from December 1, 1999 to December 1, 2009, inclusive, as set forth in Schedule 2(b) hereto. Bridge may make prepayments of such amounts only as agreed to by the parties from time to time. Except to the extent it acts a fiduciary during 1997, Bridge shall not be, and shall not be deemed to be, either the plan administrator or a named fiduciary for any purpose under the Retiree Benefits.
(c) The parties acknowledge that the payments to Praxair under Paragraph 2(a) have been calculated on the assumption that benefits under the Retiree Benefits will not be reduced by amendment in the future. In the event Praxair amends the Retiree Benefits to reduce the benefits available thereunder, such payments to be made to Praxair by Bridge will be recalculated commensurate with such benefit reduction.
(d) During calendar year 1997, Bridge shall maintain certain required medical, life insurance, and long-term disability benefits for which Praxair has financial
responsibility for (i) eligible former employees of CBI Industries and affiliates who terminated employment prior to the Effective Date, (ii) retirees entitled to Retiree Benefits, and (iii) employees of MQS Inspection, Inc. and Cooperheat, Inc. (collectively, "Non-Bridge Participants"). Bridge shall pay from its general assets, all claims, insurance premiums, and third party provider fees ("Welfare Benefits Payments") for such Non-Bridge Participants. Praxair shall reimburse Bridge for such Welfare Benefits Payments on a monthly basis. For purposes of such reimbursement, Welfare Benefits Payments will also include all claims, insurance premiums, and third party provider fees paid with respect to CBI Industries welfare benefits plans on behalf of then active employees of CBI Industries and affiliates, but only to the extent that such claims or payments are incurred in, or paid with respect to, periods prior to the Effective Date.
3. Praxair shall retain all liabilities which exist as of the Effective Date under the CBI Industries, Inc. Supplemental Survivors' Benefit, Executive Life Insurance and Benefit Restoration Trust (the "Rabbi Trust"), and no assets of the Rabbi Trust shall be transferred to the Bridge Group, except where otherwise agreed through individual arrangements entered into by specific participants. Active Bridge Group employees will accrue no further benefits under any plans covered by the Rabbi Trust on or after the Effective Date, and neither the Rabbi Trust nor Praxair shall be obligated to make any premium payments for any active Bridge Group employees under any Executive Life Insurance policies on or after the date that Bridge ceases to be part of the Praxair controlled group.
4. Bridge shall be solely responsible and liable for the amount of any and all variable compensation for Bridge Group employees.
5. Bridge shall be solely liable for, and shall indemnify Praxair and its subsidiaries which are not part of the Bridge Group, from and against any liability for, any termination payments made to, or claims for termination payments made by, any employee or former employee of Bridge or any of its direct or indirect subsidiaries (excluding MQS Inspection, Inc., Cooperheat, Inc. and Ershigs, Inc.) and any other entities in which they or any of them hold or heretofore held a direct or indirect interest (collectively referred to hereinafter as the "Bridge Companies"), regardless of when such payments are made or when such claim is presented, and regardless of when such termination occurred.
6. Bridge shall be solely responsible for any liability in connection with multiemployer plan withdrawal where such liability arose from a complete or partial withdrawal at any time from such a plan by any of the Bridge Companies, as defined in Paragraph 5.
7. The Bridge Group shall not participate in any Praxair benefit plans and programs as of the Effective Date other than the CBI Pension Plan.
8. Except where otherwise stated, nothing in this Agreement shall be construed or interpreted to restrict Praxair's or Bridge's individual right or authority to amend or terminate any benefit plans, policies or programs, maintained by such party, effective as of a date following the Effective Date.
9. (a) Notwithstanding any other provision of this Agreement, if any
amount payable hereunder to Praxair is not paid when due, then from and after
such due date interest shall accrue on the overdue amount until paid at the
greater of (i) the rate of seven and one-half percent (7 1/2%) per annum, and
(ii) a fluctuating interest rate equal to two percent (2%) plus the prime, base
or comparable rate of interest announced by Citibank N. A. (or its successor) in
New York City from time to time (but in no event greater than the highest
applicable non-usurious rate permitted under the laws of the State of New York).
(b) Bridge may at any time and from time to time prepay its obligations under Paragraphs 1(a) and 2(a) of this Agreement in full or in part, provided that any partial prepayment shall be in the amount of at least one million dollars ($1,000,000.00) and shall be accompanied by a statement from Bridge designating which obligation(s) under this Agreement are being prepaid. Prepayments shall be applied first against accrued and unpaid interest with respect to the obligation being prepaid, and then against installments of such obligation in the inverse order in which such installments become due.
10. Other than the failure to pay monies when due hereunder, neither Praxair nor Bridge shall be liable for its failure to perform hereunder to the extent that its performance is made impracticable, delayed or prevented, in whole or in part, due to any occurrence beyond its reasonable control, including, without limitation; acts of God; inclement weather; floods; accidents; strikes; lockouts; fires; wars; equipment failures; labor disputes; labor shortages; riots; demonstrations; sabotage; laws, ordinances, rules, regulations, standards or decrees of governmental or other authorities, whether valid or invalid (including, without limitation, import or export prohibitions or priorities, requisitions, allocations and price adjustment restrictions); inability to obtain or unavoidable delay in obtaining necessary power, materials, facilities, services or equipment; interruption or unavoidable delay in communication or transportation; or any other similar or dissimilar occurrence which would have a material adverse impact on the ability of Praxair or Bridge to perform hereunder. If a party fails to perform hereunder as a result of any occurrence described in the preceding sentence, such affected party shall (i) give written notice to that effect to the other party promptly after such occurrence together with a statement setting forth reasonably full particulars concerning such occurrence and (ii) use reasonable efforts to remedy such occurrence as quickly as possible. The requirement that such occurrence be so remedied shall not require the settlement of strikes, lockouts, or other labor difficulties. To the extent required by any such occurrence, the performance by the affected party shall be suspended during the continuance of any such occurrence (but for no longer period) and this Agreement shall otherwise remain unaffected. If at any time during the term of this Agreement such occurrence is remedied, the affected party shall promptly notify the other party and any such suspension shall end.
11. Each party agrees to refrain and to cause its subsidiaries and affiliates to refrain from using in any manner, and to use reasonable efforts to keep confidential and to cause its subsidiaries and affiliates to use reasonable efforts to keep confidential, any and all information and data relating to any employees or concerning the business and affairs of the other party or its subsidiaries or affiliates received as a result of this Agreement, except to the extent that such party can demonstrate that the information or data (i) is generally available to the public as evidenced by prior written publication through no act or failure to act by it or its subsidiaries or affiliates or (ii) is subsequently disclosed to it or its subsidiaries or affiliates on a non- confidential basis by a third party not having a confidential relationship with such other party or its subsidiaries or affiliates with respect to such information. Notwithstanding the foregoing, each of the parties and their subsidiaries and affiliates shall be free to disclose any such information or data to the extent, but only to the extent, (i) required by applicable law or by a government in a duly authorized investigation or (ii) necessary to establish a position in any litigation or any arbitration or other proceedings based upon or in connection with the subject matter of this Agreement. Prior to any disclosure pursuant to the preceding sentence, the disclosing party shall give reasonable prior notice to the other party of such intended disclosure and, if requested by such other party, shall use all reasonable efforts to obtain a protective order or similar protection for such other party. In applying this Paragraph 11, members of the Bridge Group shall not be considered to be subsidiaries or affiliates of Praxair.
12. Bridge shall hold harmless, indemnify and defend Praxair from and against any and all costs, expenses, claims, damages, lawsuits, attorneys' and accountants' fees, losses, deficiencies, assessments, administrative orders, fines, penalties, actions, proceedings, judgments, liabilities and obligations of any kind or description (a "Claim" or "Claims") asserted against, incurred or required to be paid by Praxair (regardless of when asserted or by whom), associated with or arising under any employee benefit plan or policy established, adopted or maintained by Bridge on or after the Effective Date.
Praxair shall hold harmless, indemnify and defend Bridge from and against any and all Claims, asserted against, incurred or required to be paid by Bridge (regardless of when asserted or by whom), associated with or arising under any employee benefit plan or policy maintained by Praxair and not expressly assumed by Bridge pursuant to this Agreement.
13. Each party shall furnish, or shall cause to be furnished, to the other party all plan participant and employee data or information in its possession which is necessary for such other party to maintain and implement any employee benefit plan or arrangement covered by this Agreement, or to comply with the provisions of this Agreement, and which is not otherwise readily available to such other party.
14. This Agreement shall be binding upon, and inure to the benefit of, the parties and their respective successors and permitted assigns. Nothing contained herein shall be deemed to create any third-party beneficiary rights in any individual who or entity which is not a party to this Agreement. Any assignment or delegation of this Agreement by either party without the prior written consent of the other party, which shall not unreasonably be withheld, shall be void. Notwithstanding the foregoing, no consent shall be required for Praxair to assign its right to receive payments hereunder. No assignment of an obligation hereunder shall act to release the assigning party as primary obligor therefor.
15. The validity, interpretation and performance of this Agreement shall be governed by and construed in all respects in accordance with the law of the State of New York, without reference to its conflicts of laws rules or principles.
16. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and supersedes as of the Effective Date all previous agreements and understandings, oral or written, between the parties to the extent such previous agreements address such subject matter. No modification of this Agreement or waiver of any provision hereof or right hereunder will be binding upon either party unless signed in writing by an authorized representative of such party. This Agreement will continue in force on the terms and conditions described herein until terminated or amended by mutual agreement of the parties.
17. Notwithstanding anything in this Agreement to the contrary, all actions contemplated by this Agreement with respect to employee benefit plans which are to be consummated pursuant to this Agreement shall be subject to such notices to, and/or approvals by, the Internal Revenue Service ("IRS"), Pension Benefit Guaranty Corporation (or other governmental agency or entity) as are required or deemed appropriate by the plan's sponsor. Praxair and Bridge each agrees to use its best efforts to cause all such notices and/or approvals to be filed or obtained, as the case may be.
18. The provisions of this Agreement are severable. The invalidity, in whole or in part, of any provision of this Agreement shall not affect the validity or enforceability of any other of its provisions. If one or more provisions hereof shall be declared invalid or unenforceable, the remaining provisions shall remain in full force and effect and shall be construed in the broadest possible manner to effectuate the purposes hereof. The parties further agree to replace such void or unenforceable provisions of this Agreement with valid and enforceable provisions which will achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provisions.
19. From and after the Effective Date, each of Praxair and Bridge shall cause to be performed, and hereby guarantees the performance and payment of, all actions, agreements, obligations and liabilities set forth herein to be performed or paid by its
subsidiaries. For purposes of this Paragraph 19, no Bridge Group member shall be considered to be a subsidiary of Praxair.
20. No failure or delay on the part of Praxair or Bridge in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. No modification or waiver of any provision of this Agreement nor consent to any departure by Praxair or Bridge therefrom shall in any event be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.
21. For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties hereto, and each such executed counterpart shall be deemed to be an original instrument.
22. All communications, notices, and disclosures required or permitted by this Agreement shall be in writing and shall be deemed to have been given at the earlier of (i) the date actually delivered to an officer of the other party or (ii) when postmarked in the case of a notice, etc., deposited in the United States mail, first class postage prepaid, and
addressed as follows (unless and until either party notifies the other in accordance with this
Paragraph 22, of a change in address):
If to Praxair, Inc.:
39 Old Ridgebury Road
Danbury, Connecticut 06817-0001
Attention: Vice President, Human Resources
If to Chicago Bridge & Iron Company:
1501 North Division Street
Plainfield, IL 60544
Attention: General Counsel
IN WITNESS WHEREOF, the parties have duly executed and entered into this Agreement, as of the date first above written.
PRAXAIR, INC.
By: /s/ Robert F.X. Fusaro
-----------------------------
Name: Robert F.X. Fusaro
----------------------------
Title: Attorney-in-Fact
--------------------------
|
CHICAGO BRIDGE & IRON COMPANY
By: /s/ Robert H. Wolfe
-----------------------------
Name: Robert H. Wolfe
----------------------------
Title: Vice President
----------------------------
|
SCHEDULE 2(b)
Payment Due Date Payment Amount - ---------------- -------------- December 1, 1999 $109,358.00 December 1, 2000 $109,358.00 December 1, 2001 $109,358.00 December 1, 2002 $109,358.00 December 1, 2003 $109,358.00 December 1, 2004 $109,358.00 December 1, 2005 $109,358.00 December 1, 2006 $109,358.00 December 1, 2007 $109,358.00 December 1, 2008 $109,358.00 December 1, 2009 $109,358.00 |
EXHIBIT 10.14
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), which shall be effective as of January 1, 1997, is made and entered into by and among Chicago Bridge & Iron Company N.V., a corporation organized under the laws of The Netherlands (the "Company") and Praxair, Inc., a Delaware corporation (the "Investor"). As used herein, the term "Investor" shall include Investor's successors, assigns or other transferees of its rights hereunder.
RECITALS
WHEREAS, the Company is a wholly-owned subsidiary of the Investor; and
WHEREAS, the Company contemplates conducting an initial public offering and, in connection therewith, the Investor desires to have future registration rights covering the Registrable Securities (as such term is defined in Section 1) of the Investor and certain of their transferees;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
a. the term "Bona Fide Public Offering" means an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "1933 Act"), covering the offer and sale of Common Shares of the Company;
b. the term "Common Shares" means the Company's authorized common shares, NLG.01 par value, and any class of securities issued in exchange for the Common Shares or into which the Common Shares are converted;
c. the term "IPO" means the initial Bona Fide Public Offering whereby the Investor sells Common Shares held by it;
d. the term "Registrable Securities" means: (i) the total number of Common Shares owned by the Investor as of the date hereof, and (ii) any Common Shares issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such Common Shares, excluding in all cases, however, any Common Shares that are sold by any person other than the Investor in a transaction in which its rights under this Agreement are not assigned;
e. the term "Registration Expenses" means all reasonable fees and disbursements of counsel to the Investor and all expenses incurred by the Company in complying with Sections 2, 3 and 4 hereof, including, but not limited to, all registration and filing fees, underwriters' expense allowances, printing expenses, fees and disbursements of counsel for the Company, blue sky fees and expenses, and the expense of any special audits incident to or required by any such registration (but not including the compensation of regular employees of the Company which shall be paid in any event by the Company); provided, however, that this term does not include Selling Expenses and also does not include any amounts incurred in any transaction in which the Investor does not intend to sell Registrable Securities and provided, further, that travel, meal, lodging and similar expenses incurred in connection with any "road show" in support of the Sale of Registrable Securities shall not be considered as Registration Expenses;
f. the terms "register", "registered" and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the 1933 Act, and the declaration or ordering of the effectiveness of such registration statement or document by the Securities and Exchange Commission (the "SEC");
g. the term "Selling Expenses" means all underwriting discounts and selling commissions applicable to the sale of Registrable Securities; and
h. the number of Common Shares "Then Outstanding" shall be the number of Common Shares outstanding as of any date of determination excluding Common Shares outstanding that are subject to the restrictions imposed by the
Company's Management Plan (as defined in the registration statement relating to the IPO).
2. DEMAND REGISTRATION RIGHTS.
b. In the event that the requested registration is to be a Bona Fide Public Offering, either the Investor or the other persons owning the Registrable Securities included in the registration request (together with the Company as provided in Section 5(e)) shall enter into an underwriting agreement in customary form (and no more burdensome to the Investor or such other persons owning
c. No request pursuant to Section 2(a) hereof may be made within 120 days
after the Investor has been notified in writing that the Company proposes to
make a registration of the Securities as described in the second sentence of
Section 3(a) hereof.
3. PIGGY-BACK REGISTRATION RIGHTS. a.At any time during the three-year period beginning on the date the IPO is consummated, if the number of outstanding Registrable Securities which have not been registered under the 1933 Act pursuant to the terms of this Agreement equals or exceeds 10% of the number of Common Shares Then Outstanding, the Company shall not cause any Common Shares (or similar security) to be registered under the 1933 Act (or make any filing in connection with the
b. Without the prior written consent of the Investor, the Company shall cause no Common Shares (or similar security) to be registered under the 1933 Act (or make any filing in connection with the registration of Common Shares) if any written request pursuant to Section 2 hereof has been made,
such request has not been revoked in writing and the sale of Registrable Securities contemplated by such request has not yet been consummated.
4. OBLIGATIONS OF THE COMPANY. Whenever required under this Agreement to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible, and in any event within any time period set forth in this Section 4:
a. Prepare and file with the SEC a registration statement with respect to such Registrable Securities within 60 days of the Investor's request therefor and use its best efforts to cause such registration statement to become effective within 60 days of such filing and to cause such registration statement to remain effective for so long as is necessary to complete the distribution of such Registrable Securities, not to exceed 90 days;
b. Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the 1933 Act with respect to the disposition of all securities covered by such registration statement;
c. Furnish to the Investor, other persons selling Registrable Securities and any underwriters engaged in connection therewith copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the 1933 Act, and such other documents as they may reasonably request in order to facilitate the disposition of the Registrable Securities;
where it would not otherwise be required to qualify but for this Section, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction;
e. In the event of any Bona Fide Public Offering, enter into and perform
its obligations under an underwriting agreement on customary terms generally
satisfactory to the managing underwriter of such offering (including an
indemnity no less favorable to the selling shareholder than described in
Section 2(b));
f. Take such action as is necessary or advisable in order to obtain the listing of the Registrable Securities on the securities exchanges or quotation systems on which any Common Shares are traded; and
g. Engage in such marketing and other activities in connection with the proposed sale of any Registrable Securities as is reasonably recommended by the underwriter or other primary financial advisor engaged in connection with such proposed sale.
5. FURNISH INFORMATION. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement that the Investor or its affiliates shall furnish to the Company such information regarding themselves, the Registrable Securities, and the intended method of disposition of such securities as shall be required to effect the registration of the Registrable Securities. In that connection, the Investor or any such affiliate, as the case may be, shall be required to represent to the Company that all such information which is given is both complete and accurate in all material respects.
6. EXPENSES OF REGISTRATION. All Registration Expenses and all Selling Expenses incurred in connection with any registration, qualification or compliance pursuant to this Agreement shall be borne by the sellers of the securities in such registration in proportion to the respective values of the securities then proposed to be sold by such sellers; provided that to the extent the aggregate of all Registration Expenses which would otherwise be payable by the Investor is (other than those relating to the IPO) $2,000,000 or less, such Registration Expenses of the Investor shall be borne by the Company. All Registration Expenses incurred in connection with the IPO shall be borne by the Company; provided that to the extent the
aggregate of Registration Expenses incurred in connection with the IPO exceeds $2,000,000, such excess shall be borne by the Investor. Travel, meals, lodging and similar expenses incurred in connection with any "road show" in support of the sale of Registrable Securities shall not be included in applying the above provisions, but such amounts shall be allocated as follows: The Company shall pay all such costs incurred by its employees and representatives; the Investor shall pay all such costs incurred by its employees and representatives; and all such costs incurred by the underwriters and their representatives shall be borne by the sellers of the securities being sold pursuant to such Registration Statement in proportion to the respective values of the securities then proposed to be so sold by such Sellers.
7. INDEMNIFICATION. If any Registrable Securities are included in a registration statement under this Agreement:
a. The Company will indemnify and hold harmless the Investor and each of
their affiliates (the "Investor Group"),the officers, directors, partners
and representatives of each member of the Investor Group, any underwriter
(as defined in the 1933 Act) for the Investor Group and each person, if any,
who controls any member of the Investor Group or underwriter within the
meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act"), against any losses, claims, damages, or liabilities (joint
or several) to which they or any of them may become subject under the 1933
Act, the 1934 Act or any other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of
or are based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in any registration statement filed
by the Company with the SEC and by which Registrable Securities are
registered for sale under the 1933 Act, including any preliminary prospectus
or final prospectus contained therein (or otherwise used in connection
therewith) or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading; or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any state securities law or any rule or regulation promulgated
under the 1933 Act, the 1934 Act or any state securities law; and
the Company will reimburse the Investor Group, each such officer, director or partner, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 7 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to a member of the Investor Group in any such case for any such loss, claim, damage, liability, or action to the extent that it arises from or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished by the Investor which clearly states that it is furnished expressly for use in connection with such registration by the Investor Group.
b. Each person selling Registrable Securities (and, if the person selling Registrable Securities is a direct or indirect subsidiary of the Investor, the Investor) will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the registration statement, each person, if any, who controls the Company within the meaning of the 1933 Act, any underwriter (within the meaning of the 1933 Act) for the Company or any person who controls such underwriter against any losses, claims, damages or liabilities to which the Company or any such director, officer, controlling person, or underwriter may become subject, under the 1933 Act, the 1934 Act or any other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise from or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by the Investor which clearly states that it is furnished expressly for use in connection with such registration; and the Investor or such other person, as the case may be, will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person in connection with investigation or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 7 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Investor (which consent shall not be unreasonably withheld); and further, provided, that in no event shall any indemnity under this Section 7(b) exceed the net proceeds from the relevant offering received by the Investor or other person selling Registrable Securities.
c. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Section 7 is applicable but for any reason is held to be unavailable from the Company or the Investor, the Company and the Investor or other person participating in the registration shall contribute to the aggregate losses, claims, damages and liabilities (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted) to which the Company and the Investor or other person selling Registrable Securities may be subject in such proportion so that the Investor or other person selling Registrable Securities is responsible for that portion of the foregoing amount represented by the relative fault of the Investor or other person selling Registrable Securities in the offering, on the one hand, and the Company, on the other hand, in connection with the Violation, it being understood that in assessing such relative fault consideration shall be given to the differing levels of access of the parties to information regarding the Company and the significant efforts by the Investor in, and significant benefits to the Company of, taking the Company public in its initial public offering; provided, however, that no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7(c), each person, if any, who controls the Company or any member of the Investor Group within the meaning of the 1933 Act and each officer, director, partner and representative of the Company or the Investor Group shall have the same rights to contribution as the Company or the Investor Group, as the case may be. In no event shall any contribution by the Investor or other person selling Registrable Securities exceed the net proceeds from the relevant offering received by the Investor or other person selling Registrable Securities.
d. No settlement of any action or proceeding for which indemnification is
required to be provided hereunder shall be effected without the prior written
consent of the Investor unless (i) the obligations of the Company for
indemnification or contribution pursuant to this Agreement survive and are not
extinguished by reason of the settlement and remain in full force and effect
under applicable federal and state laws, rules, regulations and orders to the
same extent as prior to such settlement, or (ii) all claims and actions against
the Investor and each person who controls the Investor within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act in such action or
proceeding are extinguished by the settlement and the indemnifying party obtains
a full release of all claims and actions against the Investor and each such
control person, which release shall be to the reasonable satisfaction of the
Investor.
e. Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 7, notify the indemnifying party in writing of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel reasonably satisfactory to the indemnified parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be, in the reasonable judgment of counsel to the indemnified party, inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to notify an indemnifying party within a reasonable time of the commencement of any such action, to the extent prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 7, but the omission so to notify the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 7.
f. The obligations of the Company and the Investor under this Section 7 shall survive through the completion of any offering of Registrable Securities in a registration statement made under the terms of this Agreement and otherwise.
g. The provisions of this Section 7 shall apply to the IPO and the offering of Common Shares pursuant to the IPO as if such Common Shares were Registrable Securities included in a registration statement under this Agreement.
8. REPORTS UNDER SECURITIES ACT OF 1934. With a view toward making available to the Investor the benefits of Rule 144 promulgated under the 1933 Act and any other rule or regulation of the SEC that may at any time permit the Investor to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:
a. use its best efforts to make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the first underwritten public offering of equity securities of the Company;
b. use its best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act;
c. furnish to the Investor so long as the Investor owns any Registrable Securities, forthwith upon request: (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time beginning 90 days after the effective date of the first underwritten public offering of equity securities of the Company), the 1933 Act and the 1934 Act (at any time after it has become subject to such reporting requirements) or that it qualifies as a Registrant where securities may be resold pursuant to Form S-3 (at any time after it so qualifies); (ii) a copy of the most recent annual or quarterly report of the Company and all other reports and documents filed by the Company with the SEC; and (iii) such other information as may be reasonably requested in availing the Investor of any rule or regulation of the SEC which permits the selling of any such securities without registration;
d. take such action, including the voluntary registration of its common shares under Section 12 of the 1934 Act, as is necessary to enable the Investor to use Form S-3 for the sale of its Registrable Securities, such action to be taken as soon as practicable after the first registration statement filed by the Company for the offering of its equity securities to the general public is declared effective; and
e. use its best efforts to maintain the listing of the Common Shares on the New York Stock Exchange and the Amsterdam Stock Exchange and to take such action as is necessary or advisable in order to obtain the listing of the Registrable Securities to be registered pursuant hereto on the securities exchanges or quotation systems on which any Common Shares are traded.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned by the Investor or another transferee who obtained such rights pursuant to this Section 9 to a transferee or assignee of such securities to the extent such transferee or assignee acquires at least 10% of the Registrable Securities outstanding on the date hereof held by the transferor provided the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; provided, however, that no such assignment of rights shall be effective if, immediately following the transfer, the transferee is, in the opinion of counsel, free to dispose of all of such securities without regard to any restrictions imposed under the 1933 Act (including, without limitation, the volume limitations of Rule 144 promulgated under the 1933 Act). No such assignment shall be effective unless and until such permitted transferee or assignee has executed and delivered to the Company a counterpart of this Agreement.
10. ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will not take any action with respect to the Registrable Securities which would adversely affect the ability of the Investor or any other person with rights hereunder to include such Registrable Securities in a registration undertaken pursuant to this Agreement without the written consent of each person so affected, except when such adjustments are otherwise required by law, including disclosure obligations under federal securities laws.
11. REMEDIES. The Investor, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to seek specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy of law would be adequate.
12. AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Investor.
13. NOTICES. All notices, demands and requests required by this Agreement shall be in writing and shall be deemed to have been given for all purposes (a) upon personal delivery, (b) one business day after being sent, when sent by professional overnight courier service from and to locations within the continental United States, or (c) five days after posting when sent by registered or certified mail (return receipt requested), addressed to the Company or the Investor at his, her or its address set forth on the signature pages hereof. Any party hereto may from time to time by notice in writing served upon the others as provided herein, designate a different mailing address or a differing person to which such notices or demands are thereafter to be addressed or delivered.
14. SUCCESSORS AND ASSIGNS. Subject to Section 9, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without limitation and without the need for an express assignment, subsequent holders of Registrable Securities to which the registration rights granted by this Agreement have been assigned as permitted herein.
15. COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original, and when executed, separately or together, shall constitute a single original instrument, effective in the same manner as if the parties hereto had executed one and the same instrument.
16. CAPTIONS. Captions are provided herein for convenience only and they are not to serve as a basis for interpretation or construction of this Agreement, nor as evidence of the intention of the parties hereto.
17. CROSS-REFERENCES. All cross-references in this Agreement, unless specifically directed to another agreement or document, refer to provisions within this Agreement.
18. GOVERNING LAW. This Agreement shall be governed by, interpreted under, and construed and enforced in accordance with the internal laws, and not the laws pertaining to conflicts or choice of laws, of the State of New York applicable to agreements made and to be performed wholly within the State of New York.
19. SEVERABILITY. The provisions of this Agreement are severable. The invalidity, in whole or in part, of any provision of this Agreement shall not affect the validity or enforceability of any other of its provisions. If one or more provisions hereof shall be declared invalid or unenforceable, the remaining provisions shall remain in full force and effect and shall be construed in the broadest possible manner to effectuate the purposes hereof. The parties further agree to replace such void or unenforceable provisions of this Agreement with valid and enforceable provisions which will achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provisions.
20. ENTIRE AGREEMENT. This Agreement contains the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes all prior written and oral agreements, understandings, commitments and practices between the parties, including all prior agreements with respect to registration rights.
IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement with the intent and agreement that the same shall be effective as of the day and year first above written.
THE COMPANY:
CHICAGO BRIDGE &
IRON COMPANY N.V.
By: /s/Robert F.X. Fusaro ------------------------ Robert F.X. Fusaro Managing Director |
Address: P.O. Box 74658 1070 BR Amsterdam The Netherlands Attn: Managing Director
with a copy to:
Chicago Bridge & Iron Company 1501 North Division Street Plainfield, IL 60544 Attn: General Counsel
THE INVESTOR:
PRAXAIR, INC.
By: /s/Robert F.X. Fusaro ------------------------ Robert F.X. Fusaro Attorney-In-Fact |
Address: 39 Old Ridgebury Road Danbury, CT 06810 Attention: Chief Financial Officer
ACKNOWLEDGED AND ACCEPTED
CHICAGO BRIDGE & IRON COMPANY
By: /s/Robert H. Wolf
--------------------
Robert H. Wolfe
Vice President
|
EXHIBIT 10.15
$55,000,000. September 30, 1996
All payments of principal and interest hereunder shall be made by electronic
transfer of immediately available funds for the account of Praxair, Inc. at
Chase Manhattan Bank, New York, NY as follows: "ABA #021-000-021; Account:
Praxair, Inc.; Account #134-0-93062; For Further Credit to: Chi Bridge Holdings,
Inc."
All amounts due under this Note shall automatically become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company in the event (i) the Company shall commence any bankruptcy, reorganization or similar case or proceeding relating to it or its property under the law of any jurisdiction, or a trustee or receiver shall be appointed for the Company or any substantial part of its property, (ii) any involuntary bankruptcy, reorganization or similar case or proceeding under the law of any jurisdiction shall have been commenced against the Company or any substantial part of its property and such case or proceeding shall not have been dismissed within 60 days.
Any overdue payment of principal or interest hereunder shall bear interest, payable on demand, for each day until paid at a rate per annum equal to two percent (2%) in excess of the
Prime Rate announced by Chase Manhattan Bank to be in effect for such day at Chase Manhattan Bank's Manhattan, New York office. If any amount owed under this Note is not paid when due, the Company agrees to pay all reasonable costs and expenses of collection, including attorney's fees.
This Note shall be governed by and construed in accordance with the law of the State of New York.
CHICAGO BRIDGE & IRON COMPANY
By: /s/ Robert H. Wolfe --------------------------- Robert H. Wolfe Vice-President |
EXHIBIT 10.16
THIS IS AN AGREEMENT dated February 28, 1997 by and among Chicago Bridge & Iron Company N.V., a corporation organized under the law of The Netherlands (the "Issuer"); Chicago Bridge & Iron Company, a corporation organized under the law of Delaware ("Delaware"); Chi Bridge Holdings, Inc., a corporation organized under the law of Delaware ("Chi Bridge"); and Praxair, Inc., a corporation organized under the law of Delaware ("Praxair").
WHEREAS, in 1996 Praxair acquired CBI Industries, Inc.;
WHEREAS, Chi Bridge is an indirect wholly-owned subsidiary of Praxair and the owner of all the outstanding shares of Delaware;
WHEREAS, Praxair has announced its intention to dispose of some or all of its interests in Delaware and of entities in which Delaware holds ownership interests;
WHEREAS, in furtherance of such disposition strategy, parties hereto and certain of their affiliates have entered into agreements to separate the business and obligations of Delaware and entities in which Delaware has or has had ownership interests from the business and obligations of Praxair and its other affiliates; and
WHEREAS, the form of Praxair's disposition of interests in Delaware and Delaware's affiliates has changed, resulting in a need to modify certain of the above-mentioned agreements and arrangements in the manner hereinafter described.
NOW THEREFORE, intending to be legally bound, the parties agree as follows:
As used herein, the following terms shall have the meanings set forth below:
"Reorganization" means the reorganization described in Section 2 below.
"Sale Date" means the date on which Praxair ceases to own directly or indirectly less than a majority of the Issuer's outstanding shares.
"Separation Agreement" means the Separation Agreement dated as of January 1, 1997 by and between Delaware and Praxair, as from time to time heretofore or hereafter amended.
"Service Agreements" means the Service Agreements as defined in the Separation Agreement.
Prior to the Sale Date, the following actions (hereinafter collectively referred to as the "Reorganization") shall be completed:
(a) Delaware shall declare and pay to Chi Bridge a dividend consisting of all the shares and other equity interests owned by Delaware in other entities (the "Dividended Shares").
(b) In exchange for shares of Chicago Bridge & Iron Company B.V., a wholly-owned subsidiary of the Issuer ("CBICBV"), Chi Bridge shall contribute to CBICBV, Dividended Shares which represent interests in entities incorporated or existing under the laws of any non-US jurisdiction.
(c) Chi Bridge shall incorporate a Delaware corporation ("NewCo") and become its sole shareholder.
(d) Chi Bridge shall transfer to NewCo all of the Dividended Shares not previously transferred by it in accordance with Section 2(ii) above in exchange for shares of NewCo.
(e) Delaware, NewCo, the Issuer, Praxair and Chi Bridge shall enter into an Assignment and Assumption Agreement pursuant to which (a) all the assets of Delaware (except for a cash amount equal to its stated capital) will be transferred to NewCo, (b) NewCo will assume all the liabilities of Delaware (including, but not limited to, liability for all intragroup amounts due to Praxair) and (c) the Issuer will guarantee and cause its
subsidiaries to guarantee the payment and performance of all such assumed liabilities.
(f) Chi Bridge shall contribute to the Issuer, in exchange for shares of the Issuer, all the shares of NewCo and CBICBV owned by Chi Bridge.
Not later than the Sale Date, Praxair, the Issuer and their respective affiliates shall execute and deliver such amendments, restatements or novations of the Separation Agreement and the Service Agreements as are necessary or appropriate to cause the Issuer and its affiliates (including but not limited to NewCo) to have the same rights and obligations as though (i) Delaware had become a wholly-owned subsidiary of the Issuer prior to the Sale Date and (ii) the Issuer and its subsidiaries had irrevocably and unconditionally guaranteed the payment and performance by Delaware and the other CB&I Companies (as defined in the Separation Agreement) of all their duties and obligations under the Separation Agreement and the Service Agreements.
Any notices or communications permitted or required hereunder shall be deemed sufficiently given if hand-delivered, or sent (i) postage prepaid by registered or certified mail -return receipt requested, or (ii) by telecopy, to the respective parties as set forth below, or to such other address as any party may notify the other of in writing:
if to the Issuer, to: Chicago Bridge & Iron Company N.V.
c/o Chicago Bridge & Iron Company
1501 North Division Street
Plainfield, Illinois 60544
Attn: General Counsel
if to Praxair, Praxair, Inc.
Chi Bridge or 39 Old Ridgebury Road
Delaware to: Danbury, Connecticut 06817-0001
Attn: General Counsel
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Notices sent by registered or certified mail shall be deemed delivered on the fourth day after deposit in the U.S. mail and notices sent by telecopy shall be deemed given on the
day of transmission provided that a duplicate copy is sent on the same day by first class U.S. mail.
(a) No person who is not a party to this Agreement shall be or be deemed to be a third party beneficiary of this Agreement.
(b) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to its conflicts of laws rules or principles. Any action to enforce, or which arises out of or is in any way related to, any of the provisions of this Agreement shall be brought and prosecuted in such court or courts located within the State of New York as may be provided by law. The parties consent to the jurisdiction of such court or courts and to service of process by registered mail, return receipt requested, or such other manner as may be provided by law.
(c) This Agreement constitutes the entire understanding of the parties and cancels and supersedes all previous agreements and understandings, oral or written, between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed and delivered by its duly authorized representatives as of the day and year first written above.
PRAXAIR, INC.
By /s/ Robert F.X. Fusaro
-----------------------------
Title Attorney-in-Fact
--------------------------
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CHICAGO BRIDGE & IRON COMPANY
By /s/ Robert H. Wolfe
-----------------------------
Title Vice President
--------------------------
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CHICAGO BRIDGE & IRON COMPANY N.V.
CHI BRIDGE HOLDINGS, INC.
Title Attorney-in-Fact
CONFORMED COPY
EXHIBIT 10.17
CREDIT AGREEMENT
dated as of
March 6, 1997
among
CHICAGO BRIDGE & IRON COMPANY N.V.
The Lenders Party Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
CHASE SECURITIES INC.,
as Arranger
[CS&M # 6700-500]
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms............................ 1
SECTION 1.02. Classification of Loans and Borrowings... 25
SECTION 1.03. Terms Generally.......................... 26
SECTION 1.04. Accounting Terms; GAAP................... 26
ARTICLE II
The Credits
-----------
SECTION 2.01. Commitments.............................. 26
SECTION 2.02. Loans and Borrowings..................... 26
SECTION 2.03. Requests for Revolving Borrowings........ 28
SECTION 2.04. Competitive Bid Procedure................ 29
SECTION 2.05. Letters of Credit........................ 32
SECTION 2.06. Funding of Borrowings.................... 40
SECTION 2.07. Interest Elections....................... 41
SECTION 2.08. Termination and Reduction of
Commitments............................ 42
SECTION 2.09. Repayment of Loans; Evidence of Debt..... 43
SECTION 2.10. Prepayment of Loans...................... 44
SECTION 2.11. Fees..................................... 45
SECTION 2.12. Interest................................. 47
SECTION 2.13. Alternate Rate of Interest............... 48
SECTION 2.14. Increased Costs.......................... 49
SECTION 2.15. Break Funding Payments................... 51
SECTION 2.16. Taxes.................................... 52
SECTION 2.17. Payments Generally; Pro Rata Treatment;
Sharing of Set-offs.................... 53
SECTION 2.18. Mitigation Obligations; Replacement of
Lenders................................ 55
SECTION 2.19. Borrowing Subsidiaries................... 56
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2
ARTICLE III
Representations and Warranties
------------------------------
the Subsidiaries.
SECTION 3.01. Organization; Powers..................... 57
SECTION 3.02. Authorization; Enforceability............ 57
SECTION 3.03. Governmental Approvals; No Conflicts..... 58
SECTION 3.04. Financial Condition; No Material Adverse
Change................................. 58
SECTION 3.05. Properties............................... 59
SECTION 3.06. Litigation and Environmental Matters..... 59
SECTION 3.07. Compliance with Laws and Agreements...... 60
SECTION 3.08. Investment and Holding Company Status.... 60
SECTION 3.09. Taxes.................................... 60
SECTION 3.10. ERISA.................................... 61
SECTION 3.11. Disclosure............................... 61
SECTION 3.12. Subsidiaries............................. 61
SECTION 3.13. Use of Proceeds.......................... 62
SECTION 3.14. Solvency................................. 62
SECTION 3.15. Federal Reserve Regulations.............. 62
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date........................... 63
SECTION 4.02. Each Credit Event........................ 65
SECTION 4.03. Initial Borrowing by Each Borrowing
Subsidiary............................. 65
ARTICLE V
Affirmative Covenants
---------------------
SECTION 5.01. Financial Statements and Other
Information............................ 66
SECTION 5.02. Notices of Material Events............... 68
SECTION 5.03. Existence; Conduct of Business........... 68
SECTION 5.04. Payment of Obligations................... 69
SECTION 5.05. Maintenance of Properties; Insurance..... 69
SECTION 5.06. Books and Records; Inspection Rights..... 69
SECTION 5.07. Compliance with Laws..................... 70
SECTION 5.08. Use of Proceeds and Letters of Credit.... 70
SECTION 5.09. Further Assurances....................... 70
ARTICLE VI
Negative Covenants
------------------
SECTION 6.01. Indebtedness............................. 71
SECTION 6.02. Liens.................................... 72
SECTION 6.03. Sale and Lease-Back Transactions......... 74
SECTION 6.04. Fundamental Changes...................... 74
SECTION 6.05. Investments, Loans, Advances,
Guarantees and Acquisitions............ 75
SECTION 6.06. Hedging Agreements....................... 75
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3
SECTION 6.07. Restricted Payments and Issuances........ 76
SECTION 6.08. Transactions with Affiliates............. 76
SECTION 6.09. Restrictive Agreements................... 77
SECTION 6.10. Capital Expenditures..................... 77
SECTION 6.11. Consolidated Interest Coverage Ratio..... 78
SECTION 6.12. Consolidated Leverage Ratio.............. 78
SECTION 6.13. Consolidated Tangible Net Worth.......... 78
ARTICLE VII
Events of Default........................ 78
-----------------
ARTICLE VIII
The Administrative Agent................. 82
------------------------
ARTICLE IX
Guarantee................................ 85
---------
ARTICLE X
Miscellaneous
-------------
SECTION 10.01. Notices.................................. 87
SECTION 10.02. Waivers; Amendments...................... 88
SECTION 10.03. Expenses; Indemnity; Damage Waiver....... 89
SECTION 10.04. Successors and Assigns................... 91
SECTION 10.05. Survival................................. 92
SECTION 10.06. Counterparts; Integration;
Effectiveness.......................... 93
SECTION 10.07. Severability 96
SECTION 10.08. Right of Setoff 96
SECTION 10.09. Governing Law; Jurisdiction; Consent
to Service of Process.................. 96
SECTION 10.10. WAIVER OF JURY TRIAL 97
SECTION 10.11. Headings 97
SECTION 10.12. Confidentiality 98
SECTION 10.13. Interest Rate Limitation 99
SECTION 10.14. Conversion of Currencies 99
SCHEDULES:
- ---------
Schedule 1.01 -- Material Subsidiaries
Schedule 2.01 -- Commitments
Schedule 3.06 -- Litigation and Environmental Matters
Schedule 3.07 -- Compliance with Laws and Agreements
Schedule 3.12 -- Subsidiaries
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.09 -- Existing Restrictions
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4
EXHIBITS:
- --------
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Opinion of U.S. Counsel for the
Borrowers
Exhibit C -- Form of Opinion of Netherlands Counsel for the
Borrowers
Exhibit D -- Form of Borrowing Subsidiary Agreement
Exhibit E -- Form of Borrowing Subsidiary Termination
Exhibit F -- Guarantor Agreement
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CREDIT AGREEMENT dated as of March 6, 1997, among
CHICAGO BRIDGE & IRON COMPANY N.V., the BORROWING
SUBSIDIARIES party hereto, the LENDERS party hereto, and
THE CHASE MANHATTAN BANK, as Administrative Agent.
The Borrowers (such term and each other capitalized term used but not otherwise defined herein having the meaning assigned to it in Article I) have requested the Lenders to establish the credit facilities provided for herein to be used to repay the Praxair Indebtedness and for the general corporate purposes of the Borrowers. The Lenders are willing to establish such credit facilities upon the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
Consolidated Leverage Eurodollar Facility Fee L/C Participation Fees
--------------------- ---------- ------------ -----------------------
Categories: Ratio Spread Rate Performance L/Cs Standby L/Cs
- ---------- ----- ------ ---- ---------------- -------------
Category 1 Less than 1.0 to 1.0 .325% .175% .200% .325%
- ----------
Category 2 Greater than or equal to .625% .250% .400% .625%
- ---------- 1.0
Category 3 to 1.0 but less than 1.5 to .750% .250% .525% .750%
- ---------- to 1.0 but less than 2.0 to
1.0
Category 4 Greater than or equal to .875% .250% .650% .875%
- ---------- 2.0 to 1.0
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and L/C Participation Fees will be determined by reference to Category 2;
twelve month period prior to such date, or who were nominated by 2/3 of the members then in office who were members for such period or who were so nominated, shall cease to constitute a majority of such board of directors or comparable governing body; or (c) after the Reorganization, New CBIC or CBICBV shall cease to be a Wholly Owned Subsidiary of the Company.
Applicable Percentage of the total Committed LC Exposure at such time.
consolidated Subsidiaries (including assets acquired pursuant to capital leases) that are (or would be) reflected in a consolidated statement of cash flow of the Company for such period prepared in accordance with GAAP. Consolidated Capital Expenditures during any period shall exclude up to $6,000,000 of purchases of equipment in the ordinary course of business to the extent the amount of such purchases is not in excess of the proceeds of sales during the preceding 12 months of equipment no longer required in connection with existing or completed projects, but shall not otherwise be reduced by dispositions of property, plant or equipment during such period.
person's assets are acquired by the Company or any of the Subsidiaries.
transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, or legally enforceable agreement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
Administrative Agent from three Federal funds brokers of recognized standing selected by it.
business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party or party responsible for reimbursement of payments made in respect of letters of credit, letters of guaranty and surety bonds and (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. Notwithstanding the foregoing definition, Indebtedness shall not include any payment or other obligations to Praxair or its Affiliates in respect of employee benefits under the Employee Benefits Disaffiliation Agreement dated January 1, 1997, between Company and Praxair, as amended from time to time.
(a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 60 days or are being contested in compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance, old age pension and other social security laws or regulations;
(d) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Company or any Subsidiary.
(b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; and
(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a
financial institution satisfying the criteria described in clause (c) above.
jurisdiction imposing (or having the power to impose) withholding tax on payments by the Company or such Borrowing Subsidiary under this Agreement.
Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day) or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it.
ARTICLE II
(d) Notwithstanding any other provision of this Agreement, a Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and
(v) the location and number of the relevant Borrower's account to which funds are to be disbursed,
which shall comply with the requirements of Section 2.06.
If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Revolving Borrowing, then the relevant Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing.
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be a Eurodollar Borrowing or a Fixed Rate Borrowing;
(iv) the Interest Period to be applicable to such Borrowing, which shall be a period contemplated by the definition of the term "Interest Period"; and
(v) the location and number of the relevant Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06.
Promptly following receipt of a Competitive Loan Bid Request in accordance with this Section, the Administrative Agent shall notify the Lenders of the details thereof by telecopy, inviting the Lenders to submit Competitive Loan Bids.
(b) Each Lender may (but shall not have any obligation to) make one
or more Competitive Loan Bids to any Borrower in response to a Competitive Loan
Bid Request. Each Competitive Loan Bid by a Lender must be in a form approved by
the Administrative Agent and must be received by the Administrative Agent by
telecopy, in the case of a Eurodollar Competitive Borrowing, not later than 9:30
a.m., New York City time, three Business Days before the proposed date of such
Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than
9:30 a.m., New York City time, on the proposed date of such Competitive Borrow
ing. Competitive Loan Bids that do not conform substantially to the form
approved by the Administrative Agent may be rejected by the Administrative
Agent, and the Administrative Agent shall notify the applicable Lender as
promptly as practicable. Each Competitive Loan Bid shall specify (i) the
principal amount (which shall be a minimum of $4,000,000 and an integral
multiple of $1,000,000 and which may equal the entire principal amount of the
Competi tive Borrowing requested by the applicable Borrower) of the Competitive
Loan or Loans that the Lender is willing to make, (ii) the Competitive Loan Bid
Rate or Rates at which the Lender is prepared to make such Loan or Loans
(expressed as a percentage rate per annum in the form of a decimal to no more
than four decimal places) and (iii) the Interest Period applicable to each such
Loan and the last day thereof.
(c) The Administrative Agent shall promptly and in no event later than 10:15 a.m. New York time, on the proposed date of borrowing, notify the relevant Borrower by telecopy of the Competitive Loan Bid Rate and the principal amount specified in each Competitive Loan Bid and the identity of the Lender that shall have made such Competitive Loan Bid.
(d) Subject only to the provisions of this paragraph, a Borrower may accept or reject any Competitive Loan Bid. The relevant Borrower shall notify the Administrative Agent by telephone, confirmed by telecopy in
(e) The Administrative Agent shall promptly notify each bidding Lender by telecopy whether or not its Competitive Loan Bid has been accepted (and, if so, the amount and Competitive Loan Bid Rate so accepted), and each successful bidder will thereupon become bound, subject to the terms and conditions hereof, to make the Competitive Loan in respect of which its Competitive Loan Bid has been accepted.
(f) If the Administrative Agent shall elect to submit a Competitive Loan Bid in its capacity as a Lender, it shall submit such Competitive Loan Bid directly to the relevant Borrower at least one quarter of an hour earlier than the time by which the other Lenders are required to
submit their Competitive Loan Bids to the Administrative Agent pursuant to paragraph (b) of this Section.
(ii)(1) Subject to the terms and conditions set forth herein, from time to time during the Availability Period any Borrower may request Competitive Letter of Credit Bids and may (but shall not have any obligation to) accept Competitive Letter of Credit Bids and obtain the issuance of Competitive Letters of Credit. To request Competitive Letter of Credit Bids, a Borrower shall notify the Administrative Agent of such request by telephone not later than 11:00 a.m., New York City time, six Business Days
before the date of the proposed issuance of the Competitive Letter of Credit. The Borrowers may submit multiple Competitive Letter of Credit Bid Requests on the same day. Each such telephonic Competitive Letter of Credit Bid Request shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Competitive Letter of Credit Bid Request in a form approved by the Administrative Agent and signed by the applicable Borrower. Each such telephonic and written Competitive Letter of Credit Bid Request shall specify the Competitive Letter of Credit to be issued, amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Competitive Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Competitive Letter of Credit, the name and address of the beneficiary thereof, whether such Competitive Letter of Credit is to be a Performance Letter of Credit or a Standby Letter of Credit and such other information as shall be necessary to prepare, amend, renew or extend such Committed Letter of Credit. Promptly following receipt of a Competitive Letter of Credit Bid Request in accordance with this Section, the Administrative Agent shall notify the Issuing Banks of the details thereof by telecopy, inviting the Issuing Banks to submit Competitive Letter of Credit Bids.
(2) Issuing Banks may (but shall not have any obligation to) make one or more Competitive Letter of Credit Bids in response to a Competitive Letter of Credit Bid Request. Each Competitive Letter of Credit Bid must be in a form approved by the Administrative Agent and must be re ceived by the Administrative Agent by telecopy not later than 9:30 a.m., New York City time, four Business Days before the proposed issue date of such Competitive Letter of Credit. Competitive Letter of Credit Bids that do not conform substantially to the form approved by the Administrative Agent may be rejected by the Administrative Agent, and the Administrative Agent shall notify the applicable Issuing Banks as promptly as practicable. Each Competitive Letter of Credit Bid shall specify the Competi tive Letter of Credit Bid Rate at which the Issuing Bank is prepared to issue the requested Competitive Letter of Credit (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places).
(3) The Administrative Agent shall promptly notify the applicable Borrower by telecopy of the Competitive Letter of Credit Bid Rate specified in each Competitive Letter of Credit Bid and the identity of the Issuing Bank that shall have made such Competitive Letter of Credit Bid.
(4) Subject only to the provisions of this paragraph, the applicable Borrower may accept or reject any
(5) The Administrative Agent shall promptly notify each bidding Issuing Bank by telecopy whether or not its Competitive Letter of Credit Bid has been accepted (and, if so, the Competitive Letter of Credit Bid Rate so accepted), and the successful bidder will thereupon become bound, subject to the terms and conditions hereof, to issue the Competitive Letter of Credit in respect of which its Competitive Letter of Credit Bid has been accepted.
(6) If the Administrative Agent shall elect to submit a Competitive Letter of Credit Bid in its capacity as an Issuing Bank, it shall submit such Competitive Letter of Credit Bid directly to the applicable Borrower at least one quarter of an hour earlier than the time by which the other Issuing Banks are required to submit their Competitive Letter of Credit Bids to the Administrative Agent pursuant to paragraph (b) of this Section.
(iii) A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the applicable Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $35,000,000 and (ii) the sum of the total Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans plus the Competitive L/C Exposure shall not exceed the total Commitments.
(it being understood that a Letter of Credit may provide for automatic year-to- year renewals in the absence of a notice to the contrary from the applicable Issuing Bank given not fewer than 30 days prior to the expiration date at any time in effect) and (ii) the date that is five Business Days prior to the Maturity Date.
LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Lenders with LC Exposures representing greater than 50% of the total LC Exposure), be applied to satisfy other obligations of the Borrowers under this Agreement. If the Company and the Borrowers are required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Company or such Borrowers within three Business Days after all Events of Default have been cured or waived.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the relevant
Borrower a corresponding amount. In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and the applicable Borrower severally agree to
pay to the Administrative Agent forthwith on demand such corresponding amount
with interest thereon, for each day from and including the date such amount is
made available to the applicable Borrower to but excluding the date of payment
to the Administrative Agent, at (i) in the case of such Lender, the greater of
the Federal Funds Effective Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation or
(ii) in the case of such Borrower, the interest rate applicable to ABR Loans.
If such Lender pays such amount to the Administrative Agent, then such amount
shall constitute such Lender's Loan included in such Borrowing. If such
Borrower pays such amount to the
Administrative Agent, then such payment shall fully discharge such Borrower's obligations hereunder with respect to the amount of principal or interest so paid.
(b) To make an election pursuant to this Section, a Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if such Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the relevant Borrower.
(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then such Borrower shall be deemed to have selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing.
(e) If the relevant Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Revolving Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Company, then, so long as an Event of Default is continuing (i) no outstanding Revolving Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Revolving Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.
(b) In the event that on the third anniversary of the date hereof the aggregate Commitments shall exceed $50,000,000, the Commitments shall be automatically reduced on such date, pro rata in accordance with the respective amounts thereof, to $50,000,000.
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of each Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof.
(e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, each Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by each such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).
(c) If after giving effect to any prepayment of Loans either (i) the sum of the aggregate Revolving Credit Exposures plus the aggregate principal amount of outstanding Competitive Loans plus the aggregate Competitive L/C Exposures exceeds the aggregate Commitments or (ii) the Revolving Credit Exposure of any Lender exceeds the Commitment of such Lender, the Borrowers shall forthwith
prepay Loans (and, if necessary, provide cash collateral to secure reimbursement obligations in respect of Letters of Credit) to the extent necessary to eliminate such excess.
(b) The Borrowers agree to pay (i) to the Administrative Agent for
the account of each Lender a participation fee with respect to its
participations in Committed Letters of Credit, which shall accrue at the
Applicable Rate on the average daily amount of such Lender's Committed LC
Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the date hereof to but
excluding the later of the date on which such Lender's Commitment terminates and
the date on which such Lender ceases to have any such Committed LC Exposure, and
(ii) to each Issuing Bank a fronting fee, which shall accrue on the undrawn
amount of each Letter of Credit issued by such Issuing Bank during the period
from and including the date hereof to but excluding the later of the date of
termination of the Commitments and the date on which such Issuing Bank ceases to
have any Letters of Credit outstanding, at a rate equal to (x) in the case of
each Committed Letter of Credit, the rate separately agreed upon by such Issuing
Bank and the Company and (y) in the case of each Competitive Letter of Credit,
the Competitive Letter of Credit Bid Rate bid by such Issuing Bank and accepted
by the applicable Borrower pursuant to Section 2.05(b)(ii), as well as each
Issuing Bank's standard fees with respect to the issuance, amendment, renewal or
extension of any Committed or Competitive Letter of Credit or the processing of
drawings
(c) The Borrowers agree to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Company and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to each Issuing Bank, in the case of fees payable to it) for distribution, in the case of facility fees and participation fees, to the Lenders. Fees paid shall not be refundable under any circumstances.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest (i) in the case of a Eurodollar Revolving Loan, at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate, or (ii) in the case of a Eurodollar Competitive Loan, at the LIBO Rate for the Interest Period in effect for such Borrowing plus (or minus, as applicable) the Margin applicable to such Loan.
(c) Each Fixed Rate Loan shall bear interest at the Fixed Rate applicable to such Loan.
(d) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by any Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section.
(f) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.
(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders (or, in the case of a Eurodollar Competitive Loan, the Lender that is required to make such Loan) that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Company and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Company and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of
(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or any Issuing Bank; or
(ii) impose on any Lender or any Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans or Fixed Rate Loans made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan or Fixed Rate Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or such Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or such Issuing Bank hereunder (whether of principal, interest or otherwise), in each case by an amount deemed by such Lender or Issuing Bank to be material, then the Company will pay or cause the applicable Borrower to pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or any Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or such Issuing Bank's capital or on the capital of such Lender's or such Issuing Bank's holding company, if any, by an amount deemed by such Lender or Issuing Bank to be material, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing
Bank, to a level below that which such Lender or such Issuing Bank or such Lender's or such Issuing Bank's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or such Issuing Bank's policies and the policies of such Lender's or such Issuing Bank's holding company with respect to capital adequacy), then from time to time the Company will pay or cause the applicable Borrower to pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender's or such Issuing Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section, and explaining in reasonable detail the manner in which such amount or amounts shall have been determined, shall be delivered to the Company and shall be conclusive absent manifest error. The Company will pay or will cause the applicable Borrower to pay such Lender or such Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.
(e) Notwithstanding the foregoing provisions of this Section, a Lender shall not be entitled to compensation pursuant to this Section (i) in respect of any demand for compensation if it shall not be the general practice of such Lender to demand such compensation in similar circumstances under comparable provisions of other comparable credit agreements with Borrowers similarly situated or (ii) in respect of any Competitive Loan or Competitive Letter of Credit if the Change in Law that would otherwise entitle it to such compensation shall have been publicly announced prior to submission of the Competitive Loan Bid pursuant to which such Loan was made or the Competitive Letter of Credit
Bid pursuant to which such Competitive Letter of Credit was made.
additional sums payable under this Section) the Administrative Agent, Lender or Issuing Bank (as the case may be) receive an amount equal to the sum they would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Borrowers shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(c) Each Borrower shall indemnify the Administrative Agent, each Lender and each Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or such Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of such Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Company by a Lender or an Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by any Borrower to a Governmental Authority, such Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which a Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Company (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Company as will permit such payments to be made without withholding or at a reduced rate.
make each payment required to be made by it hereunder (whether of principal,
interest, fees or reimbursement of LC Disbursements, or of amounts payable under
Section 2.14, 2.15 or 2.16, or otherwise) prior to 12:00 noon, New York City
time, on the date when due, in immediately available funds, without set-off or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at its offices at 270
Park Avenue, New York, New York, except payments to be made directly to the
Issuing Bank as expressly provided herein and except that payments pursuant to
Sections 2.14, 2.15, 2.16 and 10.03 shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All
payments hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties, and (iii) third, towards payment of other amounts due hereunder, ratably among the parties entitled thereto in accordance with the amounts then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans or participations in such LC Disbursements in respect of Committed Letters of Credit resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and participations in such LC Disbursements and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans and participations in LC Disbursements in respect of Committed Letters of Credit of other Lenders to the extent necessary
(d) Unless the Administrative Agent shall have received notice from a Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Banks hereunder that such Borrower will not make such payment, the Administrative Agent may assume that such Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Banks, as the case may be, the amount due. In such event, if such Borrower has not in fact made such payment, then each of the Lenders or the Issuing Banks, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(d) or (e), 2.06(b) or 2.17(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid.
circumstances entitling such Borrower to require such assignment and delegation cease to apply.
ARTICLE III
The Company represents and warrants to the Lenders that:
Subsidiary Agreement (as to which a Borrowing Subsidiary Termination has not become effective) has been duly executed and delivered by the Company and the applicable Borrowing Subsidiary and constitutes a legal, valid and binding obligation of such Borrowing Subsidiary, in each case enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
(b) The Company has heretofore furnished to the Lenders (i) its unaudited pro forma combined statements of financial position and combined statements of operations as of and for the fiscal years 1993-1995 on a stand- alone basis, and (ii) projections including income statement, balance sheet and cash flow projections of the Company and the Subsidiaries for the fiscal years 1996 to 2001. Such
pro forma financial statements have been prepared in good faith by the Company and present fairly in all material respects on a pro forma basis the combined financial position and results of operations of the Company and the Subsidiaries as of the dates and for the periods indicated. Such projections have been prepared in good faith by the Company based on assumptions believed by the management of the Company to be reasonable at the time such projections were prepared (it being understood that no representation is made by the Company that such projections will be achieved).
(c) Since December 31, 1996, there has been no material adverse change in the business, assets, operations, prospects or condition, financial or otherwise, of the Company and its Subsidiaries, taken as a whole.
(b) Each of the Company and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to the business of the Company and its Subsidiaries, taken as a whole, and the use thereof by the Company and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
(b) Except as disclosed in Schedule 3.06 and matters disclosed in the Registration Statement, and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Company nor any of its Subsidiaries (i) has failed in the last five years to
comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) is currently subject to any Environmental Liability, (iii) has received written notice of any pending or threatened claim with respect to any Environmental Liability or (iv) has received notice of any future claim with respect to any Environmental Liability.
(c) Since the date of this Agreement, there has been no change in the status of the matters disclosed in Schedules 3.06 and 3.07 that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.
amounts, exceed by more than $100,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $1,000,000 the fair market value of the assets of all such underfunded Plans.
such debts and liabilities become absolute and matured; and (d) the Company and the Subsidiaries will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted following the Effective Date.
(b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund Indebtedness originally incurred for such purpose, or (ii) for any purpose which entails a violation of, or which is inconsistent with, the provisions of the Regulations of the Board, including Regulation G, U or X.
ARTICLE IV
(a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. The Administrative Agent shall have received from each Guarantor to the extent required under Section 5.09 either (i) a counterpart of an executed Guarantor Agreement signed on behalf of such Guarantor or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of the Guarantor Agreement) that such Guarantor has signed a counterpart of a Guarantor Agreement.
(b) The Administrative Agent shall have received a favorable written opinion (addressed to the
Administrative Agent and the Lenders and dated the Effective Date) of Cahill Gordon & Reindel, U.S. counsel for the Company and its Subsidiaries, and Loeff Claeys Verbeke, Dutch counsel for the Company and its Subsidiaries, substantially in the forms of Exhibits B and C, respectively, and covering such other matters relating to the Company and its Subsidiaries, this Agreement or the Transactions as the Administrative Agent shall reasonably request. The Company and its Subsidiaries hereby request such counsel to deliver such opinion.
(c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Company and its Subsidiaries, the authorization of the Transactions and any other legal matters relating to the Company and its Subsidiaries, this Agreement or the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a certificate, dated
the Effective Date and signed by the President, a Vice President or a Financial
Officer of the Company, confirming compliance with the conditions set forth in
paragraphs (a) and (b) of Section 4.02 (at the time of and after giving effect
to the Transactions occurring on or prior to the Effective Date) and paragraph
(g) and (h) of this Section 4.01.
(e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Company hereunder.
(f) The Lenders shall be satisfied with any changes to the material terms of the Reorganization or of the agreements to be entered into between the Company and its Subsidiaries on the one hand and Praxair and its subsidiaries on the other hand in connection therewith from those set forth in the Registration Statement.
(g) The Reorganization and the Offering shall have been completed in accordance with applicable law and on terms consistent in all material respects with the pro forma financial statements and projections furnished to the Administrative Agent prior to the date hereof.
(h) The Praxair Indebtedness and any other Indebtedness owed by the Company or its Subsidiaries to Praxair shall have been or shall simultaneously be repaid in full and cancelled, and no Indebtedness of the Company or its Subsidiaries (other than the Borrowings hereunder, the Existing Indebtedness and performance bonds and letters of credit to secure ordinary course performance obligations of the Company or a Subsidiary in connection with active construction projects (including projects about to be commenced) or bids for prospective construction projects) shall be outstanding on the Effective Date.
The Administrative Agent shall notify the Borrowers and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Banks to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 10.02) at or prior to 3:00 p.m., New York City time, on
April 15, 1997 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).
(a) The representations and warranties of the Company set forth in this Agreement and, in the case of a Borrowing by a Borrowing Subsidiary, the representations and warranties of such Borrowing Subsidiary in its Borrowing Subsidiary Agreement shall be true and correct in all material respects on and as of the date of such Borrowing (other than the continuation or conversion of any loan) or the date of issuance of such Letter of Credit, as applicable (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date).
(b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Company and, if applicable, the relevant Borrowing Subsidiary on the date
thereof as to the matters specified in paragraphs (a) and (b) of this Section.
(a) receipt by the Administrative Agent of a Borrowing Subsidiary Agreement executed by such Borrowing Subsidiary and the Company;
(b) receipt by the Administrative Agent of all documents it may reasonably request relating to the existence of such Borrowing Subsidiary, the corporate power and authority of such Borrowing Subsidiary to enter into and the validity with respect to such Borrowing Subsidiary of this Agreement and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent; and
(c) with respect to any Foreign Subsidiary, receipt by the Administrative Agent of any governmental and third party approvals necessary in connection with the execution, delivery and performance by such Borrowing Subsidiary of this Agreement.
ARTICLE V
Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Company covenants and agrees with the Lenders that:
(a) within 120 days after the end of each fiscal year of the Company, its audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Arthur Andersen LLP or other independent public accountants of recognized national standing (without a "going concern" or like
qualification or exception and without any material qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Company and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;
(b) within 60 days after the end of each of the first three fiscal quarters of each fiscal year of the Company, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Company and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of the Company (i)
certifying as to whether a Default has occurred and, if a Default has occurred,
specifying the details thereof and any action taken or proposed to be taken with
respect thereto; (ii) setting forth reasonably detailed calculations
demonstrating compliance with Sections 6.10, 6.11, 6.12 and 6.13; (iii) stating
whether, to such officer's knowledge, any change in GAAP or in the application
thereof has occurred since the date of the audited financial statements referred
to in Section 3.04 and, if any such change has occurred, specifying the effect
of such change on the financial statements accompanying such certificate; and
(iv) in the case of a delivery of financial statements under clause (a) above,
attaching a revised Schedule 1.01 identifying the Material Subsidiaries as of
the date of the balance sheet included in such financial statements;
(d) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines);
(e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Company or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Company to its shareholders generally, as the case may be; and
(f) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrowers or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender may reasonably request.
(a) the occurrence of any Default that is continuing;
(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Company or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Company and its Subsidiaries in an aggregate amount exceeding $1,000,000; and
(d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Company setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
(b) In the event any Subsidiary otherwise required to become a Guarantor under paragraph (a) above shall be an Excluded Foreign Subsidiary, promptly furnish to the Administrative Agent a notice identifying such Subsidiary and explaining in reasonable detail the factors that prevent it from becoming a Guarantor, and, if the Administrative Agent shall so request, cause such Subsidiary to execute and deliver any modified or partial guarantee of the Obligations that can be executed and delivered by such Subsidiary without any of the adverse consequences set forth in the definition of "Excluded Foreign Subsidiary".
(c) Notwithstanding any other provision of this Agreement, for purposes of paragraphs (a) and (b) above, until the 30th day following the date of this Agreement, no Subsidiary shall be required to become a Guarantor hereunder that would not have been so required in the absence of the
proviso to the definition of "Material Subsidiary" in Article I hereto (each such Subsidiary being called a "Designated Subsidiary"), and the failure of any Designated Subsidiary to be a Guarantor during such 30 day period shall not result in a Default or Event of Default under any provision contained herein. The Company agrees, by the 30th day following the date of this Agreement, to cause each Designated Subsidiary to execute and deliver a Guarantor Agreement and to become a Guarantor hereunder.
ARTICLE VI
Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, the Company covenants and agrees with the Lenders that:
(a) Indebtedness created hereunder;
(b) Indebtedness existing on the date hereof and set forth in Schedule 6.01 ("Existing Indebtedness");
(c) Unsecured Indebtedness of any Subsidiary to the Company or any other Subsidiary (including any Indebtedness of or to Lealand Finance Company, B.V., to or from any other Subsidiary but excluding any other Indebtedness of a Subsidiary Guarantor to a Subsidiary that is not a Guarantor);
(d) Performance bonds and letters of credit to secure ordinary course performance obligations of the Company or a Subsidiary in connection with active construction projects (including projects about to be commenced) or bids for prospective construction projects;
(e) Letters of credit in an aggregate face amount at any time not to exceed $28,000,000, issued in the ordinary course of business to secure obligations of the Company and the Subsidiaries under workers' compensation and other social security programs, and Guarantees of any such permitted letters of credit;
(g) Indebtedness of the Subsidiaries in an aggregate amount not to exceed $15,000,000 secured by Liens referred to in Section 6.02(d); and
(h) other unsecured Indebtedness in an aggregate principal amount for all Subsidiaries not exceeding $5,000,000 at any time outstanding.
For the avoidance of doubt, the parties agree that nothing in this Agreement shall restrict the ability of the Company or any of its Subsidiaries (i) to obtain, enter into or guarantee performance bonds and letters of credit to secure ordinary course performance obligations of the Company or a Subsidiary in connection with active construction projects (including projects about to be commenced) or bids for prospective construction projects or (ii) to guarantee the obligations of the Company or any Subsidiary under any Hedging Agreement not prohibited by this Agreement.
(a) Permitted Encumbrances;
or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Company or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;
(d) Liens on fixed or capital assets acquired, constructed or
improved by the Company or any Subsidiary; provided that (i) such
security interests secure only Indebtedness permitted under the terms of
this Agreement, (ii) such security interests and the Indebtedness
secured thereby are incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement, (iii)
the Indebtedness secured thereby does not exceed 80% of the cost of
acquiring, constructing or improving such fixed or capital assets and
(iv) such security interests shall not apply to any other property or
assets of the Company or any Subsidiary; and
(e) Liens arising or deemed to arise in connection with sale and lease-back transactions permitted under Section 6.03.
(b) The Company will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Company and its Subsidiaries on the date of execution of this Agreement and businesses reasonably related or incidental thereto.
(a) Permitted Investments;
(b) investments by the Company existing on the date hereof in the capital stock of its Subsidiaries or existing immediately following the Reorganization in the capital stock of corporations that will become Subsidiaries pursuant to the Reorganization;
(c) loans or advances made by the Company to any Subsidiary and made by any Subsidiary to the Company or any other Subsidiary;
(d) Guarantees constituting Indebtedness permitted by Section 6.0 1;
(e) Permitted Acquisitions; and
(f) Purchases of capital stock of the Company and the Subsidiaries permitted under Section 6.07.
property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) at prices and on terms and conditions not less favorable to the Company or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among the Company and its Subsidiaries not involving any other Affiliate, (c) the Reorganization and the Offering, (d) any Restricted Payment permitted by Section 6.07, (e) customary fees paid to members of the Supervisory or Management Board of the Company or the Board of Directors of any Subsidiary and (f) customary compensation including salaries and bonuses paid to officers and employees of the Company and its Subsidiaries.
Expenditures during such preceding fiscal year and (ii) $5,000,000.
ARTICLE VII
(a) any Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;
(b) any Borrower shall fail to pay any interest on any Loan or any fee or other amount (other than an amount referred to in clause (a) of this Article) payable by such Borrower under this Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five days;
(c) any representation or warranty made or deemed made by or on behalf of the Company or any Subsidiary in or in connection with this Agreement, any Borrowing Subsidiary Agreement or any amendment or modification hereof or thereof, or in any report, certificate, financial statement or other document furnished
pursuant to or in connection with this Agreement, any Borrowing Subsidiary Agreement or any amendment or modification hereof or thereof, shall prove to have been incorrect in any material respect when made or deemed made;
(d) the Company shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03 (with respect to the Company's existence) or 5.08 or in Article VI;
(e) the Company shall fail to observe or perform any covenant, condition or agreement contained in this Agreement or any Borrowing Subsidiary Agreement (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Company (which notice will be given at the request of any Lender);
(f) the Company or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable (after giving effect to any grace period);
(g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (after giving effect to any grace period) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity;
(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Company or any Subsidiary (other than a Foreign Subsidiary that is not a Material Subsidiary) or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any such Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or
decree approving or ordering any of the foregoing shall be entered;
(i) the Company or any Subsidiary (other than a Foreign Subsidiary that is not a Material Subsidiary) shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or such Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;
(j) the Company or any Subsidiary (other than a Foreign Subsidiary that is not a Material Subsidiary) shall fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an aggregate amount in excess of $5,000,000 shall be rendered against the Company, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Company or any Subsidiary to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of the Company and
its Subsidiaries in an aggregate amount exceeding (i) $1,000,000 in any year or
(ii) $5,000,000 for all periods;
(m) a Change in Control shall occur; or
(n) the guarantee by any Guarantor of the Obligations shall not be (or shall be claimed by such Guarantor not to be) valid and in full force and effect;
then, and in every such event (other than an event with respect to any Borrower described in clause (h) or (i) of
this Article), and at any time thereafter during the continuance of such event, the Administrative Agent, at the request of the Required Lenders, shall, by notice to the Company, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower; and in case of any event with respect to the Company described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower; and in the case of any event with respect to any Borrowing Subsidiary described in clause (h) or (i) of this Article, (i) the eligibility of such Borrowing Subsidiary to borrow shall thereupon terminate and (ii) the Loans of such Borrowing Subsidiary shall become immediately due and payable, together with accrued interest thereon and all fees and other obligations of such Borrowing Subsidiary accrued hereunder, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrowing Subsidiary.
ARTICLE VIII
Each of the Lenders and the Issuing Banks hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with
the Company or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02), and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Company or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by a Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any Borrowing Subsidiary Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any Borrowing Subsidiary Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by
it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders, the Issuing Banks and the Company.
Upon any such resignation, the Required Lenders shall have the right, in
consultation with the Company, to appoint a successor. If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and the Issuing Banks, appoint a successor Administrative Agent which
shall be a bank with an office in New York, New York, or an Affiliate of any
such bank. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder. The fees payable by the Company to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Company and such successor. After the
Administrative Agent's resignation hereunder, the provisions of this Article and
Section 10.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder.
ARTICLE IX
In order to induce the Lenders to extend credit hereunder, each Guarantor hereby irrevocably and unconditionally guarantees, severally and jointly with the other Guarantors, as primary obligor and not merely as a surety, the Obligations (to the extent such Obligations are not obligations of such Guarantor in its capacity as a Borrower). Each Guarantor further agrees that the due and punctual payment of the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its Guarantee hereunder notwithstanding any such extension or renewal of any Obligation.
Each Guarantor waives presentment to, demand of payment from and protest to any Borrower of any of the Obligations, and also waives notice of acceptance of its obligations and notice of protest for nonpayment. The obligations of a Guarantor hereunder shall not be affected by (a) the failure of any Lender or the Administrative Agent to assert any claim or demand or to enforce any right or remedy against any Borrower or any other Guarantor under the provisions of this Agreement or otherwise; (b) change or increase in the amount of any of the Obligations, whether or not consented to by such Guarantor, or (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Agreement, any Borrowing Subsidiary Agreement or any other agreement.
Each Guarantor further agrees that its agreement hereunder constitutes a promise of payment when due (whether or not any bankruptcy or similar proceeding shall have stayed the accrual or collection of any of the Obligations or operated as a discharge thereof) and not merely of collection, and waives any right to require that any resort be had by any Lender to any balance of any deposit account or credit on the books of any Lender in favor of any Borrower or any other person.
The obligations of the Guarantors hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever, by reason of the invalidity, illegality or unenforceability of the Obligations, any impossibility in the performance of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Guarantors hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any remedy under this Agreement or any other agreement, by any waiver or modification in respect of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or omission which may or might in any manner or to any extent vary the risk of the Guarantors or otherwise operate as a discharge of the Guarantors or any other Borrower as a matter of law or equity.
Each Guarantor further agrees that its obligations hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by the Administrative Agent or any Lender upon the bankruptcy or reorganization of any Borrower or other Guarantor or otherwise.
In furtherance of the foregoing and not in limitation of any other right which the Administrative Agent or any Lender may have at law or in equity against any Guarantor by virtue hereof, upon the failure of any Borrower to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will, upon receipt of written demand by the Administrative Agent, forthwith pay, or cause to be paid, in cash the amount of such unpaid Obligation. Each Guarantor further agrees that if payment in respect of any Obligation shall be due in a currency other than dollars and/or at a place of payment other than New York and if, by reason of any Change in Law, disruption of currency or foreign exchange markets, war or civil disturbance or similar event, payment of such Obligation in such currency or at such place of payment shall be impossible or, in the judgment of any applicable Lender, not consistent with the protection of its rights or interests, then, at the election of any applicable Lender, such Guarantor shall make payment of such Obligation in dollars (based upon the currency exchange rate in effect for the applicable currency on the date on which such Lender receives payment in immediately available funds) and/or in New York, and shall indemnify such Lender against any losses or expenses that it shall sustain as a result of such alternative payment.
Upon payment by a Guarantor of any sums as provided above, all rights of such Guarantor against any Borrower arising as a result thereof by way of right of subrogation or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full of all the Obligations owed by such Borrower, whether in its capacity as a Borrower or as a Guarantor, to the Lenders.
In the event that all the capital stock directly or indirectly owned by the Company of any Guarantor shall be sold or otherwise transferred in a transaction permitted hereunder with the result that such Guarantor shall no longer be a Subsidiary, such Guarantor shall without further action on the part of the Administrative Agent or the Lenders cease to be a party hereto and a Guarantor hereunder, and the Administrative Agent is authorized to execute and deliver all such instruments as shall be reasonably requested by the Company to evidence the release of such Guarantor.
ARTICLE X
(a) if to any Borrower, to it in care of the Company at 1501 North Division Street, Plainfield, Illinois 60544, Attention of the Treasurer, with a copy to the General Counsel (Telecopy No. (815) 439-6600);
(b) if to the Administrative Agent, to The Chase Manhattan Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th floor, New York, New York 10081, Attention of Janet Belden (Telecopy No. (212) (552-5658), with a copy to Chase Securities Inc., 10 South LaSalle Street, 23rd floor, Chicago, Illinois
60603-1097, Attention of Jon Hinard (Telecopy No. (312) 807-4077);
(c) if to any other Lender or to an Issuing Bank, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.
(b) The Company shall indemnify the Adminis trative Agent, each Issuing Bank and each Lender, and each Related Party of any of the foregoing Persons (each such
(c) To the extent that the Company fails to pay any amount required
to be paid by it to the Administrative Agent or any Issuing Bank under paragraph
(a) or (b) of this Section, each Lender severally agrees to pay to the
Administrative Agent or such Issuing Bank, as the case may be, such Lender's
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
(d) To the extent permitted by applicable law, no Borrower shall assert, and each Borrower hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any Borrowing Subsidiary Agreement or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable promptly after written demand therefor.
any consent of the Company otherwise required under this paragraph shall not be required if an Event of Default under clause (h) or (i) of Article VII has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obliga tions under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(f) A Participant shall not be entitled to receive any greater payment under Section 2.14 or 2.16 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Company's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.16 unless the Company is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrowers, to comply with Section 2.16(e) as though it were a Lender.
hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(b) Each Borrower and Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against any Borrower or Guarantor or its properties in the courts of any jurisdiction.
(c) Each Borrower and Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement (including any Borrowing
Subsidiaries) irrevocably consents to service of process in the manner provided
for notices in Section 10.01, and the Company and each Borrower or Guarantor
located or organized outside of the State of New York hereby irrevocably
appoints CT Corporation System at 1633 Broadway, New York, NY 10019, as its
agent for service of process out of any of the courts referred to in paragraph
(b) above. Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto (including any Borrowing Subsidiary) agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given.
(b) The obligations of each Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, such Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrowers contained in this Section 10.14 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
CHICAGO BRIDGE & IRON COMPANY
N.V.,
by
/s/ James S. Sawyer ------------------------- Name: James S. Sawyer Title: Managing Director |
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent,
by
/s/ Deborah Davey ------------------------- Name: Deborah Davey Title: Vice President |
BANK OF MONTREAL,
by
/s/ Leon H. Sinclair ------------------------- Name: Leon H. Sinclair Title: Director |
THE FIRST NATIONAL BANK OF
CHICAGO,
by
/s/ Deborah E. Stevens ------------------------- Name: Deborah E. Stevens Title: Authorized Agent |
CREDIT SUISSE FIRST BOSTON,
by
/s/ Lynn Allegaert ------------------------- Name: Lynn Allegaert Title: Vice President |
by
/s/ David W. Kratovil ------------------------- Name: David W. Kratovil Title: Director |
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH,
by
/s/ Samuel Azzo ------------------------- Name: Samuel Azzo Title: Vice President |
by
/s/ Jan Buettgen ------------------------- Name: Jan Buettgen Title: Corporate Banking |
EXHIBIT 23.1.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports dated February 7, 1997 and December 16, 1996 (and to all references to our Firm) included in or made part of this Registration Statement on Form S-1.
/s/ Arthur Andersen LLP
Chicago, Illinois
March 19, 1997
|
EXHIBIT 23.1.2
AEX-Effectenbeurs nv
P.O. Box 19163
1000 GD Amsterdam
The Netherlands
Dear Sirs:
As independent public accountants with respect to Chicago Bridge & Iron Company N.V., we hereby consent to the use of our audit report, addressed to the shareholder of Chicago Bridge & Iron Company N.V. in respect of the December 31, 1996 balance sheet and to all references to our Firm in the form and context in which they are included in the Prospectus on pages F-43 through F-45 dated March 20, 1997.
It should be noted that we have not made an examination of any financial statements of Chicago Bridge & Iron Company N.V. as of any date or for any period subsequent to December 31, 1996, the date of the latest financial statements covered by our report.
Very truly yours,
/s/ Arthur Andersen & Co. Amsterdam, March 19, 1997 |
EXHIBIT 23.13
CONSENT OF DIRECTOR NOMINEE
I hereby consent to being named as a nominee to the Supervisory Board of Chicago Bridge & Iron Company, N.V., a Netherlands corporation, in its Registration Statement on Form S-1 (Registration No.333-18065) and related prospectus, and any amendments thereto, filed with the Securities Exchange Commission.
Signed: /s/ Jerry H. Ballengee
Dated: March 10, 1997
|