UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|
|
|
þ
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended March 31, 2008
OR
|
|
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from
to
Commission
File Number 1-11442
CHART INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
|
|
|
Delaware
|
|
34-1712937
|
|
|
|
(State or Other Jurisdiction
of Incorporation or Organization)
|
|
(I.R.S. Employer Identification No.)
|
One Infinity Corporate Centre Drive, Suite 300, Garfield Heights, Ohio 44125
(Address of Principal Executive Offices) (ZIP Code)
Registrants Telephone Number, Including Area Code: (440) 753-1490
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such
shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See the
definitions of large accelerated filer,
accelerated filer and smaller reporting
company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
þ
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act) Yes
o
No
þ
Indicate by check mark whether the registrant has filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes
þ
No
o
At April 30, 2008, there were 28,318,769 outstanding shares of the Companys Common Stock, par
value $0.01 per share.
CHART INDUSTRIES, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
107,937
|
|
|
$
|
92,869
|
|
Accounts receivable, net
|
|
|
91,372
|
|
|
|
96,940
|
|
Inventories, net
|
|
|
105,594
|
|
|
|
87,073
|
|
Unbilled contract revenue
|
|
|
29,783
|
|
|
|
24,405
|
|
Other current assets
|
|
|
26,704
|
|
|
|
26,775
|
|
Assets held for sale
|
|
|
985
|
|
|
|
985
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
362,375
|
|
|
|
329,047
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
104,264
|
|
|
|
99,579
|
|
Goodwill
|
|
|
248,932
|
|
|
|
248,453
|
|
Identifiable intangible assets, net
|
|
|
133,075
|
|
|
|
135,699
|
|
Other assets, net
|
|
|
12,893
|
|
|
|
12,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
861,539
|
|
|
$
|
825,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
57,026
|
|
|
$
|
65,027
|
|
Customer advances and billings in excess of contract revenue
|
|
|
77,547
|
|
|
|
60,080
|
|
Accrued expenses and other current liabilities
|
|
|
48,982
|
|
|
|
49,587
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
183,555
|
|
|
|
174,694
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
250,000
|
|
|
|
250,000
|
|
Other long-term liabilities
|
|
|
71,991
|
|
|
|
73,069
|
|
Shareholders Equity
|
|
|
|
|
|
|
|
|
Common stock, par value $.01 per share 150,000,000
shares authorized, 28,318,191 and 28,212,426 shares issued
and outstanding at March 31, 2008 and
December 31, 2007, respectively
|
|
|
283
|
|
|
|
282
|
|
Additional paid-in capital
|
|
|
244,231
|
|
|
|
241,732
|
|
Retained earnings
|
|
|
85,201
|
|
|
|
70,545
|
|
Accumulated other comprehensive income
|
|
|
26,278
|
|
|
|
15,432
|
|
|
|
|
|
|
|
|
|
|
|
355,993
|
|
|
|
327,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
$
|
861,539
|
|
|
$
|
825,754
|
|
|
|
|
|
|
|
|
The balance sheet at December 31, 2007 has been derived from the audited financial statements at
that date, but does not include all of the information and notes required by U.S. generally
accepted accounting principles for complete financial statements.
See accompanying notes to these unaudited condensed consolidated financial statements. The
accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.
3
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars and shares in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
170,329
|
|
|
$
|
152,463
|
|
Cost of sales
|
|
|
118,388
|
|
|
|
112,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
51,941
|
|
|
|
39,859
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
23,075
|
|
|
|
19,544
|
|
Amortization expense
|
|
|
2,658
|
|
|
|
3,028
|
|
|
|
|
|
|
|
|
|
|
|
25,733
|
|
|
|
22,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
26,208
|
|
|
|
17,287
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income):
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
4,745
|
|
|
|
6,346
|
|
Financing costs amortization
|
|
|
413
|
|
|
|
404
|
|
Foreign currency income
|
|
|
(150
|
)
|
|
|
(354
|
)
|
|
|
|
|
|
|
|
|
|
|
5,008
|
|
|
|
6,396
|
|
|
|
|
|
|
|
|
Income from operations before income taxes
and minority interest
|
|
|
21,200
|
|
|
|
10,891
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
6,573
|
|
|
|
3,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations before
minority interest
|
|
|
14,627
|
|
|
|
7,178
|
|
|
|
|
|
|
|
|
|
|
Minority interest, net of taxes
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
14,656
|
|
|
$
|
7,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share basic
|
|
$
|
0.52
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share diluted
|
|
$
|
0.51
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding basic
|
|
|
28,252
|
|
|
|
25,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding diluted
|
|
|
28,959
|
|
|
|
25,810
|
|
|
|
|
|
|
|
|
See accompanying notes to these unaudited condensed consolidated financial statements. The
accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.
4
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
14,656
|
|
|
$
|
7,178
|
|
Adjustments to reconcile net income to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
4,880
|
|
|
|
4,587
|
|
Employee stock and stock option related compensation
expense
|
|
|
1,155
|
|
|
|
361
|
|
Financing costs amortization
|
|
|
413
|
|
|
|
404
|
|
Other non-cash operating activities
|
|
|
(181
|
)
|
|
|
(354
|
)
|
Increase (decrease) in cash resulting from changes in
operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
6,692
|
|
|
|
(2,800
|
)
|
Inventory
|
|
|
(15,211
|
)
|
|
|
(6,812
|
)
|
Unbilled contract revenues and other current assets
|
|
|
(3,805
|
)
|
|
|
(10,481
|
)
|
Accounts payable and other current liabilities
|
|
|
(10,979
|
)
|
|
|
1,740
|
|
Customer advances and billings in excess of contract
revenue
|
|
|
16,407
|
|
|
|
7,214
|
|
|
|
|
|
|
|
|
Net Cash Provided By Operating Activities
|
|
|
14,027
|
|
|
|
1,037
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(3,701
|
)
|
|
|
(5,024
|
)
|
Acquisition of minority interest and other assets
|
|
|
(616
|
)
|
|
|
(1,622
|
)
|
|
|
|
|
|
|
|
Net Cash Used In Investing Activities
|
|
|
(4,317
|
)
|
|
|
(6,646
|
)
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Payments on revolving credit facilities or short-term debt
|
|
|
|
|
|
|
(750
|
)
|
Stock option exercise proceeds
|
|
|
706
|
|
|
|
5
|
|
Tax benefit from exercise of stock options
|
|
|
639
|
|
|
|
|
|
Other financing activities
|
|
|
|
|
|
|
(183
|
)
|
|
|
|
|
|
|
|
Net Cash Provided By (Used In) Financing Activities
|
|
|
1,345
|
|
|
|
(928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
11,055
|
|
|
|
(6,537
|
)
|
Effect of exchange rate changes on cash
|
|
|
4,013
|
|
|
|
42
|
|
Cash and cash equivalents at beginning of period
|
|
|
92,869
|
|
|
|
18,854
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
107,937
|
|
|
$
|
12,359
|
|
|
|
|
|
|
|
|
See accompanying notes to these unaudited condensed consolidated financial statements. The
accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.
5
CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2008
(Dollars and shares in thousands, except per share amounts)
NOTE A Basis of Preparation
The accompanying unaudited condensed consolidated financial statements of Chart Industries,
Inc. and its subsidiaries (the Company) have been prepared in accordance with U.S. generally
accepted accounting principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by U.S. generally accepted accounting principles for annual financial
statements. These financial statements should be read in conjunction with the audited financial
statements and notes thereto included in the Companys Annual Report on Form 10-K for the year
ended December 31, 2007
.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 2008 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2008.
Principles of Consolidation:
The unaudited condensed consolidated financial statements
include the accounts of the Company and its subsidiaries. Intercompany accounts and transactions
are eliminated in consolidation. Investments in affiliates where the Companys ownership is between
20 percent and 50 percent, or where the Company does not have control, but has the ability to
exercise significant influence over operations or financial policy, are accounted for under the
equity method.
Use of Estimates:
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. Actual results could
differ from those estimates.
Nature of Operations
: The Company is a leading global supplier of standard and
custom-engineered products and systems serving a wide variety of low-temperature and cryogenic
applications. The Company has developed an expertise in cryogenic systems and equipment, which
operate at low temperatures sometimes approaching absolute zero. The majority of the Companys
products, including vacuum-insulated containment vessels, heat exchangers, cold boxes and other
cryogenic components, are used throughout the liquid-gas supply chain for the purification,
liquefaction, distribution, storage and end-use of industrial gases and hydrocarbons. The Company
has domestic operations located in eight states, including its principal executive offices located
in Garfield Heights, Ohio and an international presence in Australia, China, the Czech Republic,
Germany and the United Kingdom.
Reclassifications:
Certain prior year amounts have been reclassified to conform to the
current year presentation.
Inventories:
Inventories are stated at the lower of cost or market with cost being determined
by the first-in, first-out (FIFO) method. The components of inventory are as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Raw materials and supplies
|
|
$
|
43,758
|
|
|
$
|
40,547
|
|
Work in process
|
|
|
27,719
|
|
|
|
21,725
|
|
Finished goods
|
|
|
34,117
|
|
|
|
24,801
|
|
|
|
|
|
|
|
|
|
|
$
|
105,594
|
|
|
$
|
87,073
|
|
|
|
|
|
|
|
|
Revenue Recognition:
For the majority of the Companys products, revenue is recognized when
products are shipped, title has transferred and collection is reasonably assured. For these
products, there is also persuasive evidence of an arrangement, and the selling price to the buyer
is fixed or determinable. For brazed aluminum heat exchangers, cold boxes, vacuum-insulated pipe,
liquefied natural gas fueling stations and engineered tanks, the Company uses the percentage of
completion method of accounting. Earned revenue is based on the percentage that incurred costs to
date bear to total estimated costs at completion after giving effect to the most current estimates.
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. Earned revenue reflects the original
contract price adjusted for agreed upon claims and change orders, if any. Losses expected to be
incurred on contracts in process, after consideration of estimated minimum recoveries from claims
and change orders, are charged to operations as soon as such losses are known. Change orders
resulting in additional revenue and profit are recognized upon approval by the customer based on
the percentage that incurred costs to date bear to total estimated costs at completion. Timing of
amounts billed on contracts varies from contract to contract and could cause a significant
variation in working capital requirements.
6
CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2008
(Dollars and shares in thousands, except per share amounts)
NOTE A Basis of Preparation Continued
Product Warranties:
The Company provides product warranties with varying terms and durations
for the majority of its products. The Company records warranty expense in cost of sales. The
changes in the Companys consolidated warranty reserve during the three months ended March 31, 2008
and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Balance as of January 1
|
|
$
|
5,731
|
|
|
$
|
4,765
|
|
Warranty expense
|
|
|
532
|
|
|
|
518
|
|
Warranty usage
|
|
|
(649
|
)
|
|
|
(421
|
)
|
|
|
|
|
|
|
|
Balance as of March 31
|
|
$
|
5,614
|
|
|
$
|
4,682
|
|
|
|
|
|
|
|
|
Goodwill and Other Intangible Assets
: In accordance with Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets, the Company does not amortize goodwill or
other indefinite lived intangible assets, but reviews them at least annually for impairment using a
measurement date of October 1st. The Company amortizes intangible assets that have finite useful
lives.
SFAS No. 142 requires that goodwill and other indefinite lived intangible assets be tested for
impairment at the reporting unit level on an annual basis. Under SFAS No. 142, a company
determines the fair value of any indefinite lived intangible assets, compares the fair value to its
carrying value and records an impairment loss if the carrying value exceeds its fair value.
Goodwill is tested utilizing a two-step approach. After recording any impairment losses for
indefinite lived intangible assets, a company is required to determine the fair value of each
reporting unit and compare the fair value to its carrying value, including goodwill, of such
reporting unit (step one). If the fair value exceeds the carrying value, no impairment loss would
be recognized. If the carrying value of the reporting unit exceeds its fair value, the goodwill of
the reporting unit may be impaired. The amount of the impairment, if any, would then be measured
in step two, which compares the implied fair value of reporting unit goodwill with the carrying
amount of that goodwill.
The following table displays the gross carrying amount and accumulated amortization for all
intangible assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
December 31, 2007
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Estimated
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
|
Useful Life
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finite-lived assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpatented technology
|
|
9 years
|
|
$
|
9,400
|
|
|
$
|
(2,776
|
)
|
|
$
|
9,400
|
|
|
$
|
(2,494
|
)
|
Patents
|
|
10 years
|
|
|
8,138
|
|
|
|
(2,490
|
)
|
|
|
8,138
|
|
|
|
(2,257
|
)
|
Product names
|
|
14 years
|
|
|
2,580
|
|
|
|
(519
|
)
|
|
|
2,580
|
|
|
|
(466
|
)
|
Non-compete agreements
|
|
3 years
|
|
|
3,474
|
|
|
|
(2,069
|
)
|
|
|
3,474
|
|
|
|
(1,850
|
)
|
Customer relations
|
|
13 years
|
|
|
101,066
|
|
|
|
(17,822
|
)
|
|
|
101,066
|
|
|
|
(15,987
|
)
|
Other
|
|
|
|
|
|
|
60
|
|
|
|
(27
|
)
|
|
|
60
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
124,718
|
|
|
$
|
(25,703
|
)
|
|
$
|
124,718
|
|
|
$
|
(23,079
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
$
|
248,932
|
|
|
|
|
|
|
|
248,453
|
|
|
|
|
|
Trademarks and trade names
|
|
|
|
|
|
|
34,060
|
|
|
|
|
|
|
|
34,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
282,992
|
|
|
|
|
|
|
$
|
282,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2008
(Dollars and shares in thousands, except per share amounts)
NOTE A Basis of Preparation Continued
Amortization expense for finite-lived intangible assets was $2,658 and $3,028 for the three months
ended March 31, 2008 and 2007, respectively, and is estimated to be approximately $10,900 for 2008
and $9,600 for fiscal years 2009 through 2013.
Stock-Based Compensation
: The Company records stock-based compensation according to SFAS No.
123(R) Share-Based Payments, which requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the financial statements based on their fair
values.
During the three months ended March 31, 2008, the Company granted 116 stock options and 107
performance share units. The stock options vest over a four year period and the performance share
units vest at the end of three years based on the achievement of certain performance and market
conditions.
The Company recognized $1,155 and $361 in stock-based compensation expense for the three
months ended March 31, 2008 and 2007, respectively. As of March 31, 2008, the total stock-based
compensation expected to be recognized over the weighted average period of 3.1 years is $5,715.
Recently Issued Accounting Pronouncements:
In September 2006, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157, Fair Value
Measurements (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements. In February 2008, the
FASB issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157 which delayed
the effective date of SFAS No. 157 for all non-financial assets and liabilities, except those that
are recognized or disclosed at fair value in the financial statements on a recurring basis. SFAS
No. 157 was effective for the Company on January 1, 2008. The adoption of SFAS No. 157 for the
Companys financial assets and liabilities did not have any impact on the Companys financial
position or results of operations and did not require expanded disclosure.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities including an amendment of FASB Statement No. 115. SFAS No. 159
permits entities to voluntarily choose to measure many financial instruments and certain other
items at fair value that are not currently required to be measured at fair value, with unrealized
gains and losses related to these financial instruments reported in earnings at each subsequent
reporting date. This statement is effective for fiscal years beginning after November 15, 2007.
The adoption of SFAS No. 159 at January 1, 2008 did not have any impact on the Companys financial
position or results of operations.
In December 2007, SFAS No. 141(R), Business Combinations was issued. SFAS No. 141(R)
requires the acquiring entity in a business combination to recognize the full fair value of the
assets acquired and liabilities assumed in the transaction at the acquisition date, the immediate
recognition of acquisition-related transaction costs and the recognition of contingent
consideration arrangements at their acquisition date fair value. SFAS No. 141(R) is effective for
acquisitions that occur on or after the beginning of the fiscal year beginning on or after December
15, 2008. SFAS No. 141(R) will impact the Companys financial position and results of operations
for any business combinations entered into after the date of adoption.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements an amendment of ARB No. 51. SFAS No. 160 requires entities to report
noncontrolling interests (formerly known as minority) as a component of shareholders equity on the
balance sheet. SFAS No. 160 will be effective for fiscal years beginning on or after December 15,
2008. The Company is currently evaluating the impact of adoption on its financial positions and
results of operations.
NOTE B Debt and Credit Arrangements
The Company has a senior secured credit facility (the Senior Credit Facility) and $170,000
of 9½% senior subordinated notes (the Subordinated Notes) outstanding. The Senior Credit
Facility consists of a $180,000 term loan facility (the Term Loan) and a $115,000 revolving
credit facility (the Revolver), of which $55,000 may be used for letters of credit extending
beyond one year from their date of issuance. The Term Loan matures on October 17, 2012 and the
Revolver matures on October 17, 2010. The Term Loan does not require any regular principal
payments prior to the maturity date. The interest rate under the Senior Credit Facility is, at the
Companys option, the Alternative Base Rate (ABR) plus 1.0% or LIBOR plus 2.0% on the Term Loan
and ABR plus 1.0% or LIBOR plus 2.0% on the Revolver. The applicable interest margin on the
Revolver could increase based upon the leverage ratio calculated at each fiscal quarter end. In
addition, the Company is required to pay an annual administrative fee of $100, a commitment fee of
0.375% on the unused Revolver balance, a letter of credit participation fee of 2.5% per annum on
the letter of credit exposure and a letter of credit issuance fee of 0.25%. The obligations under
the Senior Credit Facility are secured by
8
CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2008
(Dollars and shares in thousands, except per share amounts)
NOTE B Debt and Credit Arrangements Continued
substantially all of the assets of the Company and its U.S. subsidiaries and 65% of the capital
stock of the Companys non-U.S. subsidiaries.
The Subordinated Notes are due in 2015 with interest payable semi-annually on April 15th and
October 15th. The registration rights agreement required the Company to file an Exchange Offer
Registration Statement and complete the exchange offer for the Subordinated Notes by August 14,
2006. Since the exchange offer was not completed when required, additional interest at a rate of
0.50% was incurred for the 90-day period commencing November 12, 2006 and additional interest at a
rate of 0.75% was incurred for the 90-day period commencing February 10, 2007. The exchange offer
was completed on April 6, 2007 and this additional interest ceased accruing as of that date. Any
of the Subordinated Notes may be redeemed solely at the Companys option beginning on October 15,
2010. The initial redemption price is 104.563% of the principal amount, plus accrued interest.
Also, any of the notes may be redeemed solely at the Companys option at any time prior to October
15, 2010, plus accrued interest and a make-whole premium. In addition, before October 15, 2008,
up to 35% of the Subordinated Notes may be redeemed solely at the Companys option at a price of
109.125% of the principal amount, plus accrued interest, using the proceeds from the sales of
certain kinds of capital stock. The Subordinated Notes are general unsecured obligations of the
Company and are subordinated in right of payment to all existing and future senior debt of the
Company, including the Senior Credit Facility, pari passu in right of payment with all future
senior subordinated indebtedness of the Company, and senior in right of payment with any future
indebtedness of the Company that expressly provides for its subordination to the Subordinated
Notes. The Subordinated Notes are unconditionally guaranteed jointly and severally by
substantially all of the Companys U.S. subsidiaries.
The Senior Credit Facility agreement and provisions of the indenture governing the
Subordinated Notes contain a number of customary covenants, including but not limited to
restrictions on the Companys ability to incur additional indebtedness, create liens or other
encumbrances, sell assets, enter into sale and lease-back transactions, make certain payments,
investments, loans, advances or guarantees, make acquisitions, engage in mergers or consolidations,
pay dividends or distributions, and make capital expenditures. The Senior Credit Facility and
indenture governing the Subordinated Notes also include financial covenants relating to leverage,
interest coverage and fixed charge coverage ratios. The Company is in compliance with all
covenants. As of March 31, 2008, there was $80,000 outstanding under the Term Loan, $170,000
outstanding under the Subordinated Notes and letters of credit and bank guarantees totaling $32,899
supported by the Revolver.
Chart Ferox, a.s. (Ferox), a wholly-owned subsidiary of the Company, maintains secured
revolving credit facilities with borrowing capacity, including overdraft protection, of up to
$9,600, of which $4,400 is available only for letters of credit and bank guarantees. Under the
revolving credit facilities, Ferox may make borrowings in Czech Korunas, Euros and U.S. dollars.
Borrowings in Koruna are at PRIBOR, borrowings in Euros are at EUROBOR and borrowings in U.S.
dollars are at LIBOR, each with a fixed margin of 0.6 percent. Ferox is not required to pay a
commitment fee to the lenders under the revolving credit facilities in respect to the unutilized
commitments thereunder. Ferox must pay letter of credit and guarantee fees equal to 0.75% on the
face amount of each guarantee. Feroxs land and buildings and accounts receivable secure $4,600
and $2,500, respectively, of the revolving credit facilities. As of March 31, 2008, there were no
borrowings outstanding under the Ferox revolving credit facilities. However, there were $1,128 of
bank guarantees supported by the Ferox revolving credit facilities.
9
CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2008
(Dollars and shares in thousands, except per share amounts)
NOTE C Earnings per Share
The following table presents calculations of net income per share of common stock for the
three months ended March 31, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Net income
|
|
$
|
14,656
|
|
|
$
|
7,178
|
|
Net income per common share basic
|
|
$
|
0.52
|
|
|
$
|
0.28
|
|
Net income per common share diluted
|
|
$
|
0.51
|
|
|
$
|
0.28
|
|
Weighted average number of common shares
outstanding basic
|
|
|
28,252
|
|
|
|
25,604
|
|
Incremental shares issuable upon assumed
conversion and exercise of stock options
|
|
|
707
|
|
|
|
206
|
|
|
|
|
|
|
|
|
Total shares diluted
|
|
|
28,959
|
|
|
|
25,810
|
|
|
|
|
|
|
|
|
NOTE D Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) are as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
$
|
26,493
|
|
|
$
|
15,647
|
|
Pension liability adjustments, net of taxes
|
|
|
(215
|
)
|
|
|
(215
|
)
|
|
|
|
|
|
|
|
|
|
$
|
26,278
|
|
|
$
|
15,432
|
|
|
|
|
|
|
|
|
Comprehensive income for the three months ended March 31, 2008 and 2007 was $25,502 and
$6,863, respectively.
NOTE E Acquisitions
In February 2008, the Company entered into a joint venture in Saudi Arabia with two other
entities to form a company to manufacture air cooled heat exchangers. The contribution to the
joint venture is $616 for a 34% share of the joint venture. The joint venture will be accounted
for under the equity method.
I
n March 2007, the Company purchased the remaining minority interest in Ferox for a purchase
price of $1,612. The purchase price was applied to eliminate the minority interest in Ferox of
approximately $2,000. The difference between the purchase price and the value of the minority
interest eliminated was allocated to adjust the fair value of the assets originally acquired.
NOTE F Assets Held for Sale
The Company completed the sale of its Plaistow, New Hampshire building, and a portion of the
land, in November 2007 for a net purchase price of $2,099. The remaining Plaistow land carrying
value of $985 is classified as assets held for sale as of March 31, 2008 and December 31, 2007.
NOTE G Income Taxes
The Internal Revenue Service (IRS) commenced an examination of the Companys U.S. income tax
returns for 2004 and 2005 during the three months ended March 31, 2007. The Company expects the
examination to be concluded and settled during 2008. The Company is also currently under
examination by a number of state tax authorities. It is reasonably possible the Companys
unrecognized tax benefits at March 31, 2008 may decrease within the next 12 months, by a range of
zero to $1,200.
10
CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2008
(Dollars and shares in thousands, except per share amounts)
NOTE H Employee Benefit Plans
The Company had four defined benefit pension plans which were combined into one plan as of
January 1, 2008. The plan covers certain U.S. hourly and salary employees. The plan has been
frozen since February 2006. The defined benefit plan provides benefits based primarily on the
participants years of service and compensation.
The following table sets forth the components of net periodic pension benefit for the three
months ended March 31, 2008 and 2007.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Interest cost
|
|
$
|
571
|
|
|
$
|
523
|
|
Expected return on plan assets
|
|
|
(734
|
)
|
|
|
(680
|
)
|
|
|
|
|
|
|
|
Total pension benefit
|
|
$
|
(163
|
)
|
|
$
|
(157
|
)
|
|
|
|
|
|
|
|
NOTE I Reporting Segments
The structure of the Companys internal organization is divided into the following three
reportable segments: Energy and Chemicals (E&C), Distribution and Storage (D&S) and BioMedical.
The Companys reportable segments are business units that offer different products and are each
managed separately because they manufacture and distribute distinct products with different
production processes and sales and marketing approaches. The E&C segment sells heat exchangers,
cold boxes and liquefied natural gas vacuum-insulated pipe to natural gas, petrochemical processing
and industrial gas companies that use them for the liquefaction and separation of natural and
industrial gases. The D&S segment sells cryogenic bulk storage systems, cryogenic packaged gas
systems, cryogenic systems and components, beverage liquid CO
2
systems and cryogenic
services to various companies for the storage and transportation of both industrial and natural
gases. The BioMedical segment sells medical respiratory products, biological storage systems and
magnetic resonance imaging cryostat components. Due to the nature of the products that each
segment sells, there are no intersegment sales. Corporate includes operating expenses for
executive management, accounting, tax, treasury, human resources, information technology, legal,
internal audit, risk management and stock-based compensation expenses that are not allocated to the
reporting segments.
The Company evaluates performance and allocates resources based on operating income or loss
from continuing operations before net interest expense, financing costs amortization expense,
foreign currency gain or loss, income taxes and minority interest. The accounting policies of the
reportable segments are the same as those described in the summary of significant accounting
policies.
Information for the Companys three reportable segments and its corporate headquarters is
presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2008
|
|
|
Energy
|
|
Distribution
|
|
|
|
|
|
|
|
|
and Chemicals
|
|
and Storage
|
|
BioMedical
|
|
Corporate
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
73,868
|
|
|
$
|
74,344
|
|
|
$
|
22,117
|
|
|
$
|
|
|
|
$
|
170,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
15,171
|
|
|
|
13,332
|
|
|
|
4,534
|
|
|
|
(6,829
|
)
|
|
|
26,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2007
|
|
|
Energy
|
|
Distribution
|
|
|
|
|
|
|
|
|
and Chemicals
|
|
and Storage
|
|
BioMedical
|
|
Corporate
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
52,277
|
|
|
$
|
76,779
|
|
|
$
|
23,407
|
|
|
$
|
|
|
|
$
|
152,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
150
|
|
|
|
18,038
|
|
|
|
4,910
|
|
|
|
(5,811
|
)
|
|
|
17,287
|
|
11
CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2008
(Dollars and shares in thousands, except per share amounts)
NOTE J Subsequent Event
On April 1, 2008, Ferox acquired Flow Instruments & Engineering GmbH (Flow), which is based
in Germany for 12,000 Euros in cash, subject to customary working capital and indemnification
holdback adjustments. Flow manufactures cryogenic flow meter systems for industrial gases and
liquefied petroleum gas, distribution equipment for transport of CO
2
and other gases, and provides calibration services. Flow will be included in the Companys
Distribution & Storage segment. Flows 2007 sales were approximately $9,000.
NOTE K Supplemental Guarantor Financial Information
The Companys Subordinated Notes issued in October 2005 are guaranteed on a full,
unconditional and joint and several basis by the following wholly owned subsidiaries: Chart Inc.,
CAIRE Inc., Chart Energy and Chemicals, Inc., Chart Cooler Service Company, Inc., Chart
International Holdings, Inc., Chart Asia Inc. and Chart International Inc. (collectively, the
Subsidiary Guarantors). The following subsidiaries are not guarantors of the notes:
|
|
|
|
|
Non-Guarantor Subsidiaries
|
|
Jurisdiction
|
|
|
|
|
|
|
Abahsain Specialized Industrial Co. Ltd. (34% owned)
|
|
Saudi Arabia
|
Changzhou CEM Cryo Equipment Co., Ltd.
|
|
China
|
Chart Asia Investment Company Ltd.
|
|
Hong Kong
|
Chart Australia Pty. Ltd.
|
|
Australia
|
Chart Biomedical Limited
|
|
United Kingdom
|
Chart Cryogenic Distribution Equipment (Changzhou) Co., Ltd. (50% owned)
|
|
China
|
Chart Cryogenic Engineering Systems (Changzhou) Co., Ltd.
|
|
China
|
Chart Cryogenic Equipment (Changzhou) Co., Ltd.
|
|
China
|
Chart Ferox, a.s.
|
|
Czech Republic
|
Chart Ferox GmbH
|
|
Germany
|
GTC of Clarksville, LLC
|
|
Delaware
|
Lox Taiwan (16% owned)
|
|
Taiwan
|
Zhangjigang Chart Hailu Cryogenic Equipment Co., Ltd. (dissolved during 2007)
|
|
China
|
The following supplemental condensed consolidating and combining financial information of the
Issuer, Subsidiary Guarantors and Subsidiary Non-Guarantors presents statements of operations for
the three months ended March 31, 2008 and 2007, balance sheets as of March 31, 2008 and December
31, 2007 and statements of cash flows for the three months ended March 31, 2008 and 2007.
12
CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2008
(Dollars and shares in thousands, except per share amounts)
CONDENSED CONSOLIDATING BALANCE SHEET
As of March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
Consolidating
|
|
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Adjustments
|
|
|
Total
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
58,921
|
|
|
$
|
868
|
|
|
$
|
48,148
|
|
|
$
|
|
|
|
$
|
107,937
|
|
Accounts receivable, net
|
|
|
|
|
|
|
69,308
|
|
|
|
22,064
|
|
|
|
|
|
|
|
91,372
|
|
Inventory, net
|
|
|
|
|
|
|
54,533
|
|
|
|
52,183
|
|
|
|
(1,122
|
)
|
|
|
105,594
|
|
Other current assets
|
|
|
10,416
|
|
|
|
34,029
|
|
|
|
13,027
|
|
|
|
|
|
|
|
57,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
69,337
|
|
|
|
158,738
|
|
|
|
135,422
|
|
|
|
(1,122
|
)
|
|
|
362,375
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
63,281
|
|
|
|
40,983
|
|
|
|
|
|
|
|
104,264
|
|
Goodwill
|
|
|
|
|
|
|
190,657
|
|
|
|
58,275
|
|
|
|
|
|
|
|
248,932
|
|
Intangible assets, net
|
|
|
|
|
|
|
131,395
|
|
|
|
1,680
|
|
|
|
|
|
|
|
133,075
|
|
Investments in affiliates
|
|
|
255,946
|
|
|
|
95,784
|
|
|
|
|
|
|
|
(351,112
|
)
|
|
|
618
|
|
Intercompany receivables
|
|
|
331,901
|
|
|
|
|
|
|
|
|
|
|
|
(331,901
|
)
|
|
|
|
|
Other assets
|
|
|
9,305
|
|
|
|
1,418
|
|
|
|
1,552
|
|
|
|
|
|
|
|
12,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
666,489
|
|
|
$
|
641,273
|
|
|
$
|
237,912
|
|
|
$
|
(684,135
|
)
|
|
$
|
861,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accruals
|
|
$
|
6,375
|
|
|
$
|
137,540
|
|
|
$
|
38,953
|
|
|
$
|
687
|
|
|
$
|
183,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
6,375
|
|
|
|
137,540
|
|
|
|
38,953
|
|
|
|
687
|
|
|
|
183,555
|
|
Long-term debt
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
Intercompany payables
|
|
|
|
|
|
|
237,061
|
|
|
|
96,031
|
|
|
|
(333,092
|
)
|
|
|
|
|
Other long-term liabilities
|
|
|
54,121
|
|
|
|
10,726
|
|
|
|
7,144
|
|
|
|
|
|
|
|
71,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
310,496
|
|
|
|
385,327
|
|
|
|
142,128
|
|
|
|
(332,405
|
)
|
|
|
505,546
|
|
Common Stock
|
|
|
283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
283
|
|
Other stockholders equity
|
|
|
355,710
|
|
|
|
255,946
|
|
|
|
95,784
|
|
|
|
(351,730
|
)
|
|
|
355,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
355,993
|
|
|
|
255,946
|
|
|
|
95,784
|
|
|
|
(351,730
|
)
|
|
|
355,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
666,489
|
|
|
$
|
641,273
|
|
|
$
|
237,912
|
|
|
$
|
(684,135
|
)
|
|
$
|
861,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2008
(Dollars and shares in thousands, except per share amounts)
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
Consolidating
|
|
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Adjustments
|
|
|
Total
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
49,184
|
|
|
$
|
4,595
|
|
|
$
|
39,090
|
|
|
$
|
|
|
|
$
|
92,869
|
|
Accounts receivable, net
|
|
|
|
|
|
|
75,354
|
|
|
|
21,586
|
|
|
|
|
|
|
|
96,940
|
|
Inventory, net
|
|
|
|
|
|
|
49,164
|
|
|
|
38,491
|
|
|
|
(582
|
)
|
|
|
87,073
|
|
Other current assets
|
|
|
11,328
|
|
|
|
27,997
|
|
|
|
12,840
|
|
|
|
|
|
|
|
52,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
60,512
|
|
|
|
157,110
|
|
|
|
112,007
|
|
|
|
(582
|
)
|
|
|
329,047
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
62,917
|
|
|
|
36,662
|
|
|
|
|
|
|
|
99,579
|
|
Goodwill
|
|
|
|
|
|
|
190,657
|
|
|
|
57,796
|
|
|
|
|
|
|
|
248,453
|
|
Intangible assets, net
|
|
|
|
|
|
|
133,839
|
|
|
|
1,860
|
|
|
|
|
|
|
|
135,699
|
|
Investments in affiliates
|
|
|
165,128
|
|
|
|
61,973
|
|
|
|
|
|
|
|
(227,101
|
)
|
|
|
|
|
Intercompany receivables
|
|
|
381,525
|
|
|
|
|
|
|
|
|
|
|
|
(381,525
|
)
|
|
|
|
|
Other assets
|
|
|
9,811
|
|
|
|
1,546
|
|
|
|
1,619
|
|
|
|
|
|
|
|
12,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
616,976
|
|
|
$
|
608,042
|
|
|
$
|
209,944
|
|
|
$
|
(609,208
|
)
|
|
$
|
825,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accruals
|
|
$
|
(16,175
|
)
|
|
$
|
159,966
|
|
|
$
|
30,763
|
|
|
$
|
140
|
|
|
$
|
174,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
(16,175
|
)
|
|
|
159,966
|
|
|
|
30,763
|
|
|
|
140
|
|
|
|
174,694
|
|
Long-term debt
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
Intercompany payables
|
|
|
|
|
|
|
272,325
|
|
|
|
109,922
|
|
|
|
(382,247
|
)
|
|
|
|
|
Other long-term liabilities
|
|
|
55,160
|
|
|
|
10,623
|
|
|
|
7,286
|
|
|
|
|
|
|
|
73,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
288,985
|
|
|
|
442,914
|
|
|
|
147,971
|
|
|
|
(382,107
|
)
|
|
|
497,763
|
|
Common stock
|
|
|
282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
282
|
|
Other stockholders equity
|
|
|
327,709
|
|
|
|
165,128
|
|
|
|
61,973
|
|
|
|
(227,101
|
)
|
|
|
327,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
327,991
|
|
|
|
165,128
|
|
|
|
61,973
|
|
|
|
(227,101
|
)
|
|
|
327,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
616,976
|
|
|
$
|
608,042
|
|
|
$
|
209,944
|
|
|
$
|
(609,208
|
)
|
|
$
|
825,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2008
(Dollars and shares in thousands, except per share amounts)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
Consolidating
|
|
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Adjustments
|
|
|
Total
|
|
Net sales
|
|
$
|
|
|
|
$
|
128,906
|
|
|
|
42,717
|
|
|
$
|
(1,294
|
)
|
|
$
|
170,329
|
|
Cost of sales
|
|
|
|
|
|
|
85,177
|
|
|
|
33,388
|
|
|
|
(177
|
)
|
|
|
118,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
43,729
|
|
|
|
9,329
|
|
|
|
(1,117
|
)
|
|
|
51,941
|
|
Selling,
general and administrative expenses
|
|
|
353
|
|
|
|
22,318
|
|
|
|
3,062
|
|
|
|
|
|
|
|
25,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(353
|
)
|
|
|
21,411
|
|
|
|
6,267
|
|
|
|
(1,117
|
)
|
|
|
26,208
|
|
Interest expense, net
|
|
|
5,007
|
|
|
|
(41
|
)
|
|
|
(221
|
)
|
|
|
|
|
|
|
4,745
|
|
Other expense (income), net
|
|
|
413
|
|
|
|
(275
|
)
|
|
|
125
|
|
|
|
|
|
|
|
263
|
|
Minority interest, net of tax
|
|
|
|
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes and equity in
net (income) loss
of subsidiaries
|
|
|
(5,773
|
)
|
|
|
21,727
|
|
|
|
6,392
|
|
|
|
(1,117
|
)
|
|
|
21,229
|
|
Income tax (benefit) provision
|
|
|
(1,789
|
)
|
|
|
7,211
|
|
|
|
1,151
|
|
|
|
|
|
|
|
6,573
|
|
Equity in net (income) loss
of subsidiaries
|
|
|
(18,640
|
)
|
|
|
(4,124
|
)
|
|
|
|
|
|
|
22,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
14,656
|
|
|
$
|
18,640
|
|
|
$
|
5,241
|
|
|
$
|
(23,881
|
)
|
|
$
|
14,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
Consolidating
|
|
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Adjustments
|
|
|
Total
|
|
Net sales
|
|
$
|
|
|
|
$
|
111,468
|
|
|
|
42,057
|
|
|
$
|
(1,062
|
)
|
|
$
|
152,463
|
|
Cost of sales
|
|
|
|
|
|
|
81,985
|
|
|
|
31,560
|
|
|
|
(941
|
)
|
|
|
112,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
29,483
|
|
|
|
10,497
|
|
|
|
(121
|
)
|
|
|
39,859
|
|
Selling, general and
administrative expenses
|
|
|
651
|
|
|
|
19,779
|
|
|
|
2,142
|
|
|
|
|
|
|
|
22,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(651
|
)
|
|
|
9,704
|
|
|
|
8,355
|
|
|
|
(121
|
)
|
|
|
17,287
|
|
Interest expense, net
|
|
|
6,329
|
|
|
|
54
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
6,346
|
|
Other expense (income), net
|
|
|
404
|
|
|
|
52
|
|
|
|
(406
|
)
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes and
equity in net (income)
of subsidiaries
|
|
|
(7,384
|
)
|
|
|
9,598
|
|
|
|
8,798
|
|
|
|
(121
|
)
|
|
|
10,891
|
|
Income tax (benefit) provision
|
|
|
(2,518
|
)
|
|
|
4,506
|
|
|
|
1,725
|
|
|
|
|
|
|
|
3,713
|
|
Equity in net (income) of
subsidiaries
|
|
|
(12,044
|
)
|
|
|
(6,952
|
)
|
|
|
|
|
|
|
18,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
7,178
|
|
|
$
|
12,044
|
|
|
$
|
7,073
|
|
|
$
|
(19,117
|
)
|
|
$
|
7,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2008
(Dollars and shares in thousands, except per share amounts)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
Subsidiary Non
|
|
|
Consolidating
|
|
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Adjustments
|
|
|
Total
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
18,944
|
|
|
$
|
(8,157
|
)
|
|
$
|
471
|
|
|
$
|
2,769
|
|
|
$
|
14,027
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
(1,783
|
)
|
|
|
(1,918
|
)
|
|
|
|
|
|
|
(3,701
|
)
|
Other investing activities
|
|
|
|
|
|
|
(616
|
)
|
|
|
|
|
|
|
|
|
|
|
(616
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(2,399
|
)
|
|
|
(1,918
|
)
|
|
|
|
|
|
|
(4,317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option exercise proceeds
|
|
|
706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
706
|
|
Tax benefit from exercise of stock options
|
|
|
639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
639
|
|
Other financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany account changes
|
|
|
(10,552
|
)
|
|
|
6,829
|
|
|
|
6,492
|
|
|
|
(2,769
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(9,207
|
)
|
|
|
6,829
|
|
|
|
6,492
|
|
|
|
(2,769
|
)
|
|
|
1,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
9,737
|
|
|
|
(3,727
|
)
|
|
|
5,045
|
|
|
|
|
|
|
|
11,055
|
|
Effect of exchange rate changes on cash
|
|
|
|
|
|
|
|
|
|
|
4,013
|
|
|
|
|
|
|
|
4,013
|
|
Cash and cash equivalents, beginning of period
|
|
|
49,184
|
|
|
|
4,595
|
|
|
|
39,090
|
|
|
|
|
|
|
|
92,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
58,921
|
|
|
$
|
868
|
|
|
$
|
48,148
|
|
|
$
|
|
|
|
$
|
107,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2008
(Dollars and shares in thousands, except per share amounts)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary
|
|
|
Non-
|
|
|
Consolidating
|
|
|
|
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Adjustments
|
|
|
Total
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
14,278
|
|
|
$
|
(11,243
|
)
|
|
$
|
(3,153
|
)
|
|
$
|
1,155
|
|
|
$
|
1,037
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
(3,318
|
)
|
|
|
(1,706
|
)
|
|
|
|
|
|
|
(5,024
|
)
|
Acquisitions of minority interest
|
|
|
|
|
|
|
(1,622
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,622
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities
|
|
|
|
|
|
|
(4,940
|
)
|
|
|
(1,706
|
)
|
|
|
|
|
|
|
(6,646
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in debt
|
|
|
|
|
|
|
(750
|
)
|
|
|
|
|
|
|
|
|
|
|
(750
|
)
|
Payment of financing costs
|
|
|
(183
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(183
|
)
|
Other financing activities
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Intercompany account changes
|
|
|
(21,264
|
)
|
|
|
17,095
|
|
|
|
5,324
|
|
|
|
(1,155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(21,442
|
)
|
|
|
16,345
|
|
|
|
5,324
|
|
|
|
(1,155
|
)
|
|
|
(928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(7,164
|
)
|
|
|
162
|
|
|
|
465
|
|
|
|
|
|
|
|
(6,537
|
)
|
Effect of exchange rate changes
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
42
|
|
Cash and cash equivalents, beginning of period
|
|
|
6,084
|
|
|
|
114
|
|
|
|
12,656
|
|
|
|
|
|
|
|
18,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
(1,080
|
)
|
|
$
|
276
|
|
|
$
|
13,163
|
|
|
$
|
|
|
|
$
|
12,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Overview
Chart Industries, Inc. (the Company, Chart, or we) is a leading independent global
manufacturer of highly engineered equipment used in the production, storage and end-use of
hydrocarbon and industrial gases. We supply engineered equipment used throughout the global liquid
supply chain. The largest portion of end-use applications for our products is energy-related. We
are a leading manufacturer of standard and engineered equipment primarily used for low temperature
and cryogenic applications. We have developed an expertise in cryogenic systems and equipment,
which operate at low temperatures sometimes approaching absolute zero (0 kelvin; -273° Centigrade;
- 459° Fahrenheit). The majority of our products, including vacuum-insulated containment vessels,
heat exchangers, cold boxes and other cryogenic components are used throughout the liquid gas
supply chain for the purification, liquefaction, distribution, storage and end-use of hydrocarbon
and industrial gases.
For
the three months ended March 31, 2008, orders were $164.8 million and backlog has
decreased slightly to $468.9 million compared to $475.3 million at December 31, 2007. We
experienced growth in our sales, gross profit and operating income for the three months ended March
31, 2008 compared to the same period in 2007, which was primarily attributable to an improved
project mix and higher throughput in particular in our E&C business segment. Sales for the three
months ended March 31, 2008 were $170.3 million compared to sales of $152.5 million for the three
months ended March 31, 2007, reflecting an increase of $17.8 million, or 11.7%. Our gross profit
for the three months ended March 31, 2008 was $51.9 million, or 30.5% of sales, as compared to
$39.9 million, or 26.1% of sales, for the same period in 2007. In addition, our operating income
for the three months ended March 31, 2008 was $26.2 million compared to $17.3 million for the same
period in 2007. Our gross profit margin improvement was primarily due to our E&C segment.
As a result of the continued growth in many of the markets we serve, our present and
anticipated customer order trends, our backlog and our focus on energy-related industries, we
presently expect to experience continued sales and operating income growth for the remainder of
2008 as compared to the same period in 2007. While overall growth is expected in the global
industrial market during the remainder of 2008, more of this growth is forecasted from
international markets, particularly Central Europe and Asia, as the U.S. market is experiencing
signs of moderating growth. We also believe that our cash flow from operations, available cash and
available borrowings under our senior secured credit facility should be adequate to meet our
working capital, capital expenditure, debt service and other operational funding requirements for
the remainder of 2008.
18
Results of Operations for the Three Months Ended March 31, 2008 and 2007
The following table sets forth sales, gross profit, gross profit margin and operating income
or loss for our three operating segments for the three months ended March 31, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Sales
|
|
|
|
|
|
|
|
|
Energy & Chemicals
|
|
$
|
73,868
|
|
|
$
|
52,277
|
|
Distribution & Storage
|
|
|
74,344
|
|
|
|
76,779
|
|
BioMedical
|
|
|
22,117
|
|
|
|
23,407
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
170,329
|
|
|
$
|
152,463
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
Energy & Chemicals
|
|
$
|
21,402
|
|
|
$
|
6,026
|
|
Distribution & Storage
|
|
|
21,958
|
|
|
|
25,751
|
|
BioMedical
|
|
|
8,581
|
|
|
|
8,082
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
51,941
|
|
|
$
|
39,859
|
|
|
|
|
|
|
|
|
Gross Profit Margin
|
|
|
|
|
|
|
|
|
Energy & Chemicals
|
|
|
29.0
|
%
|
|
|
11.5
|
%
|
Distribution & Storage
|
|
|
29.5
|
%
|
|
|
33.5
|
%
|
BioMedical
|
|
|
38.8
|
%
|
|
|
34.5
|
%
|
Total
|
|
|
30.5
|
%
|
|
|
26.1
|
%
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
|
|
|
|
|
|
Energy & Chemicals
|
|
$
|
15,171
|
|
|
$
|
150
|
|
Distribution & Storage
|
|
|
13,332
|
|
|
|
18,038
|
|
BioMedical
|
|
|
4,534
|
|
|
|
4,910
|
|
Corporate
|
|
|
(6,829
|
)
|
|
|
(5,811
|
)
|
|
|
|
|
|
|
|
Total
|
|
$
|
26,208
|
|
|
$
|
17,287
|
|
|
|
|
|
|
|
|
Sales
Sales for the three months ended March 31, 2008 were $170.3 million compared to $152.5 million
for the three months ended March 31, 2007, reflecting an increase of $17.8 million, or 11.7%. E&C
segment sales were $73.9 million for the three months ended March 31, 2008 compared with sales of
$52.3 million for three months ended March 31, 2007, which reflected an increase of $21.6 million
or 41.3%. This increase in sales resulted primarily from a more favorable project mix and higher
throughput for brazed aluminum heat exchangers. D&S segment sales decreased $2.5 million, or 3.3%,
to $74.3 million for the three months ended March 31, 2008 from $76.8 million for the three months
ended March 31, 2007. Sales of bulk storage systems decreased $7.9 million while sales of package
gas systems increased $5.4 million for the three months ended March 31, 2008 compared to the same
period in 2007. The decrease in bulk storage system sales was primarily due to an expected
temporary reduction in U.S. bulk storage tank activity as a result of recent industry
consolidations. The increase in package gas systems was primarily due to higher volume as a result
of continued growth in the global industrial gas market. In addition, D&S sales benefited $4.4
million in the first quarter of 2008 from the strengthening of the Euro and Czech Koruna against
the U.S. dollar BioMedical segment sales for the three months ended March 31, 2008 were $22.1
million compared to $23.4 million for the same period in 2007, which reflected a decrease of $1.3
million. Medical respiratory product sales decreased $1.8 million and other product sales
decreased $0.7 million due to lower volume with certain customers. This was partially offset by
increased sales of $1.2 million in biological storage system due to higher volume in domestic and
international markets.
19
Gross Profit and Margin
Gross profit for the three months ended March 31, 2008 was $51.9 million, or 30.5% of sales,
versus $39.9 million, or 26.1% of sales, for the three months ended March 31, 2007 and reflected an
increase of $12.0 million. E&C segment gross profit increased $15.3 million, or 17.5 percentage
points, primarily due to improved project mix and higher throughput in the 2008 period as well as
the unfavorable impact that low margin complex field installation projects had on E&C performance
in the three months ended March 31, 2007. Gross profit for the D&S segment decreased $3.8 million,
or 4.0 percentage points, for the three months ended March 31, 2008 compared to the same period in
2007 primarily due to lower sales volume and increased material costs in bulk storage sales. These
factors were partially offset by higher package gas system sales volume and favorable mix.
BioMedical gross profit increased $0.5 million, or 4.3 percentage points, for the three months
ended March 31, 2008 compared to the same period in 2007 primarily due to higher sales volume and
favorable margin mix in biological storage system sales in domestic and international markets.
Selling, General and Administrative Expenses (SG&A)
SG&A expenses for the three months ended March 31, 2008 were $23.1 million, or 13.6% of sales,
compared to $19.5 million, or 12.8% of sales, for the three months ended March 31, 2007. SG&A
expenses for the E&C segment were $5.8 million for the three months ended March 31, 2008 compared
to $4.6 million for the three months ended March 31, 2007, an increase of $1.2 million. The
increase is primarily due to higher marketing and sales costs and increased employee-related costs
to support continued business growth. D&S segment SG&A expenses for the three months ended March
31, 2008 were $7.4 million compared to $6.5 million for the three months ended March 31, 2007, an
increase of $0.9 million. This increase was primarily attributable to higher employee-related and
infrastructure costs to support business growth particularly in China. SG&A expenses for the
BioMedical segment were $3.1 million for the three months ended March 31, 2008 compared to $2.7
million for the three months ended March 31, 2007, an increase of $0.4 million, which was primarily
due to higher employee-related and infrastructure costs. Corporate SG&A expenses for the three
months ended March 31, 2008 were $6.8 million compared to $5.7 million for the three months ended
March 31, 2007. This increase of $1.1 million was primarily attributable to increased stock-based
compensation expense of $0.8 million related to the timing of long term incentive plan awards as
well as higher employee-related costs to support our overall business growth.
Amortization Expense
Amortization expense for the three months ended March 31, 2008 was $2.7 million, or 1.6% of
sales, compared to $3.0 million, or 2.0% of sales for the three months ended March 31, 2007. The
decrease of $0.3 million was due to certain intangible assets being fully amortized as of December
31, 2007.
Operating Income
As a result of the foregoing, operating income for the three months ended March 31, 2008 was
$26.2 million, or 15.4% of sales, an increase of $8.9 million compared to operating income of $17.3
million, or 11.3% of sales, for the same period in 2007.
Net Interest Expense
Net interest expense for the three months ended March 31, 2008 and 2007 was $4.7 million and
$6.3 million, respectively. The decrease in interest expense of $1.6 million was primarily
attributable to decreased long-term debt outstanding as a result of a voluntary principal payment
of $40.0 million made on the Term Loan portion of our Senior Credit Facility with proceeds from our
secondary stock offering in June 2007, as well as a decrease in the effective interest rate under
our Subordinated Notes during the 2008 period as a result of additional interest that was paid on
the notes during 2007 until completion of our exchange offer for the notes in April 2007. Also
contributing to the decrease in net interest expense was higher interest income resulting from
higher average cash balances during the period ended March 31, 2008.
Other Expense and Income
For the three months ended March 31, 2008, foreign currency gains were $0.2 million as
compared to foreign currency gains of $0.4 million for the same period in 2007. This decrease in
income was the result of the timing of transactions in currencies other than functional currencies
primarily in the D&S and BioMedical segments.
20
Income Tax Expense
Income tax expense of $6.6 million and $3.7 million for the three months ended March 31, 2008
and 2007, respectively, represents taxes on both U.S. and foreign earnings at an annual effective
income tax rate of 31.0% and 34.1%, respectively. The decrease in the annual effective income tax
rate was primarily due to an increase in foreign investment tax credits and lower foreign tax and
domestic state tax rates.
Net Income
As a result of the foregoing, net income for the three months ended March 31, 2008 and 2007
was $14.6 million and $7.2 million, respectively.
Liquidity and Capital Resources
Debt Instruments and Related Covenants
As of March 31, 2008, the Company had $80.0 million outstanding under the Term Loan portion of
the Senior Credit Facility, $170.0 million outstanding under the Subordinated Notes and $32.9
million of letters of credit and bank guarantees supported by the revolving portion of the Senior
Credit Facility. The Company is in compliance with all covenants, including its financial
covenants, under the Senior Credit Facility and Subordinated Notes. Availability on the revolving
portion of the Senior Credit Facility was $82.1 million at March 31, 2008.
The registration rights agreement related to the Subordinated Notes required the Company to
file an Exchange Offer Registration Statement and complete the exchange offer for the Subordinated
Notes by August 14, 2006. Since the exchange offer was not completed when required, additional
interest at a rate of 0.50% was incurred for the 90-day period commencing November 12, 2006 and
additional interest at a rate of 0.75% was incurred for the 90-day period commencing February 10,
2007. The exchange offer was completed on April 6, 2007 and the additional interest ceased
accruing as of that date.
Sources and Use of Cash
Cash
provided by operations for the three months ended March 31, 2008
was $14.0 million
compared with cash provided by operations of $1.0 million for the three months ended March 31,
2007. The change in cash provided by operations in the 2008 period was primarily attributable to
increased net income and a decrease in net unbilled contract revenues due to the timing of progress
billings under existing contracts with customers. These factors were partially offset by increased
inventory to support business growth and increased accounts receivable as a result of increased
sales.
Cash used in investing activities for the three months ended March 31, 2008 was $4.3 million
compared to $6.6 million for the three months ended March 31, 2007. Capital expenditures for the
three months ended March 31, 2008 were $3.7 million compared with $5.0 million for the three months
ended March 31, 2007 and consisted primarily of capital expenditures for the D&S segment expansion
in China and the Czech Republic to support business growth. Capital expenditures during the same
period in 2007 were primarily for expansion of the brazed aluminum heat exchanger facility in
LaCrosse, Wisconsin and expansion of the D&S manufacturing facility in China. Also, during the
three months ended March 31, 2008, $0.6 million of cash was contributed to a joint venture in Saudi
Arabia for the manufacture of air cooled heat exchangers and for the three months ended March 31,
2007, $1.6 million of cash was used to purchase the remaining minority interest of Ferox.
For the three months ended March 31, 2008, cash provided by financing activities was $1.3
million primarily from the exercise of stock options. For the three months ended March 31, 2007,
cash used in financing activities was $0.9 million.
Cash Requirements
The Company does not anticipate any unusual cash requirements for working capital needs, but
expects to use $20.0 to $22.0 million of cash for capital expenditures for the remaining nine
months of 2008. A significant portion of the capital expenditures are expected to be used for
continued expansion and automation at existing facilities. Management believes that these
expansions are necessary to support our current backlog levels and our expected growth due to an
increase in global demand for our products.
During 2008, the Company expects to consider making acquisitions as part of its strategic
growth initiatives and expects to fund these acquisitions with cash, debt or stock. On April 1,
2008, the Companys wholly owned subsidiary, Ferox, which
operates in the Czech Republic, acquired
Flow Instruments & Engineering GmbH (Flow) based in
Germany for 12.0 million Euros in cash,
subject to customary working capital and indemnification holdback adjustments. Flow manufactures
cryogenic flow meter systems for industrial gases and liquefied petroleum gas, distribution
equipment for transport of CO
2
and other gases, and provides calibration services. Flow
will be included in the Companys Distribution & Storage segment.
21
For the remaining nine months of 2008, cash requirements for debt service are forecasted to be
approximately $21.0 million for scheduled interest payments under our Senior Credit Facility and
the Subordinated Notes. We are not required to make any scheduled principal payments during the
remaining nine months of 2008 under the Term Loan portion of the Senior Credit Facility or
Subordinated Notes, but we will consider making voluntary principal payments on our Senior Credit
Facility or repurchasing our Subordinated Notes on the open market to the extent permitted by our
debt covenants with available cash. For the remainder of 2008, we expect to use approximately
$31.0 million of cash for both U.S. and foreign income taxes and contribute approximately $0.5
million of cash to our defined benefit pension plan to meet ERISA minimum funding requirements.
Orders and Backlog
We consider orders to be those for which we have received a firm signed purchase order or
other written contractual commitment from the customer. Backlog is comprised of the portion of
firm signed purchase orders or other written contractual commitments received from customers that
the Company has not recognized as revenue under the percentage of completion method or based upon
shipment. Backlog can be significantly affected by the timing of orders for large projects,
particularly in the E&C segment, and it is not necessarily indicative of future backlog levels or
the rate at which backlog will be recognized as sales. Orders included in our backlog may include
customary cancellation provisions under which the customer could cancel part or all of the order at
times subject to the payment of certain costs and/or penalties. Backlog as of March 31, 2008 was
$468.9 million compared to $475.3 million as of December 31, 2007.
The following table sets forth orders and backlog by segment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
Orders
|
|
|
|
|
|
|
|
|
Energy and Chemicals
|
|
$
|
51,071
|
|
|
$
|
118,810
|
|
Distribution and Storage
|
|
|
91,050
|
|
|
|
90,362
|
|
BioMedical
|
|
|
22,745
|
|
|
|
23,893
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
164,866
|
|
|
$
|
233,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog
|
|
|
|
|
|
|
|
|
Energy and Chemicals
|
|
$
|
334,793
|
|
|
$
|
358,784
|
|
Distribution and Storage
|
|
|
124,175
|
|
|
|
107,011
|
|
BioMedical
|
|
|
9,972
|
|
|
|
9,483
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
468,940
|
|
|
$
|
475,278
|
|
|
|
|
|
|
|
|
E&C orders for the three months ended March 31, 2008 were $51.0 million compared to $118.8
million for the three months ended December 31, 2007. E&C backlog totaled $334.8 million at March
31, 2008 compared to $358.8 million at December 31, 2007. The decline in orders of $67.8 million
was primarily attributable to the receipt of a systems order and several large brazed aluminum heat
exchanger orders totaling in excess of $45.0 million during the fourth quarter of 2007. Order flow
in the E&C segment is historically volatile due to the size of some of the projects and it is not
unusual to see order intake change significantly quarter to quarter. E&C has continued to
experience robust bid activity in the markets it serves.
D&S orders for the three months ended March 31, 2008 were $91.1 million compared to $90.4
million for the three months ended December 31, 2007. D&S backlog totaled $124.2 million at March
31, 2008 compared to $107.0 million at December 31, 2007. Overall, D&S orders have remained strong
in recent quarters due to continued demand in the global industrial gas market.
BioMedical orders for the three months ended March 31, 2008 were $22.7 million compared to
$23.9 million for the three months ended December 31, 2007. BioMedical backlog at March 31, 2008
totaled $10.0 million compared to $9.5 million at December 31, 2007. The decrease in orders of
$1.2 million was primarily due to decreased demand in medical respiratory markets offset partially
by increased demand in the international biological storage market.
22
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in the Securities Act.
Application of Critical Accounting Policies
The Companys unaudited condensed consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles. As such, some accounting policies
have a significant impact on amounts reported in these unaudited condensed consolidated financial
statements. A summary of those significant accounting policies can be found in the Companys
Annual Report on Form 10-K for the year ended December 31, 2007. In particular, judgment is used
in areas such as revenue recognition for long-term contracts, determining the allowance for
doubtful accounts, inventory valuation reserves, goodwill, indefinite lived intangibles,
environmental remediation obligations, product warranty costs, debt covenants, pensions and
deferred tax assets. There have been no significant changes in accounting policies since December
31, 2007.
Forward-Looking Statements
The Company is making this statement in order to satisfy the safe harbor provisions
contained in the Private Securities Litigation Reform Act of 1995. This Quarterly Report on Form
10-Q includes forward-looking statements. These forward-looking statements include statements
relating to our business. In some cases, forward-looking statements may be identified by
terminology such as may, will, should, expects, anticipates, believes, projects,
forecasts, continue, or the negative of such terms or comparable terminology. Forward-looking
statements contained herein or in other statements made by us are made based on managements
expectations and beliefs concerning future events impacting us and are subject to uncertainties and
factors relating to our operations and business environment, all of which are difficult to predict
and many of which are beyond our control, that could cause our actual results to differ materially
from those matters expressed or implied by forward-looking statements. We believe that the
following factors, among others (including those described under Item 1A.Risk Factors, of our
Annual Report on Form 10-K for the year ended December 31, 2007), could affect our future performance and the liquidity and value of
our securities and cause our actual results to differ materially from those expressed or implied by
forward-looking statements made by us or on our behalf:
|
|
|
the cyclicality of the markets which we serve;
|
|
|
|
|
the loss of, or a significant reduction in purchases by, our largest customers;
|
|
|
|
|
competition in our markets;
|
|
|
|
|
general economic, political, business and market risks associated with our
international operations;
|
|
|
|
|
our ability to successfully manage our growth;
|
|
|
|
|
the loss of key employees;
|
|
|
|
|
the pricing and availability of raw materials and our ability to manage our
fixed-price contract exposure, including exposure to fixed pricing in long-term
customer contracts;
|
|
|
|
|
our ability to successfully acquire or integrate companies that provide
complementary products or technologies;
|
|
|
|
|
our ability to continue our technical innovation in our product lines;
|
|
|
|
|
the impairment of our goodwill and other indefinite-lived intangible assets;
|
|
|
|
|
the costs of compliance with environmental, health and safety laws and responding to
potential liabilities under these laws;
|
|
|
|
|
litigation and disputes involving us, including the extent of product liability,
warranty, pension and severance claims asserted against us;
|
|
|
|
|
labor costs and disputes and our relations with our employees;
|
|
|
|
|
fluctuations in foreign currency exchange and interest rates;
|
|
|
|
|
disruptions in our operations due to hurricanes or other severe weather;
|
23
|
|
|
our ability to protect our intellectual property and know-how;
|
|
|
|
|
claims that our products or processes infringe intellectual property rights of
others;
|
|
|
|
|
regulations governing the export of our products;
|
|
|
|
|
additional liabilities related to taxes; and
|
|
|
|
|
risks associated with our substantial indebtedness, leverage, debt service and
liquidity.
|
There may be other factors that may cause our actual results to differ materially from the
forward-looking statements.
All forward-looking statements attributable to us or persons acting on our behalf apply only
as of the date of this Quarterly Report and are expressly qualified in their entirety by the
cautionary statements included in our Annual Report on Form 10-K for the fiscal year ended December
31, 2007, as the same may be updated from time to time. We undertake no obligation to update or
revise forward-looking statements to reflect events or circumstances that arise after the filing
date of this document.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, the Companys operations are exposed to continuing
fluctuations in foreign currency values and interest rates that can affect the cost of operating
and financing. Accordingly, the Company addresses a portion of these risks through a program of
risk management.
The Companys primary interest rate risk exposure results from the various floating rate
pricing mechanisms on the senior credit facility. If interest rates were to increase 200 basis
points (2 percent) from March 31, 2008 rates, and assuming no changes in debt from the March 31,
2008 levels, the additional annual expense would be approximately $1.6 million on a pre-tax basis.
The Company has assets, liabilities and cash flows in foreign currencies creating exposure to
foreign currency exchange fluctuations in the normal course of business. Charts primary exchange
rate exposure is with the Euro, the British pound, the Czech koruna and the Chinese yuan. Monthly
measurement, evaluation and forward exchange rate contracts are employed as methods to reduce this
risk. The Company enters into foreign exchange forward contracts to hedge anticipated and firmly
committed foreign currency transactions. Chart does not use derivative financial instruments for
speculative or trading purposes. The terms of the contracts are one year or less. The Company
held immaterial positions in foreign exchange forward contracts at March 31, 2008.
Item 4. Controls and Procedures
As of March 31, 2008, an evaluation was performed, under the supervision and with the
participation of the Companys management including the Companys Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the Companys disclosure
controls and procedures pursuant to Rule 13a-15 under the Securities and Exchange Act of 1934, as
amended (the Exchange Act). Based upon that evaluation, such officers concluded that the
Companys disclosure controls and procedures are effective to ensure that information required to
be disclosed by the Company in the reports it files or submits under the Exchange Act (1) is
recorded, processed, summarized and reported, within the time periods specified in the Securities
and Exchange Commissions rules and forms and (2) is accumulated and communicated to the Companys
management including the Chief Executive Officer and Chief Financial Officer, as appropriate to
allow for timely decisions regarding required disclosure.
There were no changes in the Companys internal control over financial reporting that occurred
during the Companys most recent fiscal quarter that have materially affected, or are reasonably
likely to materially affect, the Companys internal control over financial reporting.
24
PART II. OTHER INFORMATION
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider
the risk factors disclosed in Item 1A, Risk Factors, of the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2007
Item 6. Exhibits
The following exhibits are filed with this report:
|
10.1
|
|
Employment Agreement dated February 26, 2008 between Chart Industries, Inc. and
Samuel F. Thomas
|
|
|
10.2
|
|
Employment Agreement dated February 26, 2008 between Chart Industries, Inc. and
Michael F. Biehl
|
|
|
10.3
|
|
Employment Agreement dated February 26, 2008 between Chart Industries, Inc. and
Matthew J. Klaben
|
|
|
10.4
|
|
Employment Agreement dated February 26, 2008 between Chart Industries, Inc. and James
H. Hoppel, Jr.
|
|
|
10.5
|
|
Employment Agreement dated February 26, 2008 between Chart Industries, Inc. and
Kenneth J. Webster
|
|
|
10.6
|
|
Form of 2008 Performance Unit Agreement under the Amended and Restated Chart
Industries, Inc. 2005 Stock Incentive Plan (incorporated by reference to Exhibit 10.4.4 to
the Registrants Annual Report on Form 10-K for the year ended December 31, 2007)
|
|
|
10.7
|
|
Form of Stock Award Agreement and Deferral Election Form (for Non-Employee
Directors) under the Amended and Restated Chart Industries, Inc. 2005 Stock Incentive Plan
(incorporated by reference to Exhibit 10.4.6 to the Registrants Annual Report on Form
10-K for the year ended December 31, 2007)
|
|
|
31.1
|
|
Rule 13a-14(a) Certification of Chief Executive Officer
|
|
|
31.2
|
|
Rule 13a-14(a) Certification of Chief Financial Officer
|
|
|
32.1
|
|
Section 1350 Certification of Chief Executive Officer
|
|
|
32.2
|
|
Section 1350 Certification of Chief Financial Officer
|
25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
Chart Industries, Inc.
(Registrant)
|
|
Date: May 1, 2008
|
By:
|
/s/ Michael F. Biehl
|
|
|
|
Michael F. Biehl
|
|
|
|
Executive Vice President,
Chief
Financial Officer and Treasurer
(Principal Financial Officer)
(Duly Authorized Officer)
|
|
26
Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the Agreement) dated February 26, 2008 by and between Chart
Industries, Inc. (the Company) and Samuel F. Thomas (the Executive).
The Company desires to employ Executive and to enter into an agreement embodying the terms of
such employment; and
Executive desires to accept such employment and enter into such an agreement.
In consideration of the premises and mutual covenants herein and for other good and valuable
consideration, the parties agree as follows:
1.
Term of Employment
. Subject to the provisions of Section 8 of this Agreement,
Executive shall be employed by the Company, on the terms and subject to the conditions set forth in
this Agreement, for the period commencing on February 26, 2008, and ending on the second
anniversary of said date (the Employment Term). Thereafter the Employment Term shall
automatically be extended on February 26 of each year for a period of one year from such date. In
addition, in the event of a Change in Control, the Employment Term shall automatically be extended
for a period of three years beginning on the date of the Change in Control and ending on the third
anniversary of the date of such Change in Control (unless further extended under the immediately
preceding sentence). The Company or Executive may give notice to the other party that the
Employment Term shall no longer be extended (the Non-Renewal Notice), in which event the
Employment Term shall expire on the latest of: (i) such second anniversary of the original
Employment Term commencement date, (ii) such third anniversary of a Change in Control, or (iii) the
first anniversary of the delivery of such Non-Renewal Notice. In any case, the Employment Term may
be terminated earlier under the terms and conditions set forth herein.
2.
Position
.
a.
Title
. During the Employment Term, Executive shall serve as the Companys
Chairman, Chief Executive Officer and President. In such position, Executive shall have such
duties, authority and responsibility as shall be determined from time to time by the Board of
Directors of the Company (the Board),which duties, authority and responsibility are consistent
with the position of Chairman, Chief Executive Officer and President of the Company.
b.
Best Efforts
. During the Employment Term, Executive will devote Executives full
business time and best efforts to the performance of Executives duties hereunder and will not
engage in any other business, profession or occupation for compensation or otherwise which would
conflict or interfere with the rendition of such services either directly or indirectly, without
the prior written consent of the Board; provided that nothing herein shall preclude Executive,
subject to the prior approval of the Board, from accepting appointment to or continue to serve on
any board of directors or trustees of any business corporation or any charitable organization;
provided in each case, and in the aggregate, that such activities do not
conflict or interfere with the performance of Executives duties hereunder or conflict with
Section 10.
c.
Place of Employment
. In connection with Executives employment by the Company,
Executive shall not be required to relocate or move from Executives existing principal residence
in Haddonfield, NJ, and shall not be required to perform services which would make the continuance
of Executives principal residence in Haddonfield, NJ, unreasonably difficult or inconvenient for
Executive. The Company shall give Executive at least six months advance notice of any proposed
relocation of its offices at which Executives present principal office is located to a location
more than 50 miles from such present location, and, if Executive in Executives sole discretion
chooses to relocate Executives principal residence as a result of such office relocation, the
Company shall promptly pay (or reimburse Executive for) all reasonable relocation expenses
(consistent with the Companys past practice for similarly situated senior executive officers)
incurred by Executive relating to a change of Executives principal residence in connection with
any such relocation of the Companys offices from such present location.
3.
Base Salary
. During the Employment Term, the Company shall pay Executive a base
salary at the annual rate of $500,000, payable in regular installments in accordance with the
Companys usual payment practices. Executive shall be entitled to such increases in Executives
base salary, if any, as may be determined from time to time in the sole discretion of the Board or
any duly authorized committee thereof. Executives annual base salary, as in effect from time to
time, is hereinafter referred to as the Base Salary.
4.
Annual Bonus
. With respect to each full fiscal year during the Employment Term
(commencing with the 2008 fiscal year), Executive shall be eligible to earn an annual bonus award
(an Annual Bonus) of up to one hundred fifty percent (150%) of one hundred ten percent (110%) of
the Executives Base Salary (with it being understood that one hundred ten percent (110%) of the
Executives Base Salary is the Target) based upon the achievement of the performance targets
established by the Board, or any duly authorized committee thereof, within the first three months
of each fiscal year during the Employment Term. The Annual Bonus, if any, shall be paid to
Executive within two and one-half (2.5) months after the end of the applicable fiscal year. Any
Annual Bonus payable hereunder shall be determined in accordance with the terms of the Companys
Incentive Compensation Plan, as currently in effect and as it may be amended from time to time,
including any successor plan. In the event of a Change In Control as defined in the Incentive
Compensation Plan, the annual bonus may be pro-rated in accordance with the terms of the Incentive
Compensation Plan.
5.
Employee Benefits
. During the Employment Term, Executive shall be entitled to
participate in the Companys employee benefit plans (other than annual bonus and incentive plans)
providing for health, life and disability insurance, retirement, deferred compensation and fringe
benefits, as well as any equity compensation plans, as in effect from time to time (collectively
Employee Benefits), on the same basis as those benefits are generally made available to other
senior executives of the Company. Executives right to participate in any Employee Benefits shall
be subject to the applicable eligibility criteria for participation and Executive shall not be
entitled to any benefits under, or based on, any Employee Benefits for any purposes of this
Agreement if Executive does not during the Employment Term satisfy the eligibility criteria for
participation in such Employee Benefits. Any equity incentive granted,
2
awarded and held by the Executive shall be governed by the applicable terms of any such grant
and award, and shall not be impacted by the terms of this Agreement, except to the extent taken
into account in determinations under Section 9.
6.
Vacation
. During the Employment Term, Executive shall be entitled to 5 weeks of
paid vacation annually to be taken at such times as chosen by Executive.
7.
Business Expenses and Perquisites
.
a.
Expenses
. During the Employment Term, reasonable business expenses incurred by
Executive in the performance of Executives duties hereunder shall be reimbursed by the Company in
accordance with Company policies.
b.
Perquisites
. During the Employment Term, Executive shall be eligible for an
automobile allowance of up to $1,000 per month, consistent with the Companys current practices.
8.
Termination
. The Employment Term and Executives employment hereunder may be
terminated by either party at any time and for any reason; provided that Executive will be required
to give the Company at least 60 days advance written notice of any resignation of Executives
employment. The provisions of this Section 8 governs Executives rights upon Termination of
Employment with the Company and its affiliates. Termination of Employment as used in this
Agreement means the separation from service, within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended from time to time (Code, any reference in this Agreement to a
Section of the Code shall include all lawful regulations and pronouncements promulgated thereunder,
as well as any successor Sections of the Code having the same or similar purpose), of Executive
with the Company and all of its affiliates, for any reason, including without limitation, quit,
discharge, or retirement, or a leave of absence (including military leave, sick leave, or other
bona fide leave of absence such as temporary employment by the government if the period of such
leave exceeds the greater of six months, or the period for which Executives right to reemployment
is provided either by statute or by contract) or permanent decrease in service to a level that is
no more than Twenty Percent (20%) of its prior level. For this purpose, whether a Termination of
Employment has occurred is determined based on whether it is reasonably anticipated that no further
services will be performed by Executive after a certain date or that the level of bona fide
services Executive will perform after such date (whether as an employee or as an independent
contractor) would permanently decrease to no more than Twenty Percent (20%) of the average level of
bona fide services performed (whether as an employee or an independent contractor) over the
immediately preceding 36-month period (or the full period of services if Executive has been
providing services less than 36 months). The terms Terminate or Terminated, when used in
reference to Executives employment or the Employment Period, shall refer to a Termination of
Employment as set forth in this paragraph. Date of Termination refers to the effective date of
Executives Termination of Employment.
3
a.
Termination By the Company For Cause or By Executive Resignation Without Good
Reason
.
(i)
Events
. The Employment Term and Executives employment hereunder may be
terminated by the Company for Cause (as defined below) and shall terminate automatically upon
Executives resignation without Good Reason (as defined in Section 8(c)); provided that Executive
will be required to give the Company at least 60 days advance written notice of a resignation
without Good Reason.
(ii)
For Cause
. For purposes of this Agreement, Cause shall mean the Executives
(A) willful failure to perform duties which, if curable, is not cured promptly, or in any event
within ten (10) days, following the first written notice of such failure from the Company, (B)
commission of, or plea of guilty or no contest to a (x) felony or (y) crime involving moral
turpitude, (C) willful malfeasance or misconduct which is demonstrably injurious to the Company or
its subsidiaries or affiliates, (D) material breach of the material terms of this Agreement,
including, without limitation, any non-competition, non-solicitation or confidentiality provisions,
(E) commission of any act of gross negligence, corporate waste, disloyalty or unfaithfulness to the
Company which adversely affects the business of the Company or its subsidiaries or affiliates, or
(F) any other act or course of conduct which will demonstrably have a material adverse effect on
the Company, a subsidiary or affiliates business.
(iii)
Compensation
. If Executives employment is terminated by the Company for Cause,
or if Executive resigns without Good Reason, Executive shall be entitled to receive the amounts in
clauses (A) through (D) below referred to herein as Accrued Rights:
(A) the Base Salary through the Date of Termination;
(B) any Annual Bonus earned, but unpaid, as of the Date of Termination for the immediately
preceding fiscal year, paid in accordance with Section 4 (except to the extent payment is otherwise
deferred pursuant to any applicable deferred compensation arrangement with the Company);
(C) reimbursement, within 60 days following submission by Executive to the Company of
appropriate supporting documentation, for any unreimbursed business expenses properly incurred by
Executive in accordance with Company policy prior to the date of Executives Termination of
Employment; provided claims for such reimbursement (accompanied by appropriate supporting
documentation) are submitted to the Company within 90 days following the date of Executives
Termination of Employment; and
(D) such Employee Benefits, if any, as to which Executive may be entitled under the employee
benefit plans of the Company, including payment for any accrued but unused vacation within 30 days
following the date of Executives Date of Termination.
Following such Termination of Employment by the Company for Cause or resignation by Executive
without Good Reason, except as set forth in this Section 8(a)(iii), Executive shall have no
further rights to any compensation or any other benefits under this Agreement.
4
b.
Disability or Death
.
(i)
Events
. The Employment Term and Executives employment hereunder shall terminate
upon Executives death and may be terminated by the Company if Executive becomes physically or
mentally incapacitated and is therefore unable for a period of six (6) consecutive months or for an
aggregate of nine (9) months in any twenty-four (24) consecutive month period to perform
Executives duties (such incapacity is hereinafter referred to as Disability). In no event shall
an Executives employment be continued beyond the 29th month of absence due to Executives
Disability. Any question as to the existence of the Disability of Executive as to which Executive
and the Company cannot agree shall be determined in writing by a qualified independent physician
mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to
a qualified independent physician, each shall appoint such a physician and those two physicians
shall select a third who shall make such determination in writing. The determination of Disability
made in writing to the Company and Executive shall be final and conclusive for all purposes of the
Agreement.
(ii)
Compensation
. Upon Executives Termination of Employment hereunder for either
Disability or death, Executive or Executives estate (as the case may be) shall be entitled to
receive:
(A) the Accrued Rights; and
(B) a pro rata portion of the Annual Bonus, if any, that Executive would have been entitled to
receive pursuant to Section 4 hereof for such year based upon the Companys actual results for the
year of termination and the percentage of the fiscal year that shall have elapsed through the
Executives Date of Termination, payable to Executive pursuant to Section 4 had Executives
employment not terminated.
Following Executives Termination of Employment due to death or Disability, except as set
forth in this Section 8(b)(ii), Executive shall have no further rights to any compensation or any
other benefits under this Agreement.
c.
Termination by the Company Without Cause or Resignation by Executive for Good
Reason
.
(i)
Events
. The Employment Term and Executives employment hereunder may be
terminated by the Company without Cause or by Executives resignation for Good Reason at any time
including during the Protected Period.
(ii)
Good Reason
. For purposes of this Agreement, Good Reason shall mean, without
Executives consent: (i) a material diminution in Executives base salary (excluding any general
salary reduction similarly affecting substantially all other senior executives of the Company as a
result of a material adverse change in the Companys prospects or business); (ii) a material
diminution in Executives authority, duties, or responsibilities; (iii) a material change in the
geographic location at which Executive must perform services; or (iv) any other action or inaction
that constitutes a material breach by the Company of this Agreement; provided, however, that Good
Reason shall not be deemed to exist unless: (A) the Executive has provided notice to the Company
of the existence of one or more of the conditions listed in (i)
5
through (iv) within 90 days after the initial occurrence of such condition or conditions; and
(B) such condition or conditions have not been cured by the Company within 30 days after receipt of
such notice. Simply the receipt by the Executive of a Non-Renewal Notice from the Company shall
not, in and of itself, be deemed to be an event of Good Reason under this Agreement.
(iii)
Protected Period
. For purposes of this Agreement, Protected Period shall mean
the period of time commencing on the date of a Change in Control and ending two years after such
date.
(iv)
Change in Control
. For purposes of this Agreement, Change in Control shall
mean, with respect to the Executive, the happening of any of the following events (but only if with
respect to the Executive, such event would constitute a change in the ownership or effective
control of the corporation, or in the ownership of a substantial portion of the assets of the
corporation, as defined under Section 409A of the Code):
(A) a change in the ownership of the Company (or any affiliate which either employs the
Executive or is a direct or indirect parent of such employer) by which any one person, or more than
one person acting as a group, acquires ownership of stock of the Company (or such an affiliate)
that, together with stock held by such person or group, constitutes more than Fifty Percent (50%)
of the total fair market value or total voting power of the stock of the Company (or such an
affiliate). However, if any one person, or more than one person acting as a group, is considered
to own more than 50% of the total fair market value or total voting power of the stock of the
Company (or such an affiliate), the acquisition of additional stock by the same person or persons
is not considered to cause a Change in Control. (An increase in the percentage of stock owned by
any one person, or persons acting as a group, as a result of a transaction in which the Company (or
such an affiliate) acquires its stock in exchange for property will be treated as an acquisition of
stock for purposes of this definition. This parenthetical phrase applies only when there is a
transfer of stock of the Company (or issuance of stock of the Company) (or such an affiliate) and
stock in the Company (or such an affiliate) remains outstanding after the transaction.)
(B) a change in effective control of the Company (or any affiliate which either employs the
Executive or is a direct or indirect parent of such employer) by which:
(1) any one person, or more than one person acting as a group, acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the Company (or such an
affiliate) possessing Thirty Percent (30%) or more of the total voting power of the
stock of the Company (or such an affiliate); or
(2) a majority of members of the Board of Directors is replaced during any
12-month period by Directors whose appointment or election is not endorsed by a
majority of the members of the Board of Directors before the date of the appointment
or election.
6
(C) a change in the ownership of a substantial portion of the assets of the Company (or any
affiliate which either employs the Executive or is a direct or indirect parent of such employer) by
which any one person, or more than one person acting as a group, acquires (or has acquired during
the 12-month period ending on the date of the most recent acquisition by such person or persons)
assets from the Company (or such an affiliate) that have a total gross fair market value equal to
or more than Forty Percent (40%) of the total gross fair market value of all of the assets of the
Company (or such an affiliate) immediately prior to such acquisition or acquisitions. For this
purpose, gross fair market value means the value of the assets of the corporation, or the value of
the assets being disposed of, determined without regard to any liabilities associated with such
assets.
For purposes of this definition, persons will be considered to be acting as a group if they are
owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock,
or similar business transaction with the Company. If a person, including an entity, owns stock in
both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or
similar transaction, such shareholder is considered to be acting as a group with other shareholders
only with respect to the ownership in that corporation before the transaction giving rise to the
change and not with respect to the ownership interest in the other corporation.
(v)
Compensation if Terminated Outside of Protected Period
. If, at any time other
than during the Protected Period, the Executives employment is terminated by the Company without
Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason within
6 months of the condition giving rise to the good reason, Executive shall be entitled to receive:
(A) the Accrued Rights;
(B) subject to Executives (x) continued compliance with the provisions of Sections 10 and 11
and (y) execution and delivery of a general release of claims against the Company and its
affiliates in a form reasonably acceptable to the Company, payment in one lump sum of:
(1) 200% of the greater of the current Base Salary or Executives highest Base
Salary paid within the Employment Term; plus
(2) 200% of Executives Target Annual Bonus;
payable to Executive in one lump sum immediately following the expiration of the revocation period
provided for in such release, but in no event later than two and a half (2-1/2) months after the
end of the year in which the Executives Termination of Employment occurred; and
(C) continued coverage under the Companys group health plans during the twenty-four (24)
months following Executives Date of Termination on the same basis as active employees of the
Company; provided that during any portion of that period beyond eighteen (18) months following
Executives Date of Termination, to the extent coverage under the Companys group health plans is
not permissible under the terms of such plans, the Company may, in lieu of providing such coverage,
pay Executive an amount equal to the
7
premium subsidy the Company otherwise would have paid on Executives behalf for such coverage
during the balance of such period.
(vi)
Compensation if Terminated during Protected Period
. If, during the Protected
Period, either the Executives employment is Terminated by the Company without Cause (other than by
reason of death or Disability) or if Executive resigns for Good Reason, Executive shall be entitled
to receive:
(A) the Accrued Rights;
(B) subject to Executives (x) continued compliance with the provisions of Sections 10 and 11
and (y) execution and delivery of a general release of claims against the Company and its
affiliates in a form reasonably acceptable to the Company, payment in one lump sum of:
(1) 300% of the greater of the current Base Salary or Executives highest Base
Salary paid within the Employment Term; plus
(2) 300% of Executives Target Annual Bonus;
payable generally within ten (10) business days after Executives Date of Termination, or, if
later, upon the expiration of the revocation period provided for in such release, except when such
payment is delayed and paid in accordance with Section 9(b) for a determination under Section 9,
but in no event later than two and a half (2-1/2) months after the end of the year in which the
Executives Termination of Employment occurred; and
(C) continued coverage under the Companys group health plans during the thirty-six (36)
months following Executives Date of Termination on the same basis as active employees of the
Company; provided that during any portion of that period beyond eighteen (18) months following
Executives Date of Termination, to the extent coverage under the Companys group health plans is
not permissible under the terms of such plans, the Company may, in lieu of providing such coverage,
pay Executive an amount equal to the premium subsidy the Company otherwise would have paid on
Executives behalf for such coverage during the balance of such period.
Following Executives Termination of Employment by the Company without Cause (other than by
reason of Executives death or Disability) or by Executives resignation for Good Reason, except as
set forth in this Section 8(c), Executive shall have no further rights to any compensation or any
other benefits under this Agreement.
d.
Expiration of Employment Term
.
(i)
Election Not to Renew the Employment Term
. In the event either party provides the
other with the Non-Renewal Notice pursuant to Section 1, unless Executives employment is earlier
terminated pursuant to paragraphs (a), (b) or (c) of this Section 8, the expiration of the
Employment Term and the Executives Termination of Employment hereunder (whether or not Executive
continues as an employee of the Company thereafter) shall be deemed to occur on the close of
business on the last day of such Employment Term and Executive shall
8
be entitled to receive the Accrued Rights. The Companys providing of a Non-Renewal Notice
under Section 1 shall not prejudice in any way Executives right to assert an event of Good Reason
(as such term is defined above), whether related to such Non-Renewal Notice or otherwise, at any
time during the Employment Term.
Following such termination of Executives employment hereunder, except as set forth in this
Section 8(d)(i), Executive shall have no further rights to any compensation or any other benefits
under this Agreement.
(ii)
Continued Employment Beyond the Expiration of the Employment Term
. Unless the
parties otherwise agree in writing, continuation of Executives employment with the Company beyond
the expiration of the Employment Term shall be deemed an employment at-will and shall not be deemed
to extend any of the provisions of this Agreement and Executives employment may thereafter be
terminated at will by either Executive or the Company; provided that the provisions of Sections 10,
11 and 12 of this Agreement shall survive any termination of this Agreement or Executives
Termination of Employment hereunder.
e.
Notice of Termination
. Any purported Termination of Employment by the Company or
by Executive (other than due to Executives death) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 13(i) hereof. For purposes of
this Agreement, a Notice of Termination shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for Termination of Employment under the
provision so indicated.
f.
Board/Committee Resignation
. Upon termination of Executives employment for any
reason, Executive agrees to resign, as of the date of such termination and to the extent
applicable, from the Board (and any committees thereof) and the Board of Directors (and any
committees thereof) of any of the Companys affiliates.
9.
Conditional Reduction in Payments
.
a. Notwithstanding anything in this Agreement to the contrary, in the event that it shall be
determined (as hereafter provided) that any payment or distribution provided for pursuant to the
terms of this Agreement for the benefit of Executive, when aggregated with any other payments or
benefits received or receivable by Executive (individually and collectively, a Payment), would
constitute parachute payments within the meaning of Section 280G of the Code, and would be
subject to the excise tax imposed by Section 4999 of the Code or to any similar tax imposed by
state or local law, or to any interest or penalties with respect to such taxes (such tax or taxes,
together with any such interest and penalties, being hereafter collectively referred to as the
Excise Tax), then Executives payments under Section 8 hereof shall be either:
(i) delivered in full, or
(ii) reduced to the minimum extent necessary so that no portion of the Payment, after
such reduction, constitutes an Excess Parachute Payment (as defined in
9
Section 280G(b) of the Code) (the amount of such reduction shall be referred to as the
Excess Amount);
whichever of the foregoing amounts, taking into account the applicable federal, state and local
income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis of the
greatest amount of benefits, notwithstanding that all or some portion of such benefits may be
taxable under Section 4999 of the Code.
b. All determinations required to be made under this Section 9, including whether an Excise
Tax is payable by Executive and the amount of such Excise Tax and whether a reduction in the
Payment is to be made and the amount of such Excess Amount, if any, shall be made by a nationally
recognized accounting firm proposed by the Company and reasonably acceptable to Executive (which
accounting firm shall be the Accounting Firm hereunder). The Company or Executive shall direct
the Accounting Firm to submit its determination and detailed supporting calculations to both the
Company and Executive within 30 calendar days after the Date of Termination, if applicable, and any
other time or times as may be requested by the Company or Executive. The Company shall pay
Executives payments under Section 8 hereof, as reduced or not reduced pursuant to the final
determination of the Accounting Firm and Subsection 9(a) above, no later than the later of (x) the
time otherwise required hereunder or (y) five business days after receipt of such determination.
If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall, at the same
time as it makes such determination, furnish the Company and Executive an opinion that Executive
has substantial authority not to report any Excise Tax on Executives federal, state or local
income or other tax return.
c. As a result of the uncertainty in the application of Section 4999 of the Code and the
possibility of similar uncertainty regarding applicable state or local tax law at the time of any
determination by the Accounting Firm hereunder, it is possible that, pursuant to a final
determination of a court or an Internal Revenue Service proceeding which has been finally and
conclusively resolved, an Excess Parachute Payment was received by Executive which would have been
intended to be reduced by the Excess Amount pursuant to Subsection 9(a) above. In such case, then
such amount received by Executive shall be deemed to be an overpayment, and Executive shall repay
the amount equal to the Excess Amount (to the extent received by Executive) to the Company on
demand (but no less than ten days after Executive receives written demand).
d. The Company and Executive shall each provide the Accounting Firm access to and copies of
any books, records and documents in the possession of the Company or Executive, as the case may be,
reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determinations and calculations contemplated by
Subsection 9(b). Any determination by the Accounting Firm as to the amount of any Excess Amount
shall be binding upon the Company and Executive.
e. The fees and expenses of the Accounting Firm for its services in connection with the
determinations and calculations contemplated by Subsection 9(b) shall be borne by the Company.
10
10.
Non-Competition
.
a. Executive acknowledges and recognizes the highly competitive nature of the businesses of
the Company and its affiliates and accordingly agrees as follows:
(i) During the Employment Term and the twenty-four (24) months following the date of
Executives Termination of Employment or, if any benefits are paid to Executive pursuant to
subparagraph (vi) of Section 8.c. of this Agreement, the thirty-six (36) months following the date
of Executives Termination of Employment (the Restricted Period), Executive will not, whether on
Executives own behalf or on behalf of or in conjunction with any person, firm, partnership, joint
venture, association, corporation or other business organization, entity or enterprise whatsoever
(Person), directly or indirectly solicit or assist in soliciting in competition with the Company,
the business of any client or customer or prospective client or customer:
(A) with whom Executive had personal contact or dealings on behalf of the Company during the
one year period preceding the earlier of the Executives Termination of Employment or such
solicitation;
(B) with whom employees reporting to Executive have had personal contact or dealings on behalf
of the Company during the one year immediately preceding the Executives Termination of Employment;
or
(C) for whom Executive had direct or indirect responsibility during the one year immediately
preceding Executives Termination of Employment.
(ii) During the Restricted Period, Executive will not directly or indirectly:
(A) engage in (1) the business of manufacturing equipment used in (x) the production, storage
and end-use of hydrocarbon and industrial gases business or (y) low temperature and cryogenic
applications, (2) any other businesses which the Company or its subsidiaries engage in during the
term of Executives employment with the Company and (3) any businesses which, as of the date of
Executives Termination of Employment, the Company or its subsidiaries both (x) have specific plans
to conduct in the future (and as to which Executive is aware of such planning) and (y) have
allocated or invested capital as of the date of such Termination of Employment (a Competitive
Business);
(B) enter the employ of, or render any services to, any Person (or any division or controlled
or controlling affiliate of any Person) who or which engages in a Competitive Business;
(C) acquire a financial interest in, or otherwise become actively involved with, any
Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer,
director, principal, agent, trustee or consultant; or
(D) interfere with, or attempt to interfere with, business relationships (whether formed
before, on or after the date of this Agreement) between the
11
Company or any of its affiliates and customers, clients, suppliers, partners, members or
investors of the Company or its affiliates.
(iii) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or
indirectly own, solely as an investment, securities of any Person engaged in the business of the
Company or its affiliates which are publicly traded on a national or regional stock exchange or
quotation system or on the over-the-counter market if Executive (i) is not a controlling person of,
or a member of a group which controls, such person and (ii) does not, directly or indirectly, own
5% or more of any class of securities of such Person.
(iv) During the Restricted Period, Executive will not, whether on Executives own behalf or on
behalf of or in conjunction with any Person, directly or indirectly:
(A) solicit or encourage any employee of the Company or its affiliates to leave the employment
of the Company or its affiliates; or
(B) hire any such employee who was employed by the Company or its affiliates as of the date of
Executives Termination of Employment with the Company or who left the employment of the Company or
its affiliates coincident with, or within one year prior to or after, the termination of
Executives employment with the Company.
(v) During the Restricted Period, Executive will not, directly or indirectly, solicit or
encourage to cease to work with the Company or its affiliates any consultant then under contract
with the Company or its affiliates.
b. It is expressly understood and agreed that although Executive and the Company consider the
restrictions contained in this Section 10 to be reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive, the provisions of
this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such maximum extent as such court may judicially determine or indicate to
be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the other restrictions
contained herein.
11.
Confidentiality; Intellectual Property
.
a.
Confidentiality
.
(i) Executive will not at any time (whether during or after Executives employment with the
Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person
other than the Company; or (y) disclose, divulge, reveal, communicate, share, transfer or provide
access to any Person outside the Company (other than its professional advisers who are bound by
confidentiality obligations or other than in performing his or her duties on behalf of the Company
consistent with Company policies), any non-public, proprietary or confidential
informationincluding without limitation trade secrets, know-how, research and development,
software, databases, inventions, processes, formulae, technology,
12
designs and other intellectual property, information concerning finances, investments,
profits, pricing, costs, products, services, vendors, customers, clients, partners, investors,
personnel, compensation, recruiting, training, advertising, sales, marketing, promotions,
government and regulatory activities and approvals concerning the past, current or future
business, activities and operations of the Company, its subsidiaries or affiliates and/or any third
party that has disclosed or provided any of same to the Company on a confidential basis
(Confidential Information) without the prior written authorization of the Board or a duly
authorized committee thereof.
(ii) Confidential Information shall not include any information that is (a) generally known
to the industry or the public other than as a result of Executives breach of this covenant or any
breach of other confidentiality obligations by third parties; (b) made legitimately available to
Executive by a third party without breach of any confidentiality obligation; or (c) required by law
to be disclosed; provided that Executive shall give prompt written notice to the Company of such
requirement, disclose no more information than is so required, and cooperate with any attempts by
the Company to obtain a protective order or similar treatment.
(iii) Upon termination of Executives employment with the Company for any reason, Executive
shall (x) cease and not thereafter commence use of any Confidential Information or intellectual
property (including without limitation, any patent, invention, copyright, trade secret, trademark,
trade name, logo, domain name or other source indicator) owned or used by the Company, its
subsidiaries or affiliates; (y) immediately destroy, delete, or return to the Company, at the
Companys option, all originals and copies in any form or medium (including memoranda, books,
papers, plans, computer files, letters and other data) in Executives possession or control
(including any of the foregoing stored or located in Executives office, home, laptop or other
computer, whether or not Company property) that contain Confidential Information or otherwise
relate to the business of the Company, its affiliates and subsidiaries, except that Executive may
retain only those portions of any personal notes, notebooks and diaries that do not contain any
Confidential Information; and (z) notify and fully cooperate with the Company regarding the
delivery or destruction of any other Confidential Information of which Executive is or becomes
aware.
b.
Intellectual Property
.
(i) If Executive has created, invented, designed, developed, contributed to or improved any
works of authorship, inventions, intellectual property, materials, documents or other work product
(including without limitation, research, reports, software, databases, systems, applications,
presentations, textual works, content, or audiovisual materials) (Works), either alone or with
third parties, at any time during Executives employment by the Company and within the scope of
such employment and/or with the use of any of the Companys resources (Company Works), Executive
shall promptly and fully disclose same, to the best of his or her knowledge, to the Company and
hereby irrevocably assigns, transfers and conveys, to the maximum extent permitted by applicable
law, all rights and intellectual property rights therein (including rights under patent, industrial
property, copyright, trademark, trade secret, unfair competition and related laws) to the Company
to the extent ownership of any such rights does not vest originally in the Company.
13
(ii) Executive shall take all reasonably requested actions and execute all reasonably
requested documents (including any licenses or assignments required by a government contract) at
the Companys expense (but without further remuneration) to assist the Company in validating,
maintaining, protecting, enforcing, perfecting, recording, patenting or registering any of the
Companys rights in the Company Works.
(iii) Executive shall not improperly use for the benefit of, bring to any premises of,
divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Company
any confidential, proprietary or non-public information or intellectual property relating to a
former employer or other third party without the prior written permission of such third party.
Executive hereby indemnifies, holds harmless and agrees to defend the Company and its officers,
directors, partners, employees, agents and representatives from any breach of the foregoing
covenant. Executive shall comply with all relevant policies and guidelines of the Company,
including regarding the protection of confidential information and intellectual property and
potential conflicts of interest. Executive acknowledges that the Company may amend any such
policies and guidelines from time to time, and that Executive remains at all times bound by their
most current version.
(iv) The provisions of Section 11 shall survive the Executives Termination of Employment for
any reason.
12.
Specific Performance
. Executive acknowledges and agrees that the Companys
remedies at law for a breach or threatened breach of any of the provisions of Section 10 or Section
11 would be inadequate and the Company would suffer irreparable damages as a result of such breach
or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law, the Company, without posting any
bond, shall be entitled to cease making any payments or providing any benefit otherwise required by
this Agreement and obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any other equitable remedy which may then
be available.
13.
Miscellaneous
.
a.
Governing Law
. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to conflicts of laws principles thereof.
b.
Dispute Resolution
. Except as otherwise provided in Section 12 of this Agreement,
any controversy, dispute, or claim arising out of, in connection with, or in relation to, the
interpretation, performance or breach of this Agreement, including, without limitation, the
validity, scope, and enforceability of this section, may at the election of any party, be solely
and finally settled by arbitration conducted in Cleveland, Ohio, by and in accordance with the then
existing rules for commercial arbitration of the American Arbitration Association, or any successor
organization and with the Expedited Procedures thereof (collectively, the Rules). Each of the
parties hereto agrees that such arbitration shall be conducted by a single arbitrator selected in
accordance with the Rules; provided that such arbitrator shall be experienced in deciding cases
concerning the matter which is the subject of the dispute. Any of the parties may
14
demand arbitration by written notice to the other and to the Arbitrator set forth in this
Section 13(b) (Demand for Arbitration). Each of the parties agrees that if possible, the award
shall be made in writing no more than 30 days following the end of the proceeding. Any award
rendered by the arbitrator(s) shall be final and binding and judgment may be entered on it in any
court of competent jurisdiction. Each of the parties hereto agrees to treat as confidential the
results of any arbitration (including, without limitation, any findings of fact and/or law made by
the arbitrator) and not to disclose such results to any unauthorized person. The parties intend
that this agreement to arbitrate be valid, enforceable and irrevocable. In the event of any
arbitration with regard to this Agreement, each party shall pay its own legal fees and expenses
except to the extent set forth in Section 13(p), provided, however, that the Company agrees to pay
the cost of the Arbitrators fees.
c.
Entire Agreement/Amendments
. This Agreement contains the entire understanding of
the parties with respect to the employment of Executive by the Company. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. This Agreement may not be
altered, modified, or amended except by written instrument signed by the parties hereto.
d.
No Waiver
. The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of such partys rights or deprive
such party of the right thereafter to insist upon strict adherence to that term or any other term
of this Agreement.
e.
Severability
. In the event that any one or more of the provisions of this
Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions of this Agreement shall not be affected
thereby.
f.
Assignment
. This Agreement, and all of Executives rights and duties hereunder,
shall not be assignable or delegable by Executive. Any purported assignment or delegation by
Executive in violation of the foregoing shall be null and void ab initio and of no force and
effect. This Agreement may be assigned by the Company to a person or entity which is an affiliate
or a successor in interest to substantially all of the business operations of the Company. The
Company will require any person or entity which is an affiliate or a successor in interest to
substantially all of the business operations of the Company to assume all obligations of the
Company under this Agreement.
g.
Set Off; No Mitigation
. The Companys obligation to pay Executive the amounts
provided and to make the arrangements provided hereunder shall be subject to bona fide set off,
counterclaim or recoupment in good faith of amounts owed by Executive to the Company or its
affiliates. Executive shall not be required to mitigate the amount of any payment provided for
pursuant to this Agreement by seeking other employment.
h.
Successors; Binding Agreement
. This Agreement shall inure to the benefit of and be
binding upon personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
15
i.
Notice
. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand or overnight courier or three days after it has been mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the respective addresses
set forth below in this Agreement, or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
If to the Company:
Chart Industries, Inc.
One Infinity Corporate Centre Drive, Suite 300
Garfield Heights, Ohio 44125
Facsimile: (440) 753-1491
Attention: Chief Financial Officer and General Counsel
If to Executive:
To the most recent address of Executive set forth in the personnel records of the Company.
j.
Executive Representation
. Executive hereby represents to the Company that the
execution and delivery of this Agreement by Executive and the Company and the performance by
Executive of Executives duties hereunder shall not constitute a breach of, or otherwise
contravene, the terms of any employment agreement or other agreement or policy to which Executive
is a party or otherwise bound.
k.
Prior Agreements
. This Agreement supercedes all prior agreements and
understandings (including verbal agreements) between Executive and the Company and/or its
affiliates regarding the terms and conditions of Executives employment with the Company and/or its
affiliates, except that this Agreement does not supercede any stock option agreement, performance
unit agreement, or indemnification agreement.
l.
Cooperation
. Executive shall provide Executives reasonable cooperation in
connection with any action or proceeding (or any appeal from any action or proceeding) which
relates to events occurring during Executives employment hereunder. This provision shall survive
any termination of this Agreement.
m.
Withholding Taxes
. The Company may withhold from any amounts payable under this
Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any
applicable law or regulation.
n.
Counterparts
. This Agreement may be signed in counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.
o.
Compliance with Section 409A
. Notwithstanding anything herein to the contrary, (i)
if at the time of Executives Termination of Employment with the Company
16
Executive is a specified employee as defined in Section 409A of the Code, and the deferral
of the commencement of any payments or benefits otherwise payable hereunder as a result of such
Termination of Employment is necessary in order to prevent the imposition of any accelerated or
additional tax under Section 409A of the Code, then the Company will defer the commencement of the
payment of any such payments or benefits hereunder (without any reduction in such payments or
benefits ultimately paid or provided to Executive) until the date that is six months following
Executives Termination of Employment with the Company (or the earliest date as is permitted under
Section 409A of the Code) and (ii) if any other payments of money or other benefits due to
Executive hereunder could cause the application of an accelerated or additional tax under Section
409A of the Code, such payments or other benefits shall be deferred if deferral will make such
payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or
other benefits shall be restructured, to the extent possible, in a manner, determined by the Board
or any duly authorized committee thereof, that does not cause such an accelerated or additional tax
or result in an additional cost to the Company. The Company shall consult with Executive in good
faith regarding the implementation of the provisions of this Section 13(o); provided that neither
the Company nor any of its employees or representatives shall have any liability to Executive with
respect thereto.
p.
Enforcement Costs
. The Company is aware that upon the occurrence of a Change in
Control the Board of Directors or a shareholder of the Company may then cause or attempt to cause
the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt
to cause the Company to institute, or may institute, litigation or arbitration seeking to have this
Agreement declared unenforceable, or may take, or attempt to take, other action to deny Executive
the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement
could be frustrated. It is the intent of the Company that Executive not be required to incur the
expenses associated with the enforcement of Executives rights under this Agreement by litigation,
arbitration or other legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to Executive hereunder, nor be bound to negotiate any
settlement of Executives rights hereunder under threat of incurring such expenses. Accordingly,
if at any time following a Change in Control, it should appear to Executive that the Company has
failed to comply with any of its obligations under this Agreement or the Company or any other
person takes any action to declare this Agreement void or unenforceable, or institutes any
litigation, arbitration or other legal action designed to deny, diminish or recover from Executive
the benefits intended to be provided to Executive hereunder, and Executive has complied with all of
Executives obligations under Sections 10 and 11, then the Company irrevocably authorizes Executive
from time to time to retain counsel of Executives choice at the expense of the Company as provided
in this Section 13(p) to represent Executive in connection with the initiation or defense of any
litigation, arbitration or other legal action, whether by or against the Company or any Director,
officer, shareholder or other person affiliated with the Company, in any jurisdiction. The
Companys obligations under this Section 13(p) shall not be conditioned on Executives success in
the prosecution or defense of any such litigation, arbitration or other legal action.
Notwithstanding any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to Executive entering into an attorney-client
relationship with such counsel, and in that connection the Company and Executive agree that a
confidential relationship shall exist between Executive and such counsel. The reasonable fees and
expenses of counsel selected from time to time by Executive as hereinabove provided shall be paid
or reimbursed to Executive by the Company on
17
a regular, periodic basis no later than 30 days after presentation by Executive of a
statement or statements prepared by such counsel in accordance with its customary practices, up to
a maximum aggregate amount of $500,000, provided that Executive presents such statement(s) no later
than 30 days prior to the end of Executives taxable year following the year in which such expenses
were incurred. Notwithstanding the foregoing, this Section 13(p) shall not apply at any time unless
a Change in Control has occurred.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year
first above written.
|
|
|
|
|
CHART INDUSTRIES, INC.
|
|
SAMUEL F. THOMAS
|
(Company)
|
|
(Executive)
|
|
|
|
|
|
By:
|
|
/s/ Michael F. Biehl
|
|
/s/ Samuel F. Thomas
|
|
|
|
|
|
Name:
|
|
Michael F. Biehl
|
|
|
|
|
|
|
|
Title:
|
|
Executive Vice President, Chief Financial
|
|
|
|
|
Officer & Treasurer
|
|
|
18
Exhibit 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the Agreement) dated February 26, 2008 by and between Chart
Industries, Inc. (the Company) and Michael F. Biehl (the Executive).
The Company desires to employ Executive and to enter into an agreement embodying the terms of
such employment; and
Executive desires to accept such employment and enter into such an agreement.
In consideration of the premises and mutual covenants herein and for other good and valuable
consideration, the parties agree as follows:
1.
Term of Employment
. Subject to the provisions of Section 8 of this Agreement,
Executive shall be employed by the Company, on the terms and subject to the conditions set forth in
this Agreement, for the period commencing on February 26, 2008, and ending on the second
anniversary of said date (the Employment Term). Thereafter the Employment Term shall
automatically be extended on February 26 of each year for a period of one year from such date. In
addition, in the event of a Change in Control, the Employment Term shall automatically be extended
for a period of three years beginning on the date of the Change in Control and ending on the third
anniversary of the date of such Change in Control (unless further extended under the immediately
preceding sentence). The Company or Executive may give notice to the other party that the
Employment Term shall no longer be extended (the Non-Renewal Notice), in which event the
Employment Term shall expire on the latest of: (i) such second anniversary of the original
Employment Term commencement date, (ii) such third anniversary of a Change in Control, or (iii) the
first anniversary of the delivery of such Non-Renewal Notice. In any case, the Employment Term may
be terminated earlier under the terms and conditions set forth herein.
2.
Position
.
a.
Title
. During the Employment Term, Executive shall serve as the Companys
Executive Vice President, Chief Financial Officer & Treasurer. In such position, Executive shall
have such duties, authority and responsibility as shall be determined from time to time by the
Board of Directors of the Company (the Board) or the Chief Executive Officer of the Company,
which duties, authority and responsibility are consistent with the position of Executive Vice
President, Chief Financial Officer & Treasurer of the Company.
b.
Best Efforts
. During the Employment Term, Executive will devote Executives full
business time and best efforts to the performance of Executives duties hereunder and will not
engage in any other business, profession or occupation for compensation or otherwise which would
conflict or interfere with the rendition of such services either directly or indirectly, without
the prior written consent of the Board; provided that nothing herein shall preclude Executive,
subject to the prior approval of the Board, from accepting appointment to or continue to serve on
any board of directors or trustees of any business corporation or any
charitable organization; provided in each case, and in the aggregate, that such activities do
not conflict or interfere with the performance of Executives duties hereunder or conflict with
Section 10.
c.
Place of Employment
. In connection with Executives employment by the Company,
Executive shall not be required to relocate or move from Executives existing principal residence
in Westlake, OH, and shall not be required to perform services which would make the continuance of
Executives principal residence in Westlake, OH, unreasonably difficult or inconvenient for
Executive. The Company shall give Executive at least six months advance notice of any proposed
relocation of its offices at which Executives present principal office is located to a location
more than 50 miles from such present location, and, if Executive in Executives sole discretion
chooses to relocate Executives principal residence as a result of such office relocation, the
Company shall promptly pay (or reimburse Executive for) all reasonable relocation expenses
(consistent with the Companys past practice for similarly situated senior executive officers)
incurred by Executive relating to a change of Executives principal residence in connection with
any such relocation of the Companys offices from such present location.
3.
Base Salary
. During the Employment Term, the Company shall pay Executive a base
salary at the annual rate of $262,150, payable in regular installments in accordance with the
Companys usual payment practices. Executive shall be entitled to such increases in Executives
base salary, if any, as may be determined from time to time in the sole discretion of the Board or
any duly authorized committee thereof. Executives annual base salary, as in effect from time to
time, is hereinafter referred to as the Base Salary.
4.
Annual Bonus
. With respect to each full fiscal year during the Employment Term
(commencing with the 2008 fiscal year), Executive shall be eligible to earn an annual bonus award
(an Annual Bonus) of up to one hundred fifty percent (150%) of one hundred percent (100%) of the
Executives Base Salary (with it being understood that one hundred percent (100%) of the
Executives Base Salary is the Target) based upon the achievement of the performance targets
established by the Board, or any duly authorized committee thereof, within the first three months
of each fiscal year during the Employment Term. The Annual Bonus, if any, shall be paid to
Executive within two and one-half (2.5) months after the end of the applicable fiscal year. Any
Annual Bonus payable hereunder shall be determined in accordance with the terms of the Companys
Incentive Compensation Plan, as currently in effect and as it may be amended from time to time,
including any successor plan. In the event of a Change In Control as defined in the Incentive
Compensation Plan, the annual bonus may be pro-rated in accordance with the terms of the Incentive
Compensation Plan.
5.
Employee Benefits
. During the Employment Term, Executive shall be entitled to
participate in the Companys employee benefit plans (other than annual bonus and incentive plans)
providing for health, life and disability insurance, retirement, deferred compensation and fringe
benefits, as well as any equity compensation plans, as in effect from time to time (collectively
Employee Benefits), on the same basis as those benefits are generally made available to other
senior executives of the Company. Executives right to participate in any Employee Benefits shall
be subject to the applicable eligibility criteria for participation and Executive shall not be
entitled to any benefits under, or based on, any Employee Benefits for any purposes of this
Agreement if Executive does not during the Employment Term satisfy the
2
eligibility criteria for participation in such Employee Benefits. Any equity incentive
granted, awarded and held by the Executive shall be governed by the applicable terms of any such
grant and award, and shall not be impacted by the terms of this Agreement, except to the extent
taken into account in determinations under Section 9.
6.
Vacation
. During the Employment Term, Executive shall be entitled to 4 weeks of
paid vacation annually to be taken at such times as chosen by Executive.
7.
Business Expenses and Perquisites
.
a.
Expenses
. During the Employment Term, reasonable business expenses incurred by
Executive in the performance of Executives duties hereunder shall be reimbursed by the Company in
accordance with Company policies.
b.
Perquisites
. During the Employment Term, Executive shall be eligible for an
automobile allowance of up to $1,000 per month, consistent with the Companys current practices.
8.
Termination
. The Employment Term and Executives employment hereunder may be
terminated by either party at any time and for any reason; provided that Executive will be required
to give the Company at least 60 days advance written notice of any resignation of Executives
employment. The provisions of this Section 8 governs Executives rights upon Termination of
Employment with the Company and its affiliates. Termination of Employment as used in this
Agreement means the separation from service, within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended from time to time (Code, any reference in this Agreement to a
Section of the Code shall include all lawful regulations and pronouncements promulgated thereunder,
as well as any successor Sections of the Code having the same or similar purpose), of Executive
with the Company and all of its affiliates, for any reason, including without limitation, quit,
discharge, or retirement, or a leave of absence (including military leave, sick leave, or other
bona fide leave of absence such as temporary employment by the government if the period of such
leave exceeds the greater of six months, or the period for which Executives right to reemployment
is provided either by statute or by contract) or permanent decrease in service to a level that is
no more than Twenty Percent (20%) of its prior level. For this purpose, whether a Termination of
Employment has occurred is determined based on whether it is reasonably anticipated that no further
services will be performed by Executive after a certain date or that the level of bona fide
services Executive will perform after such date (whether as an employee or as an independent
contractor) would permanently decrease to no more than Twenty Percent (20%) of the average level of
bona fide services performed (whether as an employee or an independent contractor) over the
immediately preceding 36-month period (or the full period of services if Executive has been
providing services less than 36 months). The terms Terminate or Terminated, when used in
reference to Executives employment or the Employment Period, shall refer to a Termination of
Employment as set forth in this paragraph. Date of Termination refers to the effective date of
Executives Termination of Employment.
3
a.
Termination By the Company For Cause or By Executive Resignation Without Good
Reason
.
(i)
Events
. The Employment Term and Executives employment hereunder may be
terminated by the Company for Cause (as defined below) and shall terminate automatically upon
Executives resignation without Good Reason (as defined in Section 8(c)); provided that Executive
will be required to give the Company at least 60 days advance written notice of a resignation
without Good Reason.
(ii)
For Cause
. For purposes of this Agreement, Cause shall mean the Executives
(A) willful failure to perform duties which, if curable, is not cured promptly, or in any event
within ten (10) days, following the first written notice of such failure from the Company, (B)
commission of, or plea of guilty or no contest to a (x) felony or (y) crime involving moral
turpitude, (C) willful malfeasance or misconduct which is demonstrably injurious to the Company or
its subsidiaries or affiliates, (D) material breach of the material terms of this Agreement,
including, without limitation, any non-competition, non-solicitation or confidentiality provisions,
(E) commission of any act of gross negligence, corporate waste, disloyalty or unfaithfulness to the
Company which adversely affects the business of the Company or its subsidiaries or affiliates, or
(F) any other act or course of conduct which will demonstrably have a material adverse effect on
the Company, a subsidiary or affiliates business.
(iii)
Compensation
. If Executives employment is terminated by the Company for Cause,
or if Executive resigns without Good Reason, Executive shall be entitled to receive the amounts in
clauses (A) through (D) below referred to herein as Accrued Rights:
(A) the Base Salary through the Date of Termination;
(B) any Annual Bonus earned, but unpaid, as of the Date of Termination for the immediately
preceding fiscal year, paid in accordance with Section 4 (except to the extent payment is otherwise
deferred pursuant to any applicable deferred compensation arrangement with the Company);
(C) reimbursement, within 60 days following submission by Executive to the Company of
appropriate supporting documentation, for any unreimbursed business expenses properly incurred by
Executive in accordance with Company policy prior to the date of Executives Termination of
Employment; provided claims for such reimbursement (accompanied by appropriate supporting
documentation) are submitted to the Company within 90 days following the date of Executives
Termination of Employment; and
(D) such Employee Benefits, if any, as to which Executive may be entitled under the employee
benefit plans of the Company, including payment for any accrued but unused vacation within 30 days
following the date of Executives Date of Termination.
Following such Termination of Employment by the Company for Cause or resignation by Executive
without Good Reason, except as set forth in this Section 8(a)(iii), Executive shall have no
further rights to any compensation or any other benefits under this Agreement.
4
b.
Disability or Death
.
(i)
Events
. The Employment Term and Executives employment hereunder shall terminate
upon Executives death and may be terminated by the Company if Executive becomes physically or
mentally incapacitated and is therefore unable for a period of six (6) consecutive months or for an
aggregate of nine (9) months in any twenty-four (24) consecutive month period to perform
Executives duties (such incapacity is hereinafter referred to as Disability). In no event shall
an Executives employment be continued beyond the 29th month of absence due to Executives
Disability. Any question as to the existence of the Disability of Executive as to which Executive
and the Company cannot agree shall be determined in writing by a qualified independent physician
mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to
a qualified independent physician, each shall appoint such a physician and those two physicians
shall select a third who shall make such determination in writing. The determination of Disability
made in writing to the Company and Executive shall be final and conclusive for all purposes of the
Agreement.
(ii)
Compensation
. Upon Executives Termination of Employment hereunder for either
Disability or death, Executive or Executives estate (as the case may be) shall be entitled to
receive:
(A) the Accrued Rights; and
(B) a pro rata portion of the Annual Bonus, if any, that Executive would have been entitled to
receive pursuant to Section 4 hereof for such year based upon the Companys actual results for the
year of termination and the percentage of the fiscal year that shall have elapsed through the
Executives Date of Termination, payable to Executive pursuant to Section 4 had Executives
employment not terminated.
Following Executives Termination of Employment due to death or Disability, except as set
forth in this Section 8(b)(ii), Executive shall have no further rights to any compensation or any
other benefits under this Agreement.
c.
Termination by the Company Without Cause or Resignation by Executive for Good
Reason
.
(i)
Events
. The Employment Term and Executives employment hereunder may be
terminated by the Company without Cause or by Executives resignation for Good Reason at any time
including during the Protected Period.
(ii)
Good Reason
. For purposes of this Agreement, Good Reason shall mean, without
Executives consent: (i) a material diminution in Executives base salary (excluding any general
salary reduction similarly affecting substantially all other senior executives of the Company as a
result of a material adverse change in the Companys prospects or business); (ii) a material
diminution in Executives authority, duties, or responsibilities; (iii) a material change in the
geographic location at which Executive must perform services; or (iv) any other action or inaction
that constitutes a material breach by the Company of this Agreement; provided, however, that Good
Reason shall not be deemed to exist unless: (A) the Executive has provided notice to the Company
of the existence of one or more of the conditions listed in (i)
5
through (iv) within 90 days after the initial occurrence of such condition or conditions; and
(B) such condition or conditions have not been cured by the Company within 30 days after receipt of
such notice. Simply the receipt by the Executive of a Non-Renewal Notice from the Company shall
not, in and of itself, be deemed to be an event of Good Reason under this Agreement.
(iii)
Protected Period
. For purposes of this Agreement, Protected Period shall mean
the period of time commencing on the date of a Change in Control and ending two years after such
date.
(iv)
Change in Control
. For purposes of this Agreement, Change in Control shall
mean, with respect to the Executive, the happening of any of the following events (but only if with
respect to the Executive, such event would constitute a change in the ownership or effective
control of the corporation, or in the ownership of a substantial portion of the assets of the
corporation, as defined under Section 409A of the Code):
(A) a change in the ownership of the Company (or any affiliate which either employs the
Executive or is a direct or indirect parent of such employer) by which any one person, or more than
one person acting as a group, acquires ownership of stock of the Company (or such an affiliate)
that, together with stock held by such person or group, constitutes more than Fifty Percent (50%)
of the total fair market value or total voting power of the stock of the Company (or such an
affiliate). However, if any one person, or more than one person acting as a group, is considered
to own more than 50% of the total fair market value or total voting power of the stock of the
Company (or such an affiliate), the acquisition of additional stock by the same person or persons
is not considered to cause a Change in Control. (An increase in the percentage of stock owned by
any one person, or persons acting as a group, as a result of a transaction in which the Company (or
such an affiliate) acquires its stock in exchange for property will be treated as an acquisition of
stock for purposes of this definition. This parenthetical phrase applies only when there is a
transfer of stock of the Company (or issuance of stock of the Company) (or such an affiliate) and
stock in the Company (or such an affiliate) remains outstanding after the transaction.)
(B) a change in effective control of the Company (or any affiliate which either employs the
Executive or is a direct or indirect parent of such employer) by which:
(1) any one person, or more than one person acting as a group, acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the Company (or such an
affiliate) possessing Thirty Percent (30%) or more of the total voting power of the
stock of the Company (or such an affiliate); or
(2) a majority of members of the Board of Directors is replaced during any
12-month period by Directors whose appointment or election is not endorsed by a
majority of the members of the Board of Directors before the date of the appointment
or election.
6
(C) a change in the ownership of a substantial portion of the assets of the Company (or any
affiliate which either employs the Executive or is a direct or indirect parent of such employer) by
which any one person, or more than one person acting as a group, acquires (or has acquired during
the 12-month period ending on the date of the most recent acquisition by such person or persons)
assets from the Company (or such an affiliate) that have a total gross fair market value equal to
or more than Forty Percent (40%) of the total gross fair market value of all of the assets of the
Company (or such an affiliate) immediately prior to such acquisition or acquisitions. For this
purpose, gross fair market value means the value of the assets of the corporation, or the value of
the assets being disposed of, determined without regard to any liabilities associated with such
assets.
For purposes of this definition, persons will be considered to be acting as a group if they are
owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock,
or similar business transaction with the Company. If a person, including an entity, owns stock in
both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or
similar transaction, such shareholder is considered to be acting as a group with other shareholders
only with respect to the ownership in that corporation before the transaction giving rise to the
change and not with respect to the ownership interest in the other corporation.
(v)
Compensation if Terminated Outside of Protected Period
. If, at any time other
than during the Protected Period, the Executives employment is terminated by the Company without
Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason within
6 months of the condition giving rise to the good reason, Executive shall be entitled to receive:
(A) the Accrued Rights;
(B) subject to Executives (x) continued compliance with the provisions of Sections 10 and 11
and (y) execution and delivery of a general release of claims against the Company and its
affiliates in a form reasonably acceptable to the Company, payment in one lump sum of:
(1) 150% of the greater of the current Base Salary or Executives highest Base
Salary paid within the Employment Term; plus
(2) 150% of Executives Target Annual Bonus;
payable to Executive in one lump sum immediately following the expiration of the revocation period
provided for in such release, but in no event later than two and a half (2-1/2) months after the
end of the year in which the Executives Termination of Employment occurred; and
(C) continued coverage under the Companys group health plans during the eighteen (18) months
following Executives Date of Termination on the same basis as active employees of the Company.
(vi)
Compensation if Terminated during Protected Period
. If, during the Protected
Period, either the Executives employment is Terminated by the Company without
7
Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason,
Executive shall be entitled to receive:
(A) the Accrued Rights;
(B) subject to Executives (x) continued compliance with the provisions of Sections 10 and 11
and (y) execution and delivery of a general release of claims against the Company and its
affiliates in a form reasonably acceptable to the Company, payment in one lump sum of:
(1) 200% of the greater of the current Base Salary or Executives highest Base
Salary paid within the Employment Term; plus
(2) 200% of Executives Target Annual Bonus;
payable generally within ten (10) business days after Executives Date of Termination, or, if
later, upon the expiration of the revocation period provided for in such release, except when such
payment is delayed and paid in accordance with Section 9(b) for a determination under Section 9,
but in no event later than two and a half (2-1/2) months after the end of the year in which the
Executives Termination of Employment occurred; and
(C) continued coverage under the Companys group health plans during the twenty-four (24)
months following Executives Date of Termination on the same basis as active employees of the
Company; provided that during any portion of that period beyond eighteen (18) months following
Executives Date of Termination, to the extent coverage under the Companys group health plans is
not permissible under the terms of such plans, the Company may, in lieu of providing such coverage,
pay Executive an amount equal to the premium subsidy the Company otherwise would have paid on
Executives behalf for such coverage during the balance of such period.
Following Executives Termination of Employment by the Company without Cause (other than by
reason of Executives death or Disability) or by Executives resignation for Good Reason, except as
set forth in this Section 8(c), Executive shall have no further rights to any compensation or any
other benefits under this Agreement.
d.
Expiration of Employment Term
.
(i)
Election Not to Renew the Employment Term
. In the event either party provides the
other with the Non-Renewal Notice pursuant to Section 1, unless Executives employment is earlier
terminated pursuant to paragraphs (a), (b) or (c) of this Section 8, the expiration of the
Employment Term and the Executives Termination of Employment hereunder (whether or not Executive
continues as an employee of the Company thereafter) shall be deemed to occur on the close of
business on the last day of such Employment Term and Executive shall be entitled to receive the
Accrued Rights. The Companys providing of a Non-Renewal Notice under Section 1 shall not
prejudice in any way Executives right to assert an event of Good Reason (as such term is defined
above), whether related to such Non-Renewal Notice or otherwise, at any time during the Employment
Term.
8
Following such termination of Executives employment hereunder, except as set forth in this
Section 8(d)(i), Executive shall have no further rights to any compensation or any other benefits
under this Agreement.
(ii)
Continued Employment Beyond the Expiration of the Employment Term
. Unless the
parties otherwise agree in writing, continuation of Executives employment with the Company beyond
the expiration of the Employment Term shall be deemed an employment at-will and shall not be deemed
to extend any of the provisions of this Agreement and Executives employment may thereafter be
terminated at will by either Executive or the Company; provided that the provisions of Sections 10,
11 and 12 of this Agreement shall survive any termination of this Agreement or Executives
Termination of Employment hereunder.
e.
Notice of Termination
. Any purported Termination of Employment by the Company or
by Executive (other than due to Executives death) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 13(i) hereof. For purposes of
this Agreement, a Notice of Termination shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for Termination of Employment under the
provision so indicated.
f.
Board/Committee Resignation
. Upon termination of Executives employment for any
reason, Executive agrees to resign, as of the date of such termination and to the extent
applicable, from the Board (and any committees thereof) and the Board of Directors (and any
committees thereof) of any of the Companys affiliates.
9.
Conditional Reduction in Payments
.
a. Notwithstanding anything in this Agreement to the contrary, in the event that it shall be
determined (as hereafter provided) that any payment or distribution provided for pursuant to the
terms of this Agreement for the benefit of Executive, when aggregated with any other payments or
benefits received or receivable by Executive (individually and collectively, a Payment), would
constitute parachute payments within the meaning of Section 280G of the Code, and would be
subject to the excise tax imposed by Section 4999 of the Code or to any similar tax imposed by
state or local law, or to any interest or penalties with respect to such taxes (such tax or taxes,
together with any such interest and penalties, being hereafter collectively referred to as the
Excise Tax), then Executives payments under Section 8 hereof shall be either:
(i) delivered in full, or
(ii) reduced to the minimum extent necessary so that no portion of the Payment, after
such reduction, constitutes an Excess Parachute Payment (as defined in Section 280G(b) of
the Code) (the amount of such reduction shall be referred to as the Excess Amount);
whichever of the foregoing amounts, taking into account the applicable federal, state and local
income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis of the
9
greatest amount of benefits, notwithstanding that all or some portion of such benefits may be
taxable under Section 4999 of the Code.
b. All determinations required to be made under this Section 9, including whether an Excise
Tax is payable by Executive and the amount of such Excise Tax and whether a reduction in the
Payment is to be made and the amount of such Excess Amount, if any, shall be made by a nationally
recognized accounting firm proposed by the Company and reasonably acceptable to Executive (which
accounting firm shall be the Accounting Firm hereunder). The Company or Executive shall direct
the Accounting Firm to submit its determination and detailed supporting calculations to both the
Company and Executive within 30 calendar days after the Date of Termination, if applicable, and any
other time or times as may be requested by the Company or Executive. The Company shall pay
Executives payments under Section 8 hereof, as reduced or not reduced pursuant to the final
determination of the Accounting Firm and Subsection 9(a) above, no later than the later of (x) the
time otherwise required hereunder or (y) five business days after receipt of such determination.
If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall, at the same
time as it makes such determination, furnish the Company and Executive an opinion that Executive
has substantial authority not to report any Excise Tax on Executives federal, state or local
income or other tax return.
c. As a result of the uncertainty in the application of Section 4999 of the Code and the
possibility of similar uncertainty regarding applicable state or local tax law at the time of any
determination by the Accounting Firm hereunder, it is possible that, pursuant to a final
determination of a court or an Internal Revenue Service proceeding which has been finally and
conclusively resolved, an Excess Parachute Payment was received by Executive which would have been
intended to be reduced by the Excess Amount pursuant to Subsection 9(a) above. In such case, then
such amount received by Executive shall be deemed to be an overpayment, and Executive shall repay
the amount equal to the Excess Amount (to the extent received by Executive) to the Company on
demand (but no less than ten days after Executive receives written demand).
d. The Company and Executive shall each provide the Accounting Firm access to and copies of
any books, records and documents in the possession of the Company or Executive, as the case may be,
reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determinations and calculations contemplated by
Subsection 9(b). Any determination by the Accounting Firm as to the amount of any Excess Amount
shall be binding upon the Company and Executive.
e. The fees and expenses of the Accounting Firm for its services in connection with the
determinations and calculations contemplated by Subsection 9(b) shall be borne by the Company.
10.
Non-Competition
.
a. Executive acknowledges and recognizes the highly competitive nature of the businesses of
the Company and its affiliates and accordingly agrees as follows:
10
(i) During the Employment Term and the eighteen (18) months following the date of Executives
Termination of Employment or, if any benefits are paid to Executive pursuant to subparagraph (vi)
of Section 8.c. of this Agreement, the twenty-four (24) months following the date of Executives
Termination of Employment (the Restricted Period), Executive will not, whether on Executives own
behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture,
association, corporation or other business organization, entity or enterprise whatsoever
(Person), directly or indirectly solicit or assist in soliciting in competition with the Company,
the business of any client or customer or prospective client or customer:
(A) with whom Executive had personal contact or dealings on behalf of the Company during the
one year period preceding the earlier of the Executives Termination of Employment or such
solicitation;
(B) with whom employees reporting to Executive have had personal contact or dealings on behalf
of the Company during the one year immediately preceding the Executives Termination of Employment;
or
(C) for whom Executive had direct or indirect responsibility during the one year immediately
preceding Executives Termination of Employment.
(ii) During the Restricted Period, Executive will not directly or indirectly:
(A) engage in (1) the business of manufacturing equipment used in (x) the production, storage
and end-use of hydrocarbon and industrial gases business or (y) low temperature and cryogenic
applications, (2) any other businesses which the Company or its subsidiaries engage in during the
term of Executives employment with the Company and (3) any businesses which, as of the date of
Executives Termination of Employment, the Company or its subsidiaries both (x) have specific plans
to conduct in the future (and as to which Executive is aware of such planning) and (y) have
allocated or invested capital as of the date of such Termination of Employment (a Competitive
Business);
(B) enter the employ of, or render any services to, any Person (or any division or controlled
or controlling affiliate of any Person) who or which engages in a Competitive Business;
(C) acquire a financial interest in, or otherwise become actively involved with, any
Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer,
director, principal, agent, trustee or consultant; or
(D) interfere with, or attempt to interfere with, business relationships (whether formed
before, on or after the date of this Agreement) between the Company or any of its affiliates and
customers, clients, suppliers, partners, members or investors of the Company or its affiliates.
(iii) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or
indirectly own, solely as an investment, securities of any Person
11
engaged in the business of the Company or its affiliates which are publicly traded on a
national or regional stock exchange or quotation system or on the over-the-counter market if
Executive (i) is not a controlling person of, or a member of a group which controls, such person
and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such
Person.
(iv) During the Restricted Period, Executive will not, whether on Executives own behalf or on
behalf of or in conjunction with any Person, directly or indirectly:
(A) solicit or encourage any employee of the Company or its affiliates to leave the employment
of the Company or its affiliates; or
(B) hire any such employee who was employed by the Company or its affiliates as of the date of
Executives Termination of Employment with the Company or who left the employment of the Company or
its affiliates coincident with, or within one year prior to or after, the termination of
Executives employment with the Company.
(v) During the Restricted Period, Executive will not, directly or indirectly, solicit or
encourage to cease to work with the Company or its affiliates any consultant then under contract
with the Company or its affiliates.
b. It is expressly understood and agreed that although Executive and the Company consider the
restrictions contained in this Section 10 to be reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive, the provisions of
this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such maximum extent as such court may judicially determine or indicate to
be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the other restrictions
contained herein.
11.
Confidentiality; Intellectual Property
.
a.
Confidentiality
.
(i) Executive will not at any time (whether during or after Executives employment with the
Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person
other than the Company; or (y) disclose, divulge, reveal, communicate, share, transfer or provide
access to any Person outside the Company (other than its professional advisers who are bound by
confidentiality obligations or other than in performing his or her duties on behalf of the Company
consistent with Company policies), any non-public, proprietary or confidential
informationincluding without limitation trade secrets, know-how, research and development,
software, databases, inventions, processes, formulae, technology, designs and other intellectual
property, information concerning finances, investments, profits, pricing, costs, products,
services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting,
training, advertising, sales, marketing, promotions, government and regulatory activities and
approvals concerning the past, current or future business, activities and operations of the
Company, its subsidiaries or affiliates and/or any third party that has
12
disclosed or provided any of same to the Company on a confidential basis (Confidential
Information) without the prior written authorization of the Board or a duly authorized committee
thereof.
(ii) Confidential Information shall not include any information that is (a) generally known
to the industry or the public other than as a result of Executives breach of this covenant or any
breach of other confidentiality obligations by third parties; (b) made legitimately available to
Executive by a third party without breach of any confidentiality obligation; or (c) required by law
to be disclosed; provided that Executive shall give prompt written notice to the Company of such
requirement, disclose no more information than is so required, and cooperate with any attempts by
the Company to obtain a protective order or similar treatment.
(iii) Upon termination of Executives employment with the Company for any reason, Executive
shall (x) cease and not thereafter commence use of any Confidential Information or intellectual
property (including without limitation, any patent, invention, copyright, trade secret, trademark,
trade name, logo, domain name or other source indicator) owned or used by the Company, its
subsidiaries or affiliates; (y) immediately destroy, delete, or return to the Company, at the
Companys option, all originals and copies in any form or medium (including memoranda, books,
papers, plans, computer files, letters and other data) in Executives possession or control
(including any of the foregoing stored or located in Executives office, home, laptop or other
computer, whether or not Company property) that contain Confidential Information or otherwise
relate to the business of the Company, its affiliates and subsidiaries, except that Executive may
retain only those portions of any personal notes, notebooks and diaries that do not contain any
Confidential Information; and (z) notify and fully cooperate with the Company regarding the
delivery or destruction of any other Confidential Information of which Executive is or becomes
aware.
b.
Intellectual Property
.
(i) If Executive has created, invented, designed, developed, contributed to or improved any
works of authorship, inventions, intellectual property, materials, documents or other work product
(including without limitation, research, reports, software, databases, systems, applications,
presentations, textual works, content, or audiovisual materials) (Works), either alone or with
third parties, at any time during Executives employment by the Company and within the scope of
such employment and/or with the use of any of the Companys resources (Company Works), Executive
shall promptly and fully disclose same, to the best of his or her knowledge, to the Company and
hereby irrevocably assigns, transfers and conveys, to the maximum extent permitted by applicable
law, all rights and intellectual property rights therein (including rights under patent, industrial
property, copyright, trademark, trade secret, unfair competition and related laws) to the Company
to the extent ownership of any such rights does not vest originally in the Company.
(ii) Executive shall take all reasonably requested actions and execute all reasonably
requested documents (including any licenses or assignments required by a government contract) at
the Companys expense (but without further remuneration) to assist the
13
Company in validating, maintaining, protecting, enforcing, perfecting, recording, patenting or
registering any of the Companys rights in the Company Works.
(iii) Executive shall not improperly use for the benefit of, bring to any premises of,
divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Company
any confidential, proprietary or non-public information or intellectual property relating to a
former employer or other third party without the prior written permission of such third party.
Executive hereby indemnifies, holds harmless and agrees to defend the Company and its officers,
directors, partners, employees, agents and representatives from any breach of the foregoing
covenant. Executive shall comply with all relevant policies and guidelines of the Company,
including regarding the protection of confidential information and intellectual property and
potential conflicts of interest. Executive acknowledges that the Company may amend any such
policies and guidelines from time to time, and that Executive remains at all times bound by their
most current version.
(iv) The provisions of Section 11 shall survive the Executives Termination of Employment for
any reason.
12.
Specific Performance
. Executive acknowledges and agrees that the Companys
remedies at law for a breach or threatened breach of any of the provisions of Section 10 or Section
11 would be inadequate and the Company would suffer irreparable damages as a result of such breach
or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law, the Company, without posting any
bond, shall be entitled to cease making any payments or providing any benefit otherwise required by
this Agreement and obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any other equitable remedy which may then
be available.
13.
Miscellaneous
.
a.
Governing Law
. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to conflicts of laws principles thereof.
b.
Dispute Resolution
. Except as otherwise provided in Section 12 of this Agreement,
any controversy, dispute, or claim arising out of, in connection with, or in relation to, the
interpretation, performance or breach of this Agreement, including, without limitation, the
validity, scope, and enforceability of this section, may at the election of any party, be solely
and finally settled by arbitration conducted in Cleveland, Ohio, by and in accordance with the then
existing rules for commercial arbitration of the American Arbitration Association, or any successor
organization and with the Expedited Procedures thereof (collectively, the Rules). Each of the
parties hereto agrees that such arbitration shall be conducted by a single arbitrator selected in
accordance with the Rules; provided that such arbitrator shall be experienced in deciding cases
concerning the matter which is the subject of the dispute. Any of the parties may demand
arbitration by written notice to the other and to the Arbitrator set forth in this Section 13(b)
(Demand for Arbitration). Each of the parties agrees that if possible, the award shall be made
in writing no more than 30 days following the end of the proceeding. Any award rendered
14
by the arbitrator(s) shall be final and binding and judgment may be entered on it in any court
of competent jurisdiction. Each of the parties hereto agrees to treat as confidential the results
of any arbitration (including, without limitation, any findings of fact and/or law made by the
arbitrator) and not to disclose such results to any unauthorized person. The parties intend that
this agreement to arbitrate be valid, enforceable and irrevocable. In the event of any arbitration
with regard to this Agreement, each party shall pay its own legal fees and expenses except to the
extent set forth in Section 13(p), provided, however, that the Company agrees to pay the cost of
the Arbitrators fees.
c.
Entire Agreement/Amendments
. This Agreement contains the entire understanding of
the parties with respect to the employment of Executive by the Company. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. This Agreement may not be
altered, modified, or amended except by written instrument signed by the parties hereto.
d.
No Waiver
. The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of such partys rights or deprive
such party of the right thereafter to insist upon strict adherence to that term or any other term
of this Agreement.
e.
Severability
. In the event that any one or more of the provisions of this
Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions of this Agreement shall not be affected
thereby.
f.
Assignment
. This Agreement, and all of Executives rights and duties hereunder,
shall not be assignable or delegable by Executive. Any purported assignment or delegation by
Executive in violation of the foregoing shall be null and void ab initio and of no force and
effect. This Agreement may be assigned by the Company to a person or entity which is an affiliate
or a successor in interest to substantially all of the business operations of the Company. The
Company will require any person or entity which is an affiliate or a successor in interest to
substantially all of the business operations of the Company to assume all obligations of the
Company under this Agreement.
g.
Set Off; No Mitigation
. The Companys obligation to pay Executive the amounts
provided and to make the arrangements provided hereunder shall be subject to bona fide set off,
counterclaim or recoupment in good faith of amounts owed by Executive to the Company or its
affiliates. Executive shall not be required to mitigate the amount of any payment provided for
pursuant to this Agreement by seeking other employment.
h.
Successors; Binding Agreement
. This Agreement shall inure to the benefit of and be
binding upon personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
i.
Notice
. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have
15
been duly given when delivered by hand or overnight courier or three days after it has been
mailed by United States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below in this Agreement, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
If to the Company:
Chart Industries, Inc.
One Infinity Corporate Centre Drive, Suite 300
Garfield Heights, Ohio 44125
Facsimile: (440) 753-1491
Attention: Chief Financial Officer and General Counsel
If to Executive:
To the most recent address of Executive set forth in the personnel records of the Company.
j.
Executive Representation
. Executive hereby represents to the Company that the
execution and delivery of this Agreement by Executive and the Company and the performance by
Executive of Executives duties hereunder shall not constitute a breach of, or otherwise
contravene, the terms of any employment agreement or other agreement or policy to which Executive
is a party or otherwise bound.
k.
Prior Agreements
. This Agreement supercedes all prior agreements and
understandings (including verbal agreements) between Executive and the Company and/or its
affiliates regarding the terms and conditions of Executives employment with the Company and/or its
affiliates, except that this Agreement does not supercede any stock option agreement, performance
unit agreement, or indemnification agreement.
l.
Cooperation
. Executive shall provide Executives reasonable cooperation in
connection with any action or proceeding (or any appeal from any action or proceeding) which
relates to events occurring during Executives employment hereunder. This provision shall survive
any termination of this Agreement.
m.
Withholding Taxes
. The Company may withhold from any amounts payable under this
Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any
applicable law or regulation.
n.
Counterparts
. This Agreement may be signed in counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.
o.
Compliance with Section 409A
. Notwithstanding anything herein to the contrary, (i)
if at the time of Executives Termination of Employment with the Company Executive is a specified
employee as defined in Section 409A of the Code, and the deferral of the commencement of any
payments or benefits otherwise payable hereunder as a result of such
16
Termination of Employment is necessary in order to prevent the imposition of any accelerated
or additional tax under Section 409A of the Code, then the Company will defer the commencement of
the payment of any such payments or benefits hereunder (without any reduction in such payments or
benefits ultimately paid or provided to Executive) until the date that is six months following
Executives Termination of Employment with the Company (or the earliest date as is permitted under
Section 409A of the Code) and (ii) if any other payments of money or other benefits due to
Executive hereunder could cause the application of an accelerated or additional tax under Section
409A of the Code, such payments or other benefits shall be deferred if deferral will make such
payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or
other benefits shall be restructured, to the extent possible, in a manner, determined by the Board
or any duly authorized committee thereof, that does not cause such an accelerated or additional tax
or result in an additional cost to the Company. The Company shall consult with Executive in good
faith regarding the implementation of the provisions of this Section 13(o); provided that neither
the Company nor any of its employees or representatives shall have any liability to Executive with
respect thereto.
p.
Enforcement Costs
. The Company is aware that upon the occurrence of a Change in
Control the Board of Directors or a shareholder of the Company may then cause or attempt to cause
the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt
to cause the Company to institute, or may institute, litigation or arbitration seeking to have this
Agreement declared unenforceable, or may take, or attempt to take, other action to deny Executive
the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement
could be frustrated. It is the intent of the Company that Executive not be required to incur the
expenses associated with the enforcement of Executives rights under this Agreement by litigation,
arbitration or other legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to Executive hereunder, nor be bound to negotiate any
settlement of Executives rights hereunder under threat of incurring such expenses. Accordingly,
if at any time following a Change in Control, it should appear to Executive that the Company has
failed to comply with any of its obligations under this Agreement or the Company or any other
person takes any action to declare this Agreement void or unenforceable, or institutes any
litigation, arbitration or other legal action designed to deny, diminish or recover from Executive
the benefits intended to be provided to Executive hereunder, and Executive has complied with all of
Executives obligations under Sections 10 and 11, then the Company irrevocably authorizes Executive
from time to time to retain counsel of Executives choice at the expense of the Company as provided
in this Section 13(p) to represent Executive in connection with the initiation or defense of any
litigation, arbitration or other legal action, whether by or against the Company or any Director,
officer, shareholder or other person affiliated with the Company, in any jurisdiction. The
Companys obligations under this Section 13(p) shall not be conditioned on Executives success in
the prosecution or defense of any such litigation, arbitration or other legal action.
Notwithstanding any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to Executive entering into an attorney-client
relationship with such counsel, and in that connection the Company and Executive agree that a
confidential relationship shall exist between Executive and such counsel. The reasonable fees and
expenses of counsel selected from time to time by Executive as hereinabove provided shall be paid
or reimbursed to Executive by the Company on a regular, periodic basis no later than 30 days after
presentation by Executive of a statement or statements prepared by such counsel in accordance with
its customary practices, up to a
17
maximum aggregate amount of $500,000, provided that Executive presents such statement(s) no
later than 30 days prior to the end of Executives taxable year following the year in which such
expenses were incurred. Notwithstanding the foregoing, this Section 13(p) shall not apply at any
time unless a Change in Control has occurred.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year
first above written.
|
|
|
|
|
CHART INDUSTRIES, INC.
|
|
MICHAEL F. BIEHL
|
(Company)
|
|
(Executive)
|
|
|
|
|
|
By:
|
|
/s/ Samuel F. Thomas
|
|
/s/ Michael F. Biehl
|
|
|
|
|
|
Name:
|
|
Samuel F. Thomas
|
|
|
|
|
|
|
|
Title:
|
|
Chairman, Chief Executive Officer
and President
|
|
|
18
Exhibit 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the Agreement) dated February 26, 2008 by and between Chart
Industries, Inc. (the Company) and Matthew J. Klaben (the Executive).
The Company desires to employ Executive and to enter into an agreement embodying the terms of
such employment; and
Executive desires to accept such employment and enter into such an agreement.
In consideration of the premises and mutual covenants herein and for other good and valuable
consideration, the parties agree as follows:
1.
Term of Employment
. Subject to the provisions of Section 8 of this Agreement,
Executive shall be employed by the Company, on the terms and subject to the conditions set forth in
this Agreement, for the period commencing on February 26, 2008, and ending on the second
anniversary of said date (the Employment Term). Thereafter the Employment Term shall
automatically be extended on February 26 of each year for a period of one year from such date. In
addition, in the event of a Change in Control, the Employment Term shall automatically be extended
for a period of three years beginning on the date of the Change in Control and ending on the third
anniversary of the date of such Change in Control (unless further extended under the immediately
preceding sentence). The Company or Executive may give notice to the other party that the
Employment Term shall no longer be extended (the Non-Renewal Notice), in which event the
Employment Term shall expire on the latest of: (i) such second anniversary of the original
Employment Term commencement date, (ii) such third anniversary of a Change in Control, or (iii) the
first anniversary of the delivery of such Non-Renewal Notice. In any case, the Employment Term may
be terminated earlier under the terms and conditions set forth herein.
2.
Position
.
a.
Title
. During the Employment Term, Executive shall serve as the Companys Vice
President, General Counsel & Secretary. In such position, Executive shall have such duties,
authority and responsibility as shall be determined from time to time by the Board of Directors of
the Company (the Board), the Chief Executive Officer or the Chief Financial Officer of the
Company, which duties, authority and responsibility are consistent with the position of Vice
President, General Counsel & Secretary of the Company.
b.
Best Efforts
. During the Employment Term, Executive will devote Executives full
business time and best efforts to the performance of Executives duties hereunder and will not
engage in any other business, profession or occupation for compensation or otherwise which would
conflict or interfere with the rendition of such services either directly or indirectly, without
the prior written consent of the Board; provided that nothing herein shall preclude Executive,
subject to the prior approval of the Board, from accepting appointment to or continue to serve on
any board of directors or trustees of any business corporation or any
charitable organization; provided in each case, and in the aggregate, that such activities do
not conflict or interfere with the performance of Executives duties hereunder or conflict with
Section 10.
c.
Place of Employment
. In connection with Executives employment by the Company,
Executive shall not be required to relocate or move from Executives existing principal residence
in Strongsville, OH, and shall not be required to perform services which would make the continuance
of Executives principal residence in Strongsville, OH, unreasonably difficult or inconvenient for
Executive. The Company shall give Executive at least six months advance notice of any proposed
relocation of its offices at which Executives present principal office is located to a location
more than 50 miles from such present location, and, if Executive in Executives sole discretion
chooses to relocate Executives principal residence as a result of such office relocation, the
Company shall promptly pay (or reimburse Executive for) all reasonable relocation expenses
(consistent with the Companys past practice for similarly situated senior executive officers)
incurred by Executive relating to a change of Executives principal residence in connection with
any such relocation of the Companys offices from such present location.
3.
Base Salary
. During the Employment Term, the Company shall pay Executive a base
salary at the annual rate of $210,000, payable in regular installments in accordance with the
Companys usual payment practices. Executive shall be entitled to such increases in Executives
base salary, if any, as may be determined from time to time in the sole discretion of the Board or
any duly authorized committee thereof. Executives annual base salary, as in effect from time to
time, is hereinafter referred to as the Base Salary.
4.
Annual Bonus
. With respect to each full fiscal year during the Employment Term
(commencing with the 2008 fiscal year), Executive shall be eligible to earn an annual bonus award
(an Annual Bonus) of up to one hundred fifty percent (150%) of seventy-five percent (75%) of the
Executives Base Salary (with it being understood that seventy-five percent (75%) of the
Executives Base Salary is the Target) based upon the achievement of the performance targets
established by the Board, or any duly authorized committee thereof, within the first three months
of each fiscal year during the Employment Term. The Annual Bonus, if any, shall be paid to
Executive within two and one-half (2.5) months after the end of the applicable fiscal year. Any
Annual Bonus payable hereunder shall be determined in accordance with the terms of the Companys
Incentive Compensation Plan, as currently in effect and as it may be amended from time to time,
including any successor plan. In the event of a Change In Control as defined in the Incentive
Compensation Plan, the annual bonus may be pro-rated in accordance with the terms of the Incentive
Compensation Plan.
5.
Employee Benefits
. During the Employment Term, Executive shall be entitled to
participate in the Companys employee benefit plans (other than annual bonus and incentive plans)
providing for health, life and disability insurance, retirement, deferred compensation and fringe
benefits, as well as any equity compensation plans, as in effect from time to time (collectively
Employee Benefits), on the same basis as those benefits are generally made available to other
senior executives of the Company. Executives right to participate in any Employee Benefits shall
be subject to the applicable eligibility criteria for participation and Executive shall not be
entitled to any benefits under, or based on, any Employee Benefits for any purposes of this
Agreement if Executive does not during the Employment Term satisfy the
2
eligibility criteria for participation in such Employee Benefits. Any equity incentive
granted, awarded and held by the Executive shall be governed by the applicable terms of any such
grant and award, and shall not be impacted by the terms of this Agreement, except to the extent
taken into account in determinations under Section 9.
6.
Vacation
. During the Employment Term, Executive shall be entitled to 3 weeks of
paid vacation annually to be taken at such times as chosen by Executive. Notwithstanding the
foregoing, after five years of employment with the Company, Executive shall be entitled to four
weeks of paid vacation annually to be taken at such times as chosen by Executive.
7.
Business Expenses and Perquisites
.
a.
Expenses
. During the Employment Term, reasonable business expenses incurred by
Executive in the performance of Executives duties hereunder shall be reimbursed by the Company in
accordance with Company policies.
b.
Perquisites
. During the Employment Term, Executive shall be eligible for an
automobile allowance of up to $800 per month, consistent with the Companys current practices.
8.
Termination
. The Employment Term and Executives employment hereunder may be
terminated by either party at any time and for any reason; provided that Executive will be required
to give the Company at least 60 days advance written notice of any resignation of Executives
employment. The provisions of this Section 8 governs Executives rights upon Termination of
Employment with the Company and its affiliates. Termination of Employment as used in this
Agreement means the separation from service, within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended from time to time (Code, any reference in this Agreement to a
Section of the Code shall include all lawful regulations and pronouncements promulgated thereunder,
as well as any successor Sections of the Code having the same or similar purpose), of Executive
with the Company and all of its affiliates, for any reason, including without limitation, quit,
discharge, or retirement, or a leave of absence (including military leave, sick leave, or other
bona fide leave of absence such as temporary employment by the government if the period of such
leave exceeds the greater of six months, or the period for which Executives right to reemployment
is provided either by statute or by contract) or permanent decrease in service to a level that is
no more than Twenty Percent (20%) of its prior level. For this purpose, whether a Termination of
Employment has occurred is determined based on whether it is reasonably anticipated that no further
services will be performed by Executive after a certain date or that the level of bona fide
services Executive will perform after such date (whether as an employee or as an independent
contractor) would permanently decrease to no more than Twenty Percent (20%) of the average level of
bona fide services performed (whether as an employee or an independent contractor) over the
immediately preceding 36-month period (or the full period of services if Executive has been
providing services less than 36 months). The terms Terminate or Terminated, when used in
reference to Executives employment or the Employment Period, shall refer to a Termination of
Employment as set forth in this paragraph. Date of Termination refers to the effective date of
Executives Termination of Employment.
3
a.
Termination By the Company For Cause or By Executive Resignation Without Good
Reason
.
(i)
Events
. The Employment Term and Executives employment hereunder may be
terminated by the Company for Cause (as defined below) and shall terminate automatically upon
Executives resignation without Good Reason (as defined in Section 8(c)); provided that Executive
will be required to give the Company at least 60 days advance written notice of a resignation
without Good Reason.
(ii)
For Cause
. For purposes of this Agreement, Cause shall mean the Executives
(A) willful failure to perform duties which, if curable, is not cured promptly, or in any event
within ten (10) days, following the first written notice of such failure from the Company, (B)
commission of, or plea of guilty or no contest to a (x) felony or (y) crime involving moral
turpitude, (C) willful malfeasance or misconduct which is demonstrably injurious to the Company or
its subsidiaries or affiliates, (D) material breach of the material terms of this Agreement,
including, without limitation, any non-competition, non-solicitation or confidentiality provisions,
(E) commission of any act of gross negligence, corporate waste, disloyalty or unfaithfulness to the
Company which adversely affects the business of the Company or its subsidiaries or affiliates, or
(F) any other act or course of conduct which will demonstrably have a material adverse effect on
the Company, a subsidiary or affiliates business.
(iii)
Compensation
. If Executives employment is terminated by the Company for Cause,
or if Executive resigns without Good Reason, Executive shall be entitled to receive the amounts in
clauses (A) through (D) below referred to herein as Accrued Rights:
(A) the Base Salary through the Date of Termination;
(B) any Annual Bonus earned, but unpaid, as of the Date of Termination for the immediately
preceding fiscal year, paid in accordance with Section 4 (except to the extent payment is otherwise
deferred pursuant to any applicable deferred compensation arrangement with the Company);
(C) reimbursement, within 60 days following submission by Executive to the Company of
appropriate supporting documentation, for any unreimbursed business expenses properly incurred by
Executive in accordance with Company policy prior to the date of Executives Termination of
Employment; provided claims for such reimbursement (accompanied by appropriate supporting
documentation) are submitted to the Company within 90 days following the date of Executives
Termination of Employment; and
(D) such Employee Benefits, if any, as to which Executive may be entitled under the employee
benefit plans of the Company, including payment for any accrued but unused vacation within 30 days
following the date of Executives Date of Termination.
Following such Termination of Employment by the Company for Cause or resignation by Executive
without Good Reason, except as set forth in this Section 8(a)(iii), Executive shall have no
further rights to any compensation or any other benefits under this Agreement.
4
b.
Disability or Death
.
(i)
Events
. The Employment Term and Executives employment hereunder shall terminate
upon Executives death and may be terminated by the Company if Executive becomes physically or
mentally incapacitated and is therefore unable for a period of six (6) consecutive months or for an
aggregate of nine (9) months in any twenty-four (24) consecutive month period to perform
Executives duties (such incapacity is hereinafter referred to as Disability). In no event shall
an Executives employment be continued beyond the 29th month of absence due to Executives
Disability. Any question as to the existence of the Disability of Executive as to which Executive
and the Company cannot agree shall be determined in writing by a qualified independent physician
mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to
a qualified independent physician, each shall appoint such a physician and those two physicians
shall select a third who shall make such determination in writing. The determination of Disability
made in writing to the Company and Executive shall be final and conclusive for all purposes of the
Agreement.
(ii)
Compensation
. Upon Executives Termination of Employment hereunder for either
Disability or death, Executive or Executives estate (as the case may be) shall be entitled to
receive:
(A) the Accrued Rights; and
(B) a pro rata portion of the Annual Bonus, if any, that Executive would have been entitled to
receive pursuant to Section 4 hereof for such year based upon the Companys actual results for the
year of termination and the percentage of the fiscal year that shall have elapsed through the
Executives Date of Termination, payable to Executive pursuant to Section 4 had Executives
employment not terminated.
Following Executives Termination of Employment due to death or Disability, except as set
forth in this Section 8(b)(ii), Executive shall have no further rights to any compensation or any
other benefits under this Agreement.
c.
Termination by the Company Without Cause or Resignation by Executive for Good
Reason
.
(i)
Events
. The Employment Term and Executives employment hereunder may be
terminated by the Company without Cause or by Executives resignation for Good Reason at any time
including during the Protected Period.
(ii)
Good Reason
. For purposes of this Agreement, Good Reason shall mean, without
Executives consent: (i) a material diminution in Executives base salary (excluding any general
salary reduction similarly affecting substantially all other senior executives of the Company as a
result of a material adverse change in the Companys prospects or business); (ii) a material
diminution in Executives authority, duties, or responsibilities; (iii) a material change in the
geographic location at which Executive must perform services; or (iv) any other action or inaction
that constitutes a material breach by the Company of this Agreement; provided, however, that Good
Reason shall not be deemed to exist unless: (A) the Executive has provided notice to the Company
of the existence of one or more of the conditions listed in (i)
5
through (iv) within 90 days after the initial occurrence of such condition or conditions; and
(B) such condition or conditions have not been cured by the Company within 30 days after receipt of
such notice. Simply the receipt by the Executive of a Non-Renewal Notice from the Company shall
not, in and of itself, be deemed to be an event of Good Reason under this Agreement.
(iii)
Protected Period
. For purposes of this Agreement, Protected Period shall mean
the period of time commencing on the date of a Change in Control and ending two years after such
date.
(iv)
Change in Control
. For purposes of this Agreement, Change in Control shall
mean, with respect to the Executive, the happening of any of the following events (but only if with
respect to the Executive, such event would constitute a change in the ownership or effective
control of the corporation, or in the ownership of a substantial portion of the assets of the
corporation, as defined under Section 409A of the Code):
(A) a change in the ownership of the Company (or any affiliate which either employs the
Executive or is a direct or indirect parent of such employer) by which any one person, or more than
one person acting as a group, acquires ownership of stock of the Company (or such an affiliate)
that, together with stock held by such person or group, constitutes more than Fifty Percent (50%)
of the total fair market value or total voting power of the stock of the Company (or such an
affiliate). However, if any one person, or more than one person acting as a group, is considered
to own more than 50% of the total fair market value or total voting power of the stock of the
Company (or such an affiliate), the acquisition of additional stock by the same person or persons
is not considered to cause a Change in Control. (An increase in the percentage of stock owned by
any one person, or persons acting as a group, as a result of a transaction in which the Company (or
such an affiliate) acquires its stock in exchange for property will be treated as an acquisition of
stock for purposes of this definition. This parenthetical phrase applies only when there is a
transfer of stock of the Company (or issuance of stock of the Company) (or such an affiliate) and
stock in the Company (or such an affiliate) remains outstanding after the transaction.)
(B) a change in effective control of the Company (or any affiliate which either employs the
Executive or is a direct or indirect parent of such employer) by which:
(1) any one person, or more than one person acting as a group, acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the Company (or such an
affiliate) possessing Thirty Percent (30%) or more of the total voting power of the
stock of the Company (or such an affiliate); or
(2) a majority of members of the Board of Directors is replaced during any
12-month period by Directors whose appointment or election is not endorsed by a
majority of the members of the Board of Directors before the date of the appointment
or election.
6
(C) a change in the ownership of a substantial portion of the assets of the Company (or any
affiliate which either employs the Executive or is a direct or indirect parent of such employer) by
which any one person, or more than one person acting as a group, acquires (or has acquired during
the 12-month period ending on the date of the most recent acquisition by such person or persons)
assets from the Company (or such an affiliate) that have a total gross fair market value equal to
or more than Forty Percent (40%) of the total gross fair market value of all of the assets of the
Company (or such an affiliate) immediately prior to such acquisition or acquisitions. For this
purpose, gross fair market value means the value of the assets of the corporation, or the value of
the assets being disposed of, determined without regard to any liabilities associated with such
assets.
For purposes of this definition, persons will be considered to be acting as a group if they are
owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock,
or similar business transaction with the Company. If a person, including an entity, owns stock in
both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or
similar transaction, such shareholder is considered to be acting as a group with other shareholders
only with respect to the ownership in that corporation before the transaction giving rise to the
change and not with respect to the ownership interest in the other corporation.
(v)
Compensation if Terminated Outside of Protected Period
. If, at any time other
than during the Protected Period, the Executives employment is terminated by the Company without
Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason within
6 months of the condition giving rise to the good reason, Executive shall be entitled to receive:
(A) the Accrued Rights;
(B) subject to Executives (x) continued compliance with the provisions of Sections 10 and 11
and (y) execution and delivery of a general release of claims against the Company and its
affiliates in a form reasonably acceptable to the Company, payment in one lump sum of:
(1) 100% of the greater of the current Base Salary or Executives highest Base
Salary paid within the Employment Term; plus
(2) 100% of Executives Target Annual Bonus;
payable to Executive in one lump sum immediately following the expiration of the revocation period
provided for in such release, but in no event later than two and a half (2-1/2) months after the
end of the year in which the Executives Termination of Employment occurred; and
(C) continued coverage under the Companys group health plans during the twelve (12) months
following Executives Date of Termination on the same basis as active employees of the Company.
(vi)
Compensation if Terminated during Protected Period
. If, during the Protected
Period, either the Executives employment is Terminated by the Company without
7
Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason,
Executive shall be entitled to receive:
(A) the Accrued Rights;
(B) subject to Executives (x) continued compliance with the provisions of Sections 10 and 11
and (y) execution and delivery of a general release of claims against the Company and its
affiliates in a form reasonably acceptable to the Company, payment in one lump sum of:
(1) 100% of the greater of the current Base Salary or Executives highest Base
Salary paid within the Employment Term; plus
(2) 100% of Executives Target Annual Bonus;
payable generally within ten (10) business days after Executives Date of Termination, or, if
later, upon the expiration of the revocation period provided for in such release, except when such
payment is delayed and paid in accordance with Section 9(b) for a determination under Section 9,
but in no event later than two and a half (2-1/2) months after the end of the year in which the
Executives Termination of Employment occurred; and
(C) continued coverage under the Companys group health plans during the twelve (12) months
following Executives Date of Termination on the same basis as active employees of the Company.
Following Executives Termination of Employment by the Company without Cause (other than by
reason of Executives death or Disability) or by Executives resignation for Good Reason, except as
set forth in this Section 8(c), Executive shall have no further rights to any compensation or any
other benefits under this Agreement.
d.
Expiration of Employment Term
.
(i)
Election Not to Renew the Employment Term
. In the event either party provides the
other with the Non-Renewal Notice pursuant to Section 1, unless Executives employment is earlier
terminated pursuant to paragraphs (a), (b) or (c) of this Section 8, the expiration of the
Employment Term and the Executives Termination of Employment hereunder (whether or not Executive
continues as an employee of the Company thereafter) shall be deemed to occur on the close of
business on the last day of such Employment Term and Executive shall be entitled to receive the
Accrued Rights. The Companys providing of a Non-Renewal Notice under Section 1 shall not
prejudice in any way Executives right to assert an event of Good Reason (as such term is defined
above), whether related to such Non-Renewal Notice or otherwise, at any time during the Employment
Term.
Following such termination of Executives employment hereunder, except as set forth in this
Section 8(d)(i), Executive shall have no further rights to any compensation or any other benefits
under this Agreement.
8
(ii)
Continued Employment Beyond the Expiration of the Employment Term
. Unless the
parties otherwise agree in writing, continuation of Executives employment with the Company beyond
the expiration of the Employment Term shall be deemed an employment at-will and shall not be deemed
to extend any of the provisions of this Agreement and Executives employment may thereafter be
terminated at will by either Executive or the Company; provided that the provisions of Sections 10,
11 and 12 of this Agreement shall survive any termination of this Agreement or Executives
Termination of Employment hereunder.
e.
Notice of Termination
. Any purported Termination of Employment by the Company or
by Executive (other than due to Executives death) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 13(i) hereof. For purposes of
this Agreement, a Notice of Termination shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for Termination of Employment under the
provision so indicated.
f.
Board/Committee Resignation
. Upon termination of Executives employment for any
reason, Executive agrees to resign, as of the date of such termination and to the extent
applicable, from the Board (and any committees thereof) and the Board of Directors (and any
committees thereof) of any of the Companys affiliates.
9.
Conditional Reduction in Payments
.
a. Notwithstanding anything in this Agreement to the contrary, in the event that it shall be
determined (as hereafter provided) that any payment or distribution provided for pursuant to the
terms of this Agreement for the benefit of Executive, when aggregated with any other payments or
benefits received or receivable by Executive (individually and collectively, a Payment), would
constitute parachute payments within the meaning of Section 280G of the Code, and would be
subject to the excise tax imposed by Section 4999 of the Code or to any similar tax imposed by
state or local law, or to any interest or penalties with respect to such taxes (such tax or taxes,
together with any such interest and penalties, being hereafter collectively referred to as the
Excise Tax), then Executives payments under Section 8 hereof shall be either:
(i) delivered in full, or
(ii) reduced to the minimum extent necessary so that no portion of the Payment, after
such reduction, constitutes an Excess Parachute Payment (as defined in Section 280G(b) of
the Code) (the amount of such reduction shall be referred to as the Excess Amount);
whichever of the foregoing amounts, taking into account the applicable federal, state and local
income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis of the
greatest amount of benefits, notwithstanding that all or some portion of such benefits may be
taxable under Section 4999 of the Code.
b. All determinations required to be made under this Section 9, including whether an Excise
Tax is payable by Executive and the amount of such Excise Tax and whether
9
a reduction in the Payment is to be made and the amount of such Excess Amount, if any, shall
be made by a nationally recognized accounting firm proposed by the Company and reasonably
acceptable to Executive (which accounting firm shall be the Accounting Firm hereunder). The
Company or Executive shall direct the Accounting Firm to submit its determination and detailed
supporting calculations to both the Company and Executive within 30 calendar days after the Date of
Termination, if applicable, and any other time or times as may be requested by the Company or
Executive. The Company shall pay Executives payments under Section 8 hereof, as reduced or not
reduced pursuant to the final determination of the Accounting Firm and Subsection 9(a) above, no
later than the later of (x) the time otherwise required hereunder or (y) five business days after
receipt of such determination. If the Accounting Firm determines that no Excise Tax is payable by
Executive, it shall, at the same time as it makes such determination, furnish the Company and
Executive an opinion that Executive has substantial authority not to report any Excise Tax on
Executives federal, state or local income or other tax return.
c. As a result of the uncertainty in the application of Section 4999 of the Code and the
possibility of similar uncertainty regarding applicable state or local tax law at the time of any
determination by the Accounting Firm hereunder, it is possible that, pursuant to a final
determination of a court or an Internal Revenue Service proceeding which has been finally and
conclusively resolved, an Excess Parachute Payment was received by Executive which would have been
intended to be reduced by the Excess Amount pursuant to Subsection 9(a) above. In such case, then
such amount received by Executive shall be deemed to be an overpayment, and Executive shall repay
the amount equal to the Excess Amount (to the extent received by Executive) to the Company on
demand (but no less than ten days after Executive receives written demand).
d. The Company and Executive shall each provide the Accounting Firm access to and copies of
any books, records and documents in the possession of the Company or Executive, as the case may be,
reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determinations and calculations contemplated by
Subsection 9(b). Any determination by the Accounting Firm as to the amount of any Excess Amount
shall be binding upon the Company and Executive.
e. The fees and expenses of the Accounting Firm for its services in connection with the
determinations and calculations contemplated by Subsection 9(b) shall be borne by the Company.
10.
Non-Competition
.
a. Executive acknowledges and recognizes the highly competitive nature of the businesses of
the Company and its affiliates and accordingly agrees as follows:
(i) During the Employment Term and the twelve (12) months following the date of Executives
Termination of Employment (the Restricted Period), Executive will not, whether on Executives own
behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture,
association, corporation or other business organization, entity or enterprise whatsoever
(Person), directly or indirectly solicit or assist in soliciting in
10
competition with the Company, the business of any client or customer or prospective client or
customer:
(A) with whom Executive had personal contact or dealings on behalf of the Company during the
one year period preceding the earlier of the Executives Termination of Employment or such
solicitation;
(B) with whom employees reporting to Executive have had personal contact or dealings on behalf
of the Company during the one year immediately preceding the Executives Termination of Employment;
or
(C) for whom Executive had direct or indirect responsibility during the one year immediately
preceding Executives Termination of Employment.
(ii) During the Restricted Period, Executive will not directly or indirectly:
(A) engage in (1) the business of manufacturing equipment used in (x) the production, storage
and end-use of hydrocarbon and industrial gases business or (y) low temperature and cryogenic
applications, (2) any other businesses which the Company or its subsidiaries engage in during the
term of Executives employment with the Company and (3) any businesses which, as of the date of
Executives Termination of Employment, the Company or its subsidiaries both (x) have specific plans
to conduct in the future (and as to which Executive is aware of such planning) and (y) have
allocated or invested capital as of the date of such Termination of Employment (a Competitive
Business);
(B) enter the employ of, or render any services to, any Person (or any division or controlled
or controlling affiliate of any Person) who or which engages in a Competitive Business;
(C) acquire a financial interest in, or otherwise become actively involved with, any
Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer,
director, principal, agent, trustee or consultant; or
(D) interfere with, or attempt to interfere with, business relationships (whether formed
before, on or after the date of this Agreement) between the Company or any of its affiliates and
customers, clients, suppliers, partners, members or investors of the Company or its affiliates.
(iii) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or
indirectly own, solely as an investment, securities of any Person engaged in the business of the
Company or its affiliates which are publicly traded on a national or regional stock exchange or
quotation system or on the over-the-counter market if Executive (i) is not a controlling person of,
or a member of a group which controls, such person and (ii) does not, directly or indirectly, own
5% or more of any class of securities of such Person.
(iv) During the Restricted Period, Executive will not, whether on Executives own behalf or on
behalf of or in conjunction with any Person, directly or indirectly:
11
(A) solicit or encourage any employee of the Company or its affiliates to leave the employment
of the Company or its affiliates; or
(B) hire any such employee who was employed by the Company or its affiliates as of the date of
Executives Termination of Employment with the Company or who left the employment of the Company or
its affiliates coincident with, or within one year prior to or after, the termination of
Executives employment with the Company.
(v) During the Restricted Period, Executive will not, directly or indirectly, solicit or
encourage to cease to work with the Company or its affiliates any consultant then under contract
with the Company or its affiliates.
b. It is expressly understood and agreed that although Executive and the Company consider the
restrictions contained in this Section 10 to be reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive, the provisions of
this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such maximum extent as such court may judicially determine or indicate to
be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the other restrictions
contained herein.
11.
Confidentiality; Intellectual Property
.
a.
Confidentiality
.
(i) Executive will not at any time (whether during or after Executives employment with the
Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person
other than the Company; or (y) disclose, divulge, reveal, communicate, share, transfer or provide
access to any Person outside the Company (other than its professional advisers who are bound by
confidentiality obligations or other than in performing his or her duties on behalf of the Company
consistent with Company policies), any non-public, proprietary or confidential
informationincluding without limitation trade secrets, know-how, research and development,
software, databases, inventions, processes, formulae, technology, designs and other intellectual
property, information concerning finances, investments, profits, pricing, costs, products,
services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting,
training, advertising, sales, marketing, promotions, government and regulatory activities and
approvals concerning the past, current or future business, activities and operations of the
Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any
of same to the Company on a confidential basis (Confidential Information) without the prior
written authorization of the Board or a duly authorized committee thereof.
(ii) Confidential Information shall not include any information that is (a) generally known
to the industry or the public other than as a result of Executives breach of this covenant or any
breach of other confidentiality obligations by third parties; (b) made
12
legitimately available to Executive by a third party without breach of any confidentiality
obligation; or (c) required by law to be disclosed; provided that Executive shall give prompt
written notice to the Company of such requirement, disclose no more information than is so
required, and cooperate with any attempts by the Company to obtain a protective order or similar
treatment.
(iii) Upon termination of Executives employment with the Company for any reason, Executive
shall (x) cease and not thereafter commence use of any Confidential Information or intellectual
property (including without limitation, any patent, invention, copyright, trade secret, trademark,
trade name, logo, domain name or other source indicator) owned or used by the Company, its
subsidiaries or affiliates; (y) immediately destroy, delete, or return to the Company, at the
Companys option, all originals and copies in any form or medium (including memoranda, books,
papers, plans, computer files, letters and other data) in Executives possession or control
(including any of the foregoing stored or located in Executives office, home, laptop or other
computer, whether or not Company property) that contain Confidential Information or otherwise
relate to the business of the Company, its affiliates and subsidiaries, except that Executive may
retain only those portions of any personal notes, notebooks and diaries that do not contain any
Confidential Information; and (z) notify and fully cooperate with the Company regarding the
delivery or destruction of any other Confidential Information of which Executive is or becomes
aware.
b.
Intellectual Property
.
(i) If Executive has created, invented, designed, developed, contributed to or improved any
works of authorship, inventions, intellectual property, materials, documents or other work product
(including without limitation, research, reports, software, databases, systems, applications,
presentations, textual works, content, or audiovisual materials) (Works), either alone or with
third parties, at any time during Executives employment by the Company and within the scope of
such employment and/or with the use of any of the Companys resources (Company Works), Executive
shall promptly and fully disclose same, to the best of his or her knowledge, to the Company and
hereby irrevocably assigns, transfers and conveys, to the maximum extent permitted by applicable
law, all rights and intellectual property rights therein (including rights under patent, industrial
property, copyright, trademark, trade secret, unfair competition and related laws) to the Company
to the extent ownership of any such rights does not vest originally in the Company.
(ii) Executive shall take all reasonably requested actions and execute all reasonably
requested documents (including any licenses or assignments required by a government contract) at
the Companys expense (but without further remuneration) to assist the Company in validating,
maintaining, protecting, enforcing, perfecting, recording, patenting or registering any of the
Companys rights in the Company Works.
(iii) Executive shall not improperly use for the benefit of, bring to any premises of,
divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Company
any confidential, proprietary or non-public information or intellectual property relating to a
former employer or other third party without the prior written permission of such third party.
Executive hereby indemnifies, holds harmless and agrees to defend the Company
13
and its officers, directors, partners, employees, agents and representatives from any breach
of the foregoing covenant. Executive shall comply with all relevant policies and guidelines of the
Company, including regarding the protection of confidential information and intellectual property
and potential conflicts of interest. Executive acknowledges that the Company may amend any such
policies and guidelines from time to time, and that Executive remains at all times bound by their
most current version.
(iv) The provisions of Section 11 shall survive the Executives Termination of Employment for
any reason.
12.
Specific Performance
. Executive acknowledges and agrees that the Companys
remedies at law for a breach or threatened breach of any of the provisions of Section 10 or Section
11 would be inadequate and the Company would suffer irreparable damages as a result of such breach
or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law, the Company, without posting any
bond, shall be entitled to cease making any payments or providing any benefit otherwise required by
this Agreement and obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any other equitable remedy which may then
be available.
13.
Miscellaneous
.
a.
Governing Law
. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to conflicts of laws principles thereof.
b.
Dispute Resolution
. Except as otherwise provided in Section 12 of this Agreement,
any controversy, dispute, or claim arising out of, in connection with, or in relation to, the
interpretation, performance or breach of this Agreement, including, without limitation, the
validity, scope, and enforceability of this section, may at the election of any party, be solely
and finally settled by arbitration conducted in Cleveland, Ohio, by and in accordance with the then
existing rules for commercial arbitration of the American Arbitration Association, or any successor
organization and with the Expedited Procedures thereof (collectively, the Rules). Each of the
parties hereto agrees that such arbitration shall be conducted by a single arbitrator selected in
accordance with the Rules; provided that such arbitrator shall be experienced in deciding cases
concerning the matter which is the subject of the dispute. Any of the parties may demand
arbitration by written notice to the other and to the Arbitrator set forth in this Section 13(b)
(Demand for Arbitration). Each of the parties agrees that if possible, the award shall be made
in writing no more than 30 days following the end of the proceeding. Any award rendered by the
arbitrator(s) shall be final and binding and judgment may be entered on it in any court of
competent jurisdiction. Each of the parties hereto agrees to treat as confidential the results of
any arbitration (including, without limitation, any findings of fact and/or law made by the
arbitrator) and not to disclose such results to any unauthorized person. The parties intend that
this agreement to arbitrate be valid, enforceable and irrevocable. In the event of any arbitration
with regard to this Agreement, each party shall pay its own legal fees and expenses except to the
extent set forth in Section 13(p), provided, however, that the Company agrees to pay the cost of
the Arbitrators fees.
14
c.
Entire Agreement/Amendments
. This Agreement contains the entire understanding of
the parties with respect to the employment of Executive by the Company. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. This Agreement may not be
altered, modified, or amended except by written instrument signed by the parties hereto.
d.
No Waiver
. The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of such partys rights or deprive
such party of the right thereafter to insist upon strict adherence to that term or any other term
of this Agreement.
e.
Severability
. In the event that any one or more of the provisions of this
Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions of this Agreement shall not be affected
thereby.
f.
Assignment
. This Agreement, and all of Executives rights and duties hereunder,
shall not be assignable or delegable by Executive. Any purported assignment or delegation by
Executive in violation of the foregoing shall be null and void ab initio and of no force and
effect. This Agreement may be assigned by the Company to a person or entity which is an affiliate
or a successor in interest to substantially all of the business operations of the Company. The
Company will require any person or entity which is an affiliate or a successor in interest to
substantially all of the business operations of the Company to assume all obligations of the
Company under this Agreement.
g.
Set Off; No Mitigation
. The Companys obligation to pay Executive the amounts
provided and to make the arrangements provided hereunder shall be subject to bona fide set off,
counterclaim or recoupment in good faith of amounts owed by Executive to the Company or its
affiliates. Executive shall not be required to mitigate the amount of any payment provided for
pursuant to this Agreement by seeking other employment.
h.
Successors; Binding Agreement
. This Agreement shall inure to the benefit of and be
binding upon personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
i.
Notice
. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand or overnight courier or three days after it has been mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the respective addresses
set forth below in this Agreement, or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
15
If to the Company:
Chart Industries, Inc.
One Infinity Corporate Centre Drive, Suite 300
Garfield Heights, Ohio 44125
Facsimile: (440) 753-1491
Attention: Chief Financial Officer and General Counsel
If to Executive:
To the most recent address of Executive set forth in the personnel records of the Company.
j.
Executive Representation
. Executive hereby represents to the Company that the
execution and delivery of this Agreement by Executive and the Company and the performance by
Executive of Executives duties hereunder shall not constitute a breach of, or otherwise
contravene, the terms of any employment agreement or other agreement or policy to which Executive
is a party or otherwise bound.
k.
Prior Agreements
. This Agreement supercedes all prior agreements and
understandings (including verbal agreements) between Executive and the Company and/or its
affiliates regarding the terms and conditions of Executives employment with the Company and/or its
affiliates, except that this Agreement does not supercede any stock option agreement, performance
unit agreement, or indemnification agreement.
l.
Cooperation
. Executive shall provide Executives reasonable cooperation in
connection with any action or proceeding (or any appeal from any action or proceeding) which
relates to events occurring during Executives employment hereunder. This provision shall survive
any termination of this Agreement.
m.
Withholding Taxes
. The Company may withhold from any amounts payable under this
Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any
applicable law or regulation.
n.
Counterparts
. This Agreement may be signed in counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.
o.
Compliance with Section 409A
. Notwithstanding anything herein to the contrary, (i)
if at the time of Executives Termination of Employment with the Company Executive is a specified
employee as defined in Section 409A of the Code, and the deferral of the commencement of any
payments or benefits otherwise payable hereunder as a result of such Termination of Employment is
necessary in order to prevent the imposition of any accelerated or additional tax under Section
409A of the Code, then the Company will defer the commencement of the payment of any such payments
or benefits hereunder (without any reduction in such payments or benefits ultimately paid or
provided to Executive) until the date that is six months following Executives Termination of
Employment with the Company (or the earliest date as is permitted under Section 409A of the Code)
and (ii) if any other payments of money or other
16
benefits due to Executive hereunder could cause the application of an accelerated or
additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if
deferral will make such payment or other benefits compliant under Section 409A of the Code, or
otherwise such payment or other benefits shall be restructured, to the extent possible, in a
manner, determined by the Board or any duly authorized committee thereof, that does not cause such
an accelerated or additional tax or result in an additional cost to the Company. The Company shall
consult with Executive in good faith regarding the implementation of the provisions of this Section
13(o); provided that neither the Company nor any of its employees or representatives shall have any
liability to Executive with respect thereto.
p.
Enforcement Costs
. The Company is aware that upon the occurrence of a Change in
Control the Board of Directors or a shareholder of the Company may then cause or attempt to cause
the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt
to cause the Company to institute, or may institute, litigation or arbitration seeking to have this
Agreement declared unenforceable, or may take, or attempt to take, other action to deny Executive
the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement
could be frustrated. It is the intent of the Company that Executive not be required to incur the
expenses associated with the enforcement of Executives rights under this Agreement by litigation,
arbitration or other legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to Executive hereunder, nor be bound to negotiate any
settlement of Executives rights hereunder under threat of incurring such expenses. Accordingly,
if at any time following a Change in Control, it should appear to Executive that the Company has
failed to comply with any of its obligations under this Agreement or the Company or any other
person takes any action to declare this Agreement void or unenforceable, or institutes any
litigation, arbitration or other legal action designed to deny, diminish or recover from Executive
the benefits intended to be provided to Executive hereunder, and Executive has complied with all of
Executives obligations under Sections 10 and 11, then the Company irrevocably authorizes Executive
from time to time to retain counsel of Executives choice at the expense of the Company as provided
in this Section 13(p) to represent Executive in connection with the initiation or defense of any
litigation, arbitration or other legal action, whether by or against the Company or any Director,
officer, shareholder or other person affiliated with the Company, in any jurisdiction. The
Companys obligations under this Section 13(p) shall not be conditioned on Executives success in
the prosecution or defense of any such litigation, arbitration or other legal action.
Notwithstanding any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to Executive entering into an attorney-client
relationship with such counsel, and in that connection the Company and Executive agree that a
confidential relationship shall exist between Executive and such counsel. The reasonable fees and
expenses of counsel selected from time to time by Executive as hereinabove provided shall be paid
or reimbursed to Executive by the Company on a regular, periodic basis no later than 30 days after
presentation by Executive of a statement or statements prepared by such counsel in accordance with
its customary practices, up to a maximum aggregate amount of $500,000, provided that Executive
presents such statement(s) no later than 30 days prior to the end of Executives taxable year
following the year in which such expenses were incurred. Notwithstanding the foregoing, this
Section 13(p) shall not apply at any time unless a Change in Control has occurred.
17
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year
first above written.
|
|
|
|
|
CHART INDUSTRIES, INC.
|
|
MATTHEW J. KLABEN
|
(Company)
|
|
(Executive)
|
|
|
|
|
|
By:
|
|
/s/ Michael F. Biehl
|
|
/s/ Matthew J. Klaben
|
|
|
|
|
|
Name:
|
|
Michael F. Biehl
|
|
|
|
|
|
|
|
Title:
|
|
Executive Vice President, Chief Financial
|
|
|
|
|
Officer & Treasurer
|
|
|
18
Exhibit 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the Agreement) dated February 26, 2008 by and between Chart
Industries, Inc. (the Company) and James H. Hoppel, Jr. (the Executive).
The Company desires to employ Executive and to enter into an agreement embodying the terms of
such employment; and
Executive desires to accept such employment and enter into such an agreement.
In consideration of the premises and mutual covenants herein and for other good and valuable
consideration, the parties agree as follows:
1.
Term of Employment
. Subject to the provisions of Section 8 of this Agreement,
Executive shall be employed by the Company, on the terms and subject to the conditions set forth in
this Agreement, for the period commencing on February 26, 2008, and ending on the second
anniversary of said date (the Employment Term). Thereafter the Employment Term shall
automatically be extended on February 26 of each year for a period of one year from such date. In
addition, in the event of a Change in Control, the Employment Term shall automatically be extended
for a period of three years beginning on the date of the Change in Control and ending on the third
anniversary of the date of such Change in Control (unless further extended under the immediately
preceding sentence). The Company or Executive may give notice to the other party that the
Employment Term shall no longer be extended (the Non-Renewal Notice), in which event the
Employment Term shall expire on the latest of: (i) such second anniversary of the original
Employment Term commencement date, (ii) such third anniversary of a Change in Control, or (iii) the
first anniversary of the delivery of such Non-Renewal Notice. In any case, the Employment Term may
be terminated earlier under the terms and conditions set forth herein.
2.
Position
.
a.
Title
. During the Employment Term, Executive shall serve as the Companys Vice
President Corporate Development, effective March 1, 2008. In such position, Executive shall have
such duties, authority and responsibility as shall be determined from time to time by the Board of
Directors of the Company (the Board), the Chief Executive Officer or the Chief Financial Officer
of the Company, which duties, authority and responsibility are consistent with the position of Vice
President Corporate Development of the Company.
b.
Best Efforts
. During the Employment Term, Executive will devote Executives full
business time and best efforts to the performance of Executives duties hereunder and will not
engage in any other business, profession or occupation for compensation or otherwise which would
conflict or interfere with the rendition of such services either directly or indirectly, without
the prior written consent of the Board; provided that nothing herein shall preclude Executive,
subject to the prior approval of the Board, from accepting appointment to or continue to serve on
any board of directors or trustees of any business corporation or any
charitable organization; provided in each case, and in the aggregate, that such activities do
not conflict or interfere with the performance of Executives duties hereunder or conflict with
Section 10.
c.
Place of Employment
. In connection with Executives employment by the Company,
Executive shall not be required to relocate or move from Executives existing principal residence
in North Olmsted, OH, and shall not be required to perform services which would make the
continuance of Executives principal residence in North Olmsted, OH, unreasonably difficult or
inconvenient for Executive. The Company shall give Executive at least six months advance notice
of any proposed relocation of its offices at which Executives present principal office is located
to a location more than 50 miles from such present location, and, if Executive in Executives sole
discretion chooses to relocate Executives principal residence as a result of such office
relocation, the Company shall promptly pay (or reimburse Executive for) all reasonable relocation
expenses (consistent with the Companys past practice for similarly situated senior executive
officers) incurred by Executive relating to a change of Executives principal residence in
connection with any such relocation of the Companys offices from such present location.
3.
Base Salary
. During the Employment Term, the Company shall pay Executive a base
salary at the annual rate of $192,000, payable in regular installments in accordance with the
Companys usual payment practices. Executive shall be entitled to such increases in Executives
base salary, if any, as may be determined from time to time in the sole discretion of the Board or
any duly authorized committee thereof. Executives annual base salary, as in effect from time to
time, is hereinafter referred to as the Base Salary.
4.
Annual Bonus
. With respect to each full fiscal year during the Employment Term
(commencing with the 2008 fiscal year), Executive shall be eligible to earn an annual bonus award
(an Annual Bonus) of up to one hundred fifty percent (150%) of sixty-five percent (65%) of the
Executives Base Salary (with it being understood that sixty-five percent (65%) of the Executives
Base Salary is the Target) based upon the achievement of the performance targets established by
the Board, or any duly authorized committee thereof, within the first three months of each fiscal
year during the Employment Term. The Annual Bonus, if any, shall be paid to Executive within two
and one-half (2.5) months after the end of the applicable fiscal year. Any Annual Bonus payable
hereunder shall be determined in accordance with the terms of the Companys Incentive Compensation
Plan, as currently in effect and as it may be amended from time to time, including any successor
plan. In the event of a Change In Control as defined in the Incentive Compensation Plan, the
annual bonus may be pro-rated in accordance with the terms of the Incentive Compensation Plan.
5.
Employee Benefits
. During the Employment Term, Executive shall be entitled to
participate in the Companys employee benefit plans (other than annual bonus and incentive plans)
providing for health, life and disability insurance, retirement, deferred compensation and fringe
benefits, as well as any equity compensation plans, as in effect from time to time (collectively
Employee Benefits), on the same basis as those benefits are generally made available to other
senior executives of the Company. Executives right to participate in any Employee Benefits shall
be subject to the applicable eligibility criteria for participation and Executive shall not be
entitled to any benefits under, or based on, any Employee Benefits for any purposes of this
Agreement if Executive does not during the Employment Term satisfy the
2
eligibility criteria for participation in such Employee Benefits. Any equity incentive
granted, awarded and held by the Executive shall be governed by the applicable terms of any such
grant and award, and shall not be impacted by the terms of this Agreement, except to the extent
taken into account in determinations under Section 9.
6.
Vacation
. During the Employment Term, Executive shall be entitled to 3 weeks of
paid vacation annually to be taken at such times as chosen by Executive. Notwithstanding the
foregoing, after five years of employment with the Company, Executive shall be entitled to four
weeks of paid vacation annually to be taken at such times as chosen by Executive.
7.
Business Expenses and Perquisites
.
a.
Expenses
. During the Employment Term, reasonable business expenses incurred by
Executive in the performance of Executives duties hereunder shall be reimbursed by the Company in
accordance with Company policies.
b.
Perquisites
. During the Employment Term, Executive shall be eligible for an
automobile allowance of up to $800 per month, consistent with the Companys current practices.
8.
Termination
. The Employment Term and Executives employment hereunder may be
terminated by either party at any time and for any reason; provided that Executive will be required
to give the Company at least 60 days advance written notice of any resignation of Executives
employment. The provisions of this Section 8 governs Executives rights upon Termination of
Employment with the Company and its affiliates. Termination of Employment as used in this
Agreement means the separation from service, within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended from time to time (Code, any reference in this Agreement to a
Section of the Code shall include all lawful regulations and pronouncements promulgated thereunder,
as well as any successor Sections of the Code having the same or similar purpose), of Executive
with the Company and all of its affiliates, for any reason, including without limitation, quit,
discharge, or retirement, or a leave of absence (including military leave, sick leave, or other
bona fide leave of absence such as temporary employment by the government if the period of such
leave exceeds the greater of six months, or the period for which Executives right to reemployment
is provided either by statute or by contract) or permanent decrease in service to a level that is
no more than Twenty Percent (20%) of its prior level. For this purpose, whether a Termination of
Employment has occurred is determined based on whether it is reasonably anticipated that no further
services will be performed by Executive after a certain date or that the level of bona fide
services Executive will perform after such date (whether as an employee or as an independent
contractor) would permanently decrease to no more than Twenty Percent (20%) of the average level of
bona fide services performed (whether as an employee or an independent contractor) over the
immediately preceding 36-month period (or the full period of services if Executive has been
providing services less than 36 months). The terms Terminate or Terminated, when used in
reference to Executives employment or the Employment Period, shall refer to a Termination of
Employment as set forth in this paragraph. Date of Termination refers to the effective date of
Executives Termination of Employment.
3
a.
Termination By the Company For Cause or By Executive Resignation Without Good
Reason
.
(i)
Events
. The Employment Term and Executives employment hereunder may be
terminated by the Company for Cause (as defined below) and shall terminate automatically upon
Executives resignation without Good Reason (as defined in Section 8(c)); provided that Executive
will be required to give the Company at least 60 days advance written notice of a resignation
without Good Reason.
(ii)
For Cause
. For purposes of this Agreement, Cause shall mean the Executives
(A) willful failure to perform duties which, if curable, is not cured promptly, or in any event
within ten (10) days, following the first written notice of such failure from the Company, (B)
commission of, or plea of guilty or no contest to a (x) felony or (y) crime involving moral
turpitude, (C) willful malfeasance or misconduct which is demonstrably injurious to the Company or
its subsidiaries or affiliates, (D) material breach of the material terms of this Agreement,
including, without limitation, any non-competition, non-solicitation or confidentiality provisions,
(E) commission of any act of gross negligence, corporate waste, disloyalty or unfaithfulness to the
Company which adversely affects the business of the Company or its subsidiaries or affiliates, or
(F) any other act or course of conduct which will demonstrably have a material adverse effect on
the Company, a subsidiary or affiliates business.
(iii)
Compensation
. If Executives employment is terminated by the Company for Cause,
or if Executive resigns without Good Reason, Executive shall be entitled to receive the amounts in
clauses (A) through (D) below referred to herein as Accrued Rights:
(A) the Base Salary through the Date of Termination;
(B) any Annual Bonus earned, but unpaid, as of the Date of Termination for the immediately
preceding fiscal year, paid in accordance with Section 4 (except to the extent payment is otherwise
deferred pursuant to any applicable deferred compensation arrangement with the Company);
(C) reimbursement, within 60 days following submission by Executive to the Company of
appropriate supporting documentation, for any unreimbursed business expenses properly incurred by
Executive in accordance with Company policy prior to the date of Executives Termination of
Employment; provided claims for such reimbursement (accompanied by appropriate supporting
documentation) are submitted to the Company within 90 days following the date of Executives
Termination of Employment; and
(D) such Employee Benefits, if any, as to which Executive may be entitled under the employee
benefit plans of the Company, including payment for any accrued but unused vacation within 30 days
following the date of Executives Date of Termination.
Following such Termination of Employment by the Company for Cause or resignation by Executive
without Good Reason, except as set forth in this Section 8(a)(iii), Executive shall have no
further rights to any compensation or any other benefits under this Agreement.
4
b.
Disability or Death
.
(i)
Events
. The Employment Term and Executives employment hereunder shall terminate
upon Executives death and may be terminated by the Company if Executive becomes physically or
mentally incapacitated and is therefore unable for a period of six (6) consecutive months or for an
aggregate of nine (9) months in any twenty-four (24) consecutive month period to perform
Executives duties (such incapacity is hereinafter referred to as Disability). In no event shall
an Executives employment be continued beyond the 29th month of absence due to Executives
Disability. Any question as to the existence of the Disability of Executive as to which Executive
and the Company cannot agree shall be determined in writing by a qualified independent physician
mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to
a qualified independent physician, each shall appoint such a physician and those two physicians
shall select a third who shall make such determination in writing. The determination of Disability
made in writing to the Company and Executive shall be final and conclusive for all purposes of the
Agreement.
(ii)
Compensation
. Upon Executives Termination of Employment hereunder for either
Disability or death, Executive or Executives estate (as the case may be) shall be entitled to
receive:
(A) the Accrued Rights; and
(B) a pro rata portion of the Annual Bonus, if any, that Executive would have been entitled to
receive pursuant to Section 4 hereof for such year based upon the Companys actual results for the
year of termination and the percentage of the fiscal year that shall have elapsed through the
Executives Date of Termination, payable to Executive pursuant to Section 4 had Executives
employment not terminated.
Following Executives Termination of Employment due to death or Disability, except as set
forth in this Section 8(b)(ii), Executive shall have no further rights to any compensation or any
other benefits under this Agreement.
c.
Termination by the Company Without Cause or Resignation by Executive for Good
Reason
.
(i)
Events
. The Employment Term and Executives employment hereunder may be
terminated by the Company without Cause or by Executives resignation for Good Reason at any time
including during the Protected Period.
(ii)
Good Reason
. For purposes of this Agreement, Good Reason shall mean, without
Executives consent: (i) a material diminution in Executives base salary (excluding any general
salary reduction similarly affecting substantially all other senior executives of the Company as a
result of a material adverse change in the Companys prospects or business); (ii) a material
diminution in Executives authority, duties, or responsibilities; (iii) a material change in the
geographic location at which Executive must perform services; or (iv) any other action or inaction
that constitutes a material breach by the Company of this Agreement; provided, however, that Good
Reason shall not be deemed to exist unless: (A) the Executive has provided notice to the Company
of the existence of one or more of the conditions listed in (i)
5
through (iv) within 90 days after the initial occurrence of such condition or conditions; and
(B) such condition or conditions have not been cured by the Company within 30 days after receipt of
such notice. Simply the receipt by the Executive of a Non-Renewal Notice from the Company shall
not, in and of itself, be deemed to be an event of Good Reason under this Agreement.
(iii)
Protected Period
. For purposes of this Agreement, Protected Period shall mean
the period of time commencing on the date of a Change in Control and ending two years after such
date.
(iv)
Change in Control
. For purposes of this Agreement, Change in Control shall
mean, with respect to the Executive, the happening of any of the following events (but only if with
respect to the Executive, such event would constitute a change in the ownership or effective
control of the corporation, or in the ownership of a substantial portion of the assets of the
corporation, as defined under Section 409A of the Code):
(A) a change in the ownership of the Company (or any affiliate which either employs the
Executive or is a direct or indirect parent of such employer) by which any one person, or more than
one person acting as a group, acquires ownership of stock of the Company (or such an affiliate)
that, together with stock held by such person or group, constitutes more than Fifty Percent (50%)
of the total fair market value or total voting power of the stock of the Company (or such an
affiliate). However, if any one person, or more than one person acting as a group, is considered
to own more than 50% of the total fair market value or total voting power of the stock of the
Company (or such an affiliate), the acquisition of additional stock by the same person or persons
is not considered to cause a Change in Control. (An increase in the percentage of stock owned by
any one person, or persons acting as a group, as a result of a transaction in which the Company (or
such an affiliate) acquires its stock in exchange for property will be treated as an acquisition of
stock for purposes of this definition. This parenthetical phrase applies only when there is a
transfer of stock of the Company (or issuance of stock of the Company) (or such an affiliate) and
stock in the Company (or such an affiliate) remains outstanding after the transaction.)
(B) a change in effective control of the Company (or any affiliate which either employs the
Executive or is a direct or indirect parent of such employer) by which:
(1) any one person, or more than one person acting as a group, acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the Company (or such an
affiliate) possessing Thirty Percent (30%) or more of the total voting power of the
stock of the Company (or such an affiliate); or
(2) a majority of members of the Board of Directors is replaced during any
12-month period by Directors whose appointment or election is not endorsed by a
majority of the members of the Board of Directors before the date of the appointment
or election.
6
(C) a change in the ownership of a substantial portion of the assets of the Company (or any
affiliate which either employs the Executive or is a direct or indirect parent of such employer) by
which any one person, or more than one person acting as a group, acquires (or has acquired during
the 12-month period ending on the date of the most recent acquisition by such person or persons)
assets from the Company (or such an affiliate) that have a total gross fair market value equal to
or more than Forty Percent (40%) of the total gross fair market value of all of the assets of the
Company (or such an affiliate) immediately prior to such acquisition or acquisitions. For this
purpose, gross fair market value means the value of the assets of the corporation, or the value of
the assets being disposed of, determined without regard to any liabilities associated with such
assets.
For purposes of this definition, persons will be considered to be acting as a group if they are
owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock,
or similar business transaction with the Company. If a person, including an entity, owns stock in
both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or
similar transaction, such shareholder is considered to be acting as a group with other shareholders
only with respect to the ownership in that corporation before the transaction giving rise to the
change and not with respect to the ownership interest in the other corporation.
(v)
Compensation if Terminated Outside of Protected Period
. If, at any time other
than during the Protected Period, the Executives employment is terminated by the Company without
Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason within
6 months of the condition giving rise to the good reason, Executive shall be entitled to receive:
(A) the Accrued Rights;
(B) subject to Executives (x) continued compliance with the provisions of Sections 10 and 11
and (y) execution and delivery of a general release of claims against the Company and its
affiliates in a form reasonably acceptable to the Company, payment in one lump sum of:
(1) 100% of the greater of the current Base Salary or Executives highest Base
Salary paid within the Employment Term; plus
(2) 100% of Executives Target Annual Bonus;
payable to Executive in one lump sum immediately following the expiration of the revocation period
provided for in such release, but in no event later than two and a half (2-1/2) months after the
end of the year in which the Executives Termination of Employment occurred; and
(C) continued coverage under the Companys group health plans during the twelve (12) months
following Executives Date of Termination on the same basis as active employees of the Company.
(vi)
Compensation if Terminated during Protected Period
. If, during the Protected
Period, either the Executives employment is Terminated by the Company without
7
Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason,
Executive shall be entitled to receive:
(A) the Accrued Rights;
(B) subject to Executives (x) continued compliance with the provisions of Sections 10 and 11
and (y) execution and delivery of a general release of claims against the Company and its
affiliates in a form reasonably acceptable to the Company, payment in one lump sum of:
(1) 100% of the greater of the current Base Salary or Executives highest Base
Salary paid within the Employment Term; plus
(2) 100% of Executives Target Annual Bonus;
payable generally within ten (10) business days after Executives Date of Termination, or, if
later, upon the expiration of the revocation period provided for in such release, except when such
payment is delayed and paid in accordance with Section 9(b) for a determination under Section 9,
but in no event later than two and a half (2-1/2) months after the end of the year in which the
Executives Termination of Employment occurred; and
(C) continued coverage under the Companys group health plans during the twelve (12) months
following Executives Date of Termination on the same basis as active employees of the Company.
Following Executives Termination of Employment by the Company without Cause (other than by
reason of Executives death or Disability) or by Executives resignation for Good Reason, except as
set forth in this Section 8(c), Executive shall have no further rights to any compensation or any
other benefits under this Agreement.
d.
Expiration of Employment Term
.
(i)
Election Not to Renew the Employment Term
. In the event either party provides the
other with the Non-Renewal Notice pursuant to Section 1, unless Executives employment is earlier
terminated pursuant to paragraphs (a), (b) or (c) of this Section 8, the expiration of the
Employment Term and the Executives Termination of Employment hereunder (whether or not Executive
continues as an employee of the Company thereafter) shall be deemed to occur on the close of
business on the last day of such Employment Term and Executive shall be entitled to receive the
Accrued Rights. The Companys providing of a Non-Renewal Notice under Section 1 shall not
prejudice in any way Executives right to assert an event of Good Reason (as such term is defined
above), whether related to such Non-Renewal Notice or otherwise, at any time during the Employment
Term.
Following such termination of Executives employment hereunder, except as set forth in this
Section 8(d)(i), Executive shall have no further rights to any compensation or any other benefits
under this Agreement.
8
(ii)
Continued Employment Beyond the Expiration of the Employment Term
. Unless the
parties otherwise agree in writing, continuation of Executives employment with the Company beyond
the expiration of the Employment Term shall be deemed an employment at-will and shall not be deemed
to extend any of the provisions of this Agreement and Executives employment may thereafter be
terminated at will by either Executive or the Company; provided that the provisions of Sections 10,
11 and 12 of this Agreement shall survive any termination of this Agreement or Executives
Termination of Employment hereunder.
e.
Notice of Termination
. Any purported Termination of Employment by the Company or
by Executive (other than due to Executives death) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 13(i) hereof. For purposes of
this Agreement, a Notice of Termination shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for Termination of Employment under the
provision so indicated.
f.
Board/Committee Resignation
. Upon termination of Executives employment for any
reason, Executive agrees to resign, as of the date of such termination and to the extent
applicable, from the Board (and any committees thereof) and the Board of Directors (and any
committees thereof) of any of the Companys affiliates.
9.
Conditional Reduction in Payments
.
a. Notwithstanding anything in this Agreement to the contrary, in the event that it shall be
determined (as hereafter provided) that any payment or distribution provided for pursuant to the
terms of this Agreement for the benefit of Executive, when aggregated with any other payments or
benefits received or receivable by Executive (individually and collectively, a Payment), would
constitute parachute payments within the meaning of Section 280G of the Code, and would be
subject to the excise tax imposed by Section 4999 of the Code or to any similar tax imposed by
state or local law, or to any interest or penalties with respect to such taxes (such tax or taxes,
together with any such interest and penalties, being hereafter collectively referred to as the
Excise Tax), then Executives payments under Section 8 hereof shall be either:
(i) delivered in full, or
(ii) reduced to the minimum extent necessary so that no portion of the Payment, after
such reduction, constitutes an Excess Parachute Payment (as defined in Section 280G(b) of
the Code) (the amount of such reduction shall be referred to as the Excess Amount);
whichever of the foregoing amounts, taking into account the applicable federal, state and local
income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis of the
greatest amount of benefits, notwithstanding that all or some portion of such benefits may be
taxable under Section 4999 of the Code.
b. All determinations required to be made under this Section 9, including whether an Excise
Tax is payable by Executive and the amount of such Excise Tax and whether
9
a reduction in the Payment is to be made and the amount of such Excess Amount, if any, shall
be made by a nationally recognized accounting firm proposed by the Company and reasonably
acceptable to Executive (which accounting firm shall be the Accounting Firm hereunder). The
Company or Executive shall direct the Accounting Firm to submit its determination and detailed
supporting calculations to both the Company and Executive within 30 calendar days after the Date of
Termination, if applicable, and any other time or times as may be requested by the Company or
Executive. The Company shall pay Executives payments under Section 8 hereof, as reduced or not
reduced pursuant to the final determination of the Accounting Firm and Subsection 9(a) above, no
later than the later of (x) the time otherwise required hereunder or (y) five business days after
receipt of such determination. If the Accounting Firm determines that no Excise Tax is payable by
Executive, it shall, at the same time as it makes such determination, furnish the Company and
Executive an opinion that Executive has substantial authority not to report any Excise Tax on
Executives federal, state or local income or other tax return.
c. As a result of the uncertainty in the application of Section 4999 of the Code and the
possibility of similar uncertainty regarding applicable state or local tax law at the time of any
determination by the Accounting Firm hereunder, it is possible that, pursuant to a final
determination of a court or an Internal Revenue Service proceeding which has been finally and
conclusively resolved, an Excess Parachute Payment was received by Executive which would have been
intended to be reduced by the Excess Amount pursuant to Subsection 9(a) above. In such case, then
such amount received by Executive shall be deemed to be an overpayment, and Executive shall repay
the amount equal to the Excess Amount (to the extent received by Executive) to the Company on
demand (but no less than ten days after Executive receives written demand).
d. The Company and Executive shall each provide the Accounting Firm access to and copies of
any books, records and documents in the possession of the Company or Executive, as the case may be,
reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determinations and calculations contemplated by
Subsection 9(b). Any determination by the Accounting Firm as to the amount of any Excess Amount
shall be binding upon the Company and Executive.
e. The fees and expenses of the Accounting Firm for its services in connection with the
determinations and calculations contemplated by Subsection 9(b) shall be borne by the Company.
10.
Non-Competition
.
a. Executive acknowledges and recognizes the highly competitive nature of the businesses of
the Company and its affiliates and accordingly agrees as follows:
(i) During the Employment Term and the twelve (12) months following the date of Executives
Termination of Employment (the Restricted Period), Executive will not, whether on Executives own
behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture,
association, corporation or other business organization, entity or enterprise whatsoever
(Person), directly or indirectly solicit or assist in soliciting in
10
competition with the Company, the business of any client or customer or prospective client or
customer:
(A) with whom Executive had personal contact or dealings on behalf of the Company during the
one year period preceding the earlier of the Executives Termination of Employment or such
solicitation;
(B) with whom employees reporting to Executive have had personal contact or dealings on behalf
of the Company during the one year immediately preceding the Executives Termination of Employment;
or
(C) for whom Executive had direct or indirect responsibility during the one year immediately
preceding Executives Termination of Employment.
(ii) During the Restricted Period, Executive will not directly or indirectly:
(A) engage in (1) the business of manufacturing equipment used in (x) the production, storage
and end-use of hydrocarbon and industrial gases business or (y) low temperature and cryogenic
applications, (2) any other businesses which the Company or its subsidiaries engage in during the
term of Executives employment with the Company and (3) any businesses which, as of the date of
Executives Termination of Employment, the Company or its subsidiaries both (x) have specific plans
to conduct in the future (and as to which Executive is aware of such planning) and (y) have
allocated or invested capital as of the date of such Termination of Employment (a Competitive
Business);
(B) enter the employ of, or render any services to, any Person (or any division or controlled
or controlling affiliate of any Person) who or which engages in a Competitive Business;
(C) acquire a financial interest in, or otherwise become actively involved with, any
Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer,
director, principal, agent, trustee or consultant; or
(D) interfere with, or attempt to interfere with, business relationships (whether formed
before, on or after the date of this Agreement) between the Company or any of its affiliates and
customers, clients, suppliers, partners, members or investors of the Company or its affiliates.
(iii) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or
indirectly own, solely as an investment, securities of any Person engaged in the business of the
Company or its affiliates which are publicly traded on a national or regional stock exchange or
quotation system or on the over-the-counter market if Executive (i) is not a controlling person of,
or a member of a group which controls, such person and (ii) does not, directly or indirectly, own
5% or more of any class of securities of such Person.
(iv) During the Restricted Period, Executive will not, whether on Executives own behalf or on
behalf of or in conjunction with any Person, directly or indirectly:
11
(A) solicit or encourage any employee of the Company or its affiliates to leave the employment
of the Company or its affiliates; or
(B) hire any such employee who was employed by the Company or its affiliates as of the date of
Executives Termination of Employment with the Company or who left the employment of the Company or
its affiliates coincident with, or within one year prior to or after, the termination of
Executives employment with the Company.
(v) During the Restricted Period, Executive will not, directly or indirectly, solicit or
encourage to cease to work with the Company or its affiliates any consultant then under contract
with the Company or its affiliates.
b. It is expressly understood and agreed that although Executive and the Company consider the
restrictions contained in this Section 10 to be reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive, the provisions of
this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such maximum extent as such court may judicially determine or indicate to
be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the other restrictions
contained herein.
11.
Confidentiality; Intellectual Property
.
a.
Confidentiality
.
(i) Executive will not at any time (whether during or after Executives employment with the
Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person
other than the Company; or (y) disclose, divulge, reveal, communicate, share, transfer or provide
access to any Person outside the Company (other than its professional advisers who are bound by
confidentiality obligations or other than in performing his or her duties on behalf of the Company
consistent with Company policies), any non-public, proprietary or confidential
informationincluding without limitation trade secrets, know-how, research and development,
software, databases, inventions, processes, formulae, technology, designs and other intellectual
property, information concerning finances, investments, profits, pricing, costs, products,
services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting,
training, advertising, sales, marketing, promotions, government and regulatory activities and
approvals concerning the past, current or future business, activities and operations of the
Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any
of same to the Company on a confidential basis (Confidential Information) without the prior
written authorization of the Board or a duly authorized committee thereof.
(ii) Confidential Information shall not include any information that is (a) generally known
to the industry or the public other than as a result of Executives breach of this covenant or any
breach of other confidentiality obligations by third parties; (b) made
12
legitimately available to Executive by a third party without breach of any confidentiality
obligation; or (c) required by law to be disclosed; provided that Executive shall give prompt
written notice to the Company of such requirement, disclose no more information than is so
required, and cooperate with any attempts by the Company to obtain a protective order or similar
treatment.
(iii) Upon termination of Executives employment with the Company for any reason, Executive
shall (x) cease and not thereafter commence use of any Confidential Information or intellectual
property (including without limitation, any patent, invention, copyright, trade secret, trademark,
trade name, logo, domain name or other source indicator) owned or used by the Company, its
subsidiaries or affiliates; (y) immediately destroy, delete, or return to the Company, at the
Companys option, all originals and copies in any form or medium (including memoranda, books,
papers, plans, computer files, letters and other data) in Executives possession or control
(including any of the foregoing stored or located in Executives office, home, laptop or other
computer, whether or not Company property) that contain Confidential Information or otherwise
relate to the business of the Company, its affiliates and subsidiaries, except that Executive may
retain only those portions of any personal notes, notebooks and diaries that do not contain any
Confidential Information; and (z) notify and fully cooperate with the Company regarding the
delivery or destruction of any other Confidential Information of which Executive is or becomes
aware.
b.
Intellectual Property
.
(i) If Executive has created, invented, designed, developed, contributed to or improved any
works of authorship, inventions, intellectual property, materials, documents or other work product
(including without limitation, research, reports, software, databases, systems, applications,
presentations, textual works, content, or audiovisual materials) (Works), either alone or with
third parties, at any time during Executives employment by the Company and within the scope of
such employment and/or with the use of any of the Companys resources (Company Works), Executive
shall promptly and fully disclose same, to the best of his or her knowledge, to the Company and
hereby irrevocably assigns, transfers and conveys, to the maximum extent permitted by applicable
law, all rights and intellectual property rights therein (including rights under patent, industrial
property, copyright, trademark, trade secret, unfair competition and related laws) to the Company
to the extent ownership of any such rights does not vest originally in the Company.
(ii) Executive shall take all reasonably requested actions and execute all reasonably
requested documents (including any licenses or assignments required by a government contract) at
the Companys expense (but without further remuneration) to assist the Company in validating,
maintaining, protecting, enforcing, perfecting, recording, patenting or registering any of the
Companys rights in the Company Works.
(iii) Executive shall not improperly use for the benefit of, bring to any premises of,
divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Company
any confidential, proprietary or non-public information or intellectual property relating to a
former employer or other third party without the prior written permission of such third party.
Executive hereby indemnifies, holds harmless and agrees to defend the Company
13
and its officers, directors, partners, employees, agents and representatives from any breach
of the foregoing covenant. Executive shall comply with all relevant policies and guidelines of the
Company, including regarding the protection of confidential information and intellectual property
and potential conflicts of interest. Executive acknowledges that the Company may amend any such
policies and guidelines from time to time, and that Executive remains at all times bound by their
most current version.
(iv) The provisions of Section 11 shall survive the Executives Termination of Employment for
any reason.
12.
Specific Performance
. Executive acknowledges and agrees that the Companys
remedies at law for a breach or threatened breach of any of the provisions of Section 10 or Section
11 would be inadequate and the Company would suffer irreparable damages as a result of such breach
or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law, the Company, without posting any
bond, shall be entitled to cease making any payments or providing any benefit otherwise required by
this Agreement and obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any other equitable remedy which may then
be available.
13.
Miscellaneous
.
a.
Governing Law
. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to conflicts of laws principles thereof.
b.
Dispute Resolution
. Except as otherwise provided in Section 12 of this Agreement,
any controversy, dispute, or claim arising out of, in connection with, or in relation to, the
interpretation, performance or breach of this Agreement, including, without limitation, the
validity, scope, and enforceability of this section, may at the election of any party, be solely
and finally settled by arbitration conducted in Cleveland, Ohio, by and in accordance with the then
existing rules for commercial arbitration of the American Arbitration Association, or any successor
organization and with the Expedited Procedures thereof (collectively, the Rules). Each of the
parties hereto agrees that such arbitration shall be conducted by a single arbitrator selected in
accordance with the Rules; provided that such arbitrator shall be experienced in deciding cases
concerning the matter which is the subject of the dispute. Any of the parties may demand
arbitration by written notice to the other and to the Arbitrator set forth in this Section 13(b)
(Demand for Arbitration). Each of the parties agrees that if possible, the award shall be made
in writing no more than 30 days following the end of the proceeding. Any award rendered by the
arbitrator(s) shall be final and binding and judgment may be entered on it in any court of
competent jurisdiction. Each of the parties hereto agrees to treat as confidential the results of
any arbitration (including, without limitation, any findings of fact and/or law made by the
arbitrator) and not to disclose such results to any unauthorized person. The parties intend that
this agreement to arbitrate be valid, enforceable and irrevocable. In the event of any arbitration
with regard to this Agreement, each party shall pay its own legal fees and expenses except to the
extent set forth in Section 13(p), provided, however, that the Company agrees to pay the cost of
the Arbitrators fees.
14
c.
Entire Agreement/Amendments
. This Agreement contains the entire understanding of
the parties with respect to the employment of Executive by the Company. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. This Agreement may not be
altered, modified, or amended except by written instrument signed by the parties hereto.
d.
No Waiver
. The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of such partys rights or deprive
such party of the right thereafter to insist upon strict adherence to that term or any other term
of this Agreement.
e.
Severability
. In the event that any one or more of the provisions of this
Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions of this Agreement shall not be affected
thereby.
f.
Assignment
. This Agreement, and all of Executives rights and duties hereunder,
shall not be assignable or delegable by Executive. Any purported assignment or delegation by
Executive in violation of the foregoing shall be null and void ab initio and of no force and
effect. This Agreement may be assigned by the Company to a person or entity which is an affiliate
or a successor in interest to substantially all of the business operations of the Company. The
Company will require any person or entity which is an affiliate or a successor in interest to
substantially all of the business operations of the Company to assume all obligations of the
Company under this Agreement.
g.
Set Off; No Mitigation
. The Companys obligation to pay Executive the amounts
provided and to make the arrangements provided hereunder shall be subject to bona fide set off,
counterclaim or recoupment in good faith of amounts owed by Executive to the Company or its
affiliates. Executive shall not be required to mitigate the amount of any payment provided for
pursuant to this Agreement by seeking other employment.
h.
Successors; Binding Agreement
. This Agreement shall inure to the benefit of and be
binding upon personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
i.
Notice
. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand or overnight courier or three days after it has been mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the respective addresses
set forth below in this Agreement, or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
15
If to the Company:
Chart Industries, Inc.
One Infinity Corporate Centre Drive, Suite 300
Garfield Heights, Ohio 44125
Facsimile: (440) 753-1491
Attention: Chief Financial Officer and General Counsel
If to Executive:
To the most recent address of Executive set forth in the personnel records of the Company.
j.
Executive Representation
. Executive hereby represents to the Company that the
execution and delivery of this Agreement by Executive and the Company and the performance by
Executive of Executives duties hereunder shall not constitute a breach of, or otherwise
contravene, the terms of any employment agreement or other agreement or policy to which Executive
is a party or otherwise bound.
k.
Prior Agreements
. This Agreement supercedes all prior agreements and
understandings (including verbal agreements) between Executive and the Company and/or its
affiliates regarding the terms and conditions of Executives employment with the Company and/or its
affiliates, except that this Agreement does not supercede any stock option agreement, performance
unit agreement, or indemnification agreement.
l.
Cooperation
. Executive shall provide Executives reasonable cooperation in
connection with any action or proceeding (or any appeal from any action or proceeding) which
relates to events occurring during Executives employment hereunder. This provision shall survive
any termination of this Agreement.
m.
Withholding Taxes
. The Company may withhold from any amounts payable under this
Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any
applicable law or regulation.
n.
Counterparts
. This Agreement may be signed in counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.
o.
Compliance with Section 409A
. Notwithstanding anything herein to the contrary, (i)
if at the time of Executives Termination of Employment with the Company Executive is a specified
employee as defined in Section 409A of the Code, and the deferral of the commencement of any
payments or benefits otherwise payable hereunder as a result of such Termination of Employment is
necessary in order to prevent the imposition of any accelerated or additional tax under Section
409A of the Code, then the Company will defer the commencement of the payment of any such payments
or benefits hereunder (without any reduction in such payments or benefits ultimately paid or
provided to Executive) until the date that is six months following Executives Termination of
Employment with the Company (or the earliest date as is permitted under Section 409A of the Code)
and (ii) if any other payments of money or other
16
benefits due to Executive hereunder could cause the application of an accelerated or
additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if
deferral will make such payment or other benefits compliant under Section 409A of the Code, or
otherwise such payment or other benefits shall be restructured, to the extent possible, in a
manner, determined by the Board or any duly authorized committee thereof, that does not cause such
an accelerated or additional tax or result in an additional cost to the Company. The Company shall
consult with Executive in good faith regarding the implementation of the provisions of this Section
13(o); provided that neither the Company nor any of its employees or representatives shall have any
liability to Executive with respect thereto.
p.
Enforcement Costs
. The Company is aware that upon the occurrence of a Change in
Control the Board of Directors or a shareholder of the Company may then cause or attempt to cause
the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt
to cause the Company to institute, or may institute, litigation or arbitration seeking to have this
Agreement declared unenforceable, or may take, or attempt to take, other action to deny Executive
the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement
could be frustrated. It is the intent of the Company that Executive not be required to incur the
expenses associated with the enforcement of Executives rights under this Agreement by litigation,
arbitration or other legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to Executive hereunder, nor be bound to negotiate any
settlement of Executives rights hereunder under threat of incurring such expenses. Accordingly,
if at any time following a Change in Control, it should appear to Executive that the Company has
failed to comply with any of its obligations under this Agreement or the Company or any other
person takes any action to declare this Agreement void or unenforceable, or institutes any
litigation, arbitration or other legal action designed to deny, diminish or recover from Executive
the benefits intended to be provided to Executive hereunder, and Executive has complied with all of
Executives obligations under Sections 10 and 11, then the Company irrevocably authorizes Executive
from time to time to retain counsel of Executives choice at the expense of the Company as provided
in this Section 13(p) to represent Executive in connection with the initiation or defense of any
litigation, arbitration or other legal action, whether by or against the Company or any Director,
officer, shareholder or other person affiliated with the Company, in any jurisdiction. The
Companys obligations under this Section 13(p) shall not be conditioned on Executives success in
the prosecution or defense of any such litigation, arbitration or other legal action.
Notwithstanding any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to Executive entering into an attorney-client
relationship with such counsel, and in that connection the Company and Executive agree that a
confidential relationship shall exist between Executive and such counsel. The reasonable fees and
expenses of counsel selected from time to time by Executive as hereinabove provided shall be paid
or reimbursed to Executive by the Company on a regular, periodic basis no later than 30 days after
presentation by Executive of a statement or statements prepared by such counsel in accordance with
its customary practices, up to a maximum aggregate amount of $500,000, provided that Executive
presents such statement(s) no later than 30 days prior to the end of Executives taxable year
following the year in which such expenses were incurred. Notwithstanding the foregoing, this
Section 13(p) shall not apply at any time unless a Change in Control has occurred.
17
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year
first above written.
|
|
|
|
|
CHART INDUSTRIES, INC.
(Company)
|
|
JAMES H. HOPPEL, JR.
(Executive)
|
|
|
|
|
|
By:
|
|
/s/ Michael F. Biehl
|
|
/s/ James H. Hoppel, Jr.
|
|
|
|
|
|
Name:
|
|
Michael F. Biehl
|
|
|
|
|
|
|
|
Title:
|
|
Executive Vice President, Chief Financial
Officer & Treasurer
|
|
|
18
Exhibit 10.5
EMPLOYMENT AGREEMENT (the Agreement) dated February 26, 2008 by and between Chart
Industries, Inc. (the Company) and Kenneth J. Webster (the Executive).
The Company desires to employ Executive and to enter into an agreement embodying the terms of
such employment; and
Executive desires to accept such employment and enter into such an agreement.
In consideration of the premises and mutual covenants herein and for other good and valuable
consideration, the parties agree as follows:
1.
Term of Employment
. Subject to the provisions of Section 8 of this Agreement,
Executive shall be employed by the Company, on the terms and subject to the conditions set forth in
this Agreement, for the period commencing on February 26, 2008, and ending on the second
anniversary of said date (the Employment Term). Thereafter the Employment Term shall
automatically be extended on February 26 of each year for a period of one year from such date. In
addition, in the event of a Change in Control, the Employment Term shall automatically be extended
for a period of three years beginning on the date of the Change in Control and ending on the third
anniversary of the date of such Change in Control (unless further extended under the immediately
preceding sentence). The Company or Executive may give notice to the other party that the
Employment Term shall no longer be extended (the Non-Renewal Notice), in which event the
Employment Term shall expire on the latest of: (i) such second anniversary of the original
Employment Term commencement date, (ii) such third anniversary of a Change in Control, or (iii) the
first anniversary of the delivery of such Non-Renewal Notice. In any case, the Employment Term may
be terminated earlier under the terms and conditions set forth herein.
2.
Position
.
a.
Title
. During the Employment Term, Executive shall serve as the Companys Chief
Accounting Officer and Controller, effective March 1, 2008. In such position, Executive shall have
such duties, authority and responsibility as shall be determined from time to time by the Board of
Directors of the Company (the Board), the Chief Executive Officer or the Chief Financial Officer
of the Company, which duties, authority and responsibility are consistent with the position of
Chief Accounting Officer and Controller of the Company.
b.
Best Efforts
. During the Employment Term, Executive will devote Executives full
business time and best efforts to the performance of Executives duties hereunder and will not
engage in any other business, profession or occupation for compensation or otherwise which would
conflict or interfere with the rendition of such services either directly or indirectly, without
the prior written consent of the Board; provided that nothing herein shall preclude Executive,
subject to the prior approval of the Board, from accepting appointment to or continue to serve on
any board of directors or trustees of any business corporation or any
charitable organization; provided in each case, and in the aggregate, that such activities do
not conflict or interfere with the performance of Executives duties hereunder or conflict with
Section 10.
c.
Place of Employment
. In connection with Executives employment by the Company,
Executive shall not be required to relocate or move from Executives existing principal residence
in Hudson, OH, and shall not be required to perform services which would make the continuance of
Executives principal residence in Hudson, OH, unreasonably difficult or inconvenient for
Executive. The Company shall give Executive at least six months advance notice of any proposed
relocation of its offices at which Executives present principal office is located to a location
more than 50 miles from such present location, and, if Executive in Executives sole discretion
chooses to relocate Executives principal residence as a result of such office relocation, the
Company shall promptly pay (or reimburse Executive for) all reasonable relocation expenses
(consistent with the Companys past practice for similarly situated senior executive officers)
incurred by Executive relating to a change of Executives principal residence in connection with
any such relocation of the Companys offices from such present location.
3.
Base Salary
. During the Employment Term, the Company shall pay Executive a base
salary at the annual rate of $156,000, payable in regular installments in accordance with the
Companys usual payment practices. Executive shall be entitled to such increases in Executives
base salary, if any, as may be determined from time to time in the sole discretion of the Board or
any duly authorized committee thereof. Executives annual base salary, as in effect from time to
time, is hereinafter referred to as the Base Salary.
4.
Annual Bonus
. With respect to each full fiscal year during the Employment Term
(commencing with the 2008 fiscal year), Executive shall be eligible to earn an annual bonus award
(an Annual Bonus) of up to one hundred fifty percent (150%) of forty-five percent (45%) of the
Executives Base Salary (with it being understood that forty-five percent (45%) of the Executives
Base Salary is the Target) based upon the achievement of the performance targets established by
the Board, or any duly authorized committee thereof, within the first three months of each fiscal
year during the Employment Term. The Annual Bonus, if any, shall be paid to Executive within two
and one-half (2.5) months after the end of the applicable fiscal year. Any Annual Bonus payable
hereunder shall be determined in accordance with the terms of the Companys Incentive Compensation
Plan, as currently in effect and as it may be amended from time to time, including any successor
plan. In the event of a Change In Control as defined in the Incentive Compensation Plan, the
annual bonus may be pro-rated in accordance with the terms of the Incentive Compensation Plan.
5.
Employee Benefits
. During the Employment Term, Executive shall be entitled to
participate in the Companys employee benefit plans (other than annual bonus and incentive plans)
providing for health, life and disability insurance, retirement, deferred compensation and fringe
benefits, as well as any equity compensation plans, as in effect from time to time (collectively
Employee Benefits), on the same basis as those benefits are generally made available to other
senior executives of the Company. Executives right to participate in any Employee Benefits shall
be subject to the applicable eligibility criteria for participation and Executive shall not be
entitled to any benefits under, or based on, any Employee Benefits for any purposes of this
Agreement if Executive does not during the Employment Term satisfy the
2
eligibility criteria for participation in such Employee Benefits. Any equity incentive
granted, awarded and held by the Executive shall be governed by the applicable terms of any such
grant and award, and shall not be impacted by the terms of this Agreement, except to the extent
taken into account in determinations under Section 9.
6.
Vacation
. During the Employment Term, Executive shall be entitled to annual
vacation as outlined under the Companys vacation policy where Executive is located to be taken at
such times as chosen by Executive.
7.
Business Expenses and Perquisites
.
a.
Expenses
. During the Employment Term, reasonable business expenses incurred by
Executive in the performance of Executives duties hereunder shall be reimbursed by the Company in
accordance with Company policies.
b.
Perquisites
. During the Employment Term, Executive shall be eligible for an
automobile allowance of up to $800 per month, consistent with the Companys current practices.
8.
Termination
. The Employment Term and Executives employment hereunder may be
terminated by either party at any time and for any reason; provided that Executive will be required
to give the Company at least 60 days advance written notice of any resignation of Executives
employment. The provisions of this Section 8 governs Executives rights upon Termination of
Employment with the Company and its affiliates. Termination of Employment as used in this
Agreement means the separation from service, within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended from time to time (Code, any reference in this Agreement to a
Section of the Code shall include all lawful regulations and pronouncements promulgated thereunder,
as well as any successor Sections of the Code having the same or similar purpose), of Executive
with the Company and all of its affiliates, for any reason, including without limitation, quit,
discharge, or retirement, or a leave of absence (including military leave, sick leave, or other
bona fide leave of absence such as temporary employment by the government if the period of such
leave exceeds the greater of six months, or the period for which Executives right to reemployment
is provided either by statute or by contract) or permanent decrease in service to a level that is
no more than Twenty Percent (20%) of its prior level. For this purpose, whether a Termination of
Employment has occurred is determined based on whether it is reasonably anticipated that no further
services will be performed by Executive after a certain date or that the level of bona fide
services Executive will perform after such date (whether as an employee or as an independent
contractor) would permanently decrease to no more than Twenty Percent (20%) of the average level of
bona fide services performed (whether as an employee or an independent contractor) over the
immediately preceding 36-month period (or the full period of services if Executive has been
providing services less than 36 months). The terms Terminate or Terminated, when used in
reference to Executives employment or the Employment Period, shall refer to a Termination of
Employment as set forth in this paragraph. Date of Termination refers to the effective date of
Executives Termination of Employment.
3
a.
Termination By the Company For Cause or By Executive Resignation Without Good
Reason
.
(i)
Events
. The Employment Term and Executives employment hereunder may be
terminated by the Company for Cause (as defined below) and shall terminate automatically upon
Executives resignation without Good Reason (as defined in Section 8(c)); provided that Executive
will be required to give the Company at least 60 days advance written notice of a resignation
without Good Reason.
(ii)
For Cause
. For purposes of this Agreement, Cause shall mean the Executives
(A) willful failure to perform duties which, if curable, is not cured promptly, or in any event
within ten (10) days, following the first written notice of such failure from the Company, (B)
commission of, or plea of guilty or no contest to a (x) felony or (y) crime involving moral
turpitude, (C) willful malfeasance or misconduct which is demonstrably injurious to the Company or
its subsidiaries or affiliates, (D) material breach of the material terms of this Agreement,
including, without limitation, any non-competition, non-solicitation or confidentiality provisions,
(E) commission of any act of gross negligence, corporate waste, disloyalty or unfaithfulness to the
Company which adversely affects the business of the Company or its subsidiaries or affiliates, or
(F) any other act or course of conduct which will demonstrably have a material adverse effect on
the Company, a subsidiary or affiliates business.
(iii)
Compensation
. If Executives employment is terminated by the Company for Cause,
or if Executive resigns without Good Reason, Executive shall be entitled to receive the amounts in
clauses (A) through (D) below referred to herein as Accrued Rights:
(A) the Base Salary through the Date of Termination;
(B) any Annual Bonus earned, but unpaid, as of the Date of Termination for the immediately
preceding fiscal year, paid in accordance with Section 4 (except to the extent payment is otherwise
deferred pursuant to any applicable deferred compensation arrangement with the Company);
(C) reimbursement, within 60 days following submission by Executive to the Company of
appropriate supporting documentation, for any unreimbursed business expenses properly incurred by
Executive in accordance with Company policy prior to the date of Executives Termination of
Employment; provided claims for such reimbursement (accompanied by appropriate supporting
documentation) are submitted to the Company within 90 days following the date of Executives
Termination of Employment; and
(D) such Employee Benefits, if any, as to which Executive may be entitled under the employee
benefit plans of the Company, including payment for any accrued but unused vacation within 30 days
following the date of Executives Date of Termination.
Following such Termination of Employment by the Company for Cause or resignation by Executive
without Good Reason, except as set forth in this Section 8(a)(iii), Executive shall have no
further rights to any compensation or any other benefits under this Agreement.
4
b.
Disability or Death
.
(i)
Events
. The Employment Term and Executives employment hereunder shall terminate
upon Executives death and may be terminated by the Company if Executive becomes physically or
mentally incapacitated and is therefore unable for a period of six (6) consecutive months or for an
aggregate of nine (9) months in any twenty-four (24) consecutive month period to perform
Executives duties (such incapacity is hereinafter referred to as Disability). In no event shall
an Executives employment be continued beyond the 29th month of absence due to Executives
Disability. Any question as to the existence of the Disability of Executive as to which Executive
and the Company cannot agree shall be determined in writing by a qualified independent physician
mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to
a qualified independent physician, each shall appoint such a physician and those two physicians
shall select a third who shall make such determination in writing. The determination of Disability
made in writing to the Company and Executive shall be final and conclusive for all purposes of the
Agreement.
(ii)
Compensation
. Upon Executives Termination of Employment hereunder for either
Disability or death, Executive or Executives estate (as the case may be) shall be entitled to
receive:
(A) the Accrued Rights; and
(B) a pro rata portion of the Annual Bonus, if any, that Executive would have been entitled to
receive pursuant to Section 4 hereof for such year based upon the Companys actual results for the
year of termination and the percentage of the fiscal year that shall have elapsed through the
Executives Date of Termination, payable to Executive pursuant to Section 4 had Executives
employment not terminated.
Following Executives Termination of Employment due to death or Disability, except as set
forth in this Section 8(b)(ii), Executive shall have no further rights to any compensation or any
other benefits under this Agreement.
c.
Termination by the Company Without Cause or Resignation by Executive for Good
Reason
.
(i)
Events
. The Employment Term and Executives employment hereunder may be
terminated by the Company without Cause or by Executives resignation for Good Reason at any time
including during the Protected Period.
(ii)
Good Reason
. For purposes of this Agreement, Good Reason shall mean, without
Executives consent: (i) a material diminution in Executives base salary (excluding any general
salary reduction similarly affecting substantially all other senior executives of the Company as a
result of a material adverse change in the Companys prospects or business); (ii) a material
diminution in Executives authority, duties, or responsibilities; (iii) a material change in the
geographic location at which Executive must perform services; or (iv) any other action or inaction
that constitutes a material breach by the Company of this Agreement; provided, however, that Good
Reason shall not be deemed to exist unless: (A) the Executive has provided notice to the Company
of the existence of one or more of the conditions listed in (i)
5
through (iv) within 90 days after the initial occurrence of such condition or conditions; and
(B) such condition or conditions have not been cured by the Company within 30 days after receipt of
such notice. Simply the receipt by the Executive of a Non-Renewal Notice from the Company shall
not, in and of itself, be deemed to be an event of Good Reason under this Agreement.
(iii)
Protected Period
. For purposes of this Agreement, Protected Period shall mean
the period of time commencing on the date of a Change in Control and ending two years after such
date.
(iv)
Change in Control
. For purposes of this Agreement, Change in Control shall
mean, with respect to the Executive, the happening of any of the following events (but only if with
respect to the Executive, such event would constitute a change in the ownership or effective
control of the corporation, or in the ownership of a substantial portion of the assets of the
corporation, as defined under Section 409A of the Code):
(A) a change in the ownership of the Company (or any affiliate which either employs the
Executive or is a direct or indirect parent of such employer) by which any one person, or more than
one person acting as a group, acquires ownership of stock of the Company (or such an affiliate)
that, together with stock held by such person or group, constitutes more than Fifty Percent (50%)
of the total fair market value or total voting power of the stock of the Company (or such an
affiliate). However, if any one person, or more than one person acting as a group, is considered
to own more than 50% of the total fair market value or total voting power of the stock of the
Company (or such an affiliate), the acquisition of additional stock by the same person or persons
is not considered to cause a Change in Control. (An increase in the percentage of stock owned by
any one person, or persons acting as a group, as a result of a transaction in which the Company (or
such an affiliate) acquires its stock in exchange for property will be treated as an acquisition of
stock for purposes of this definition. This parenthetical phrase applies only when there is a
transfer of stock of the Company (or issuance of stock of the Company) (or such an affiliate) and
stock in the Company (or such an affiliate) remains outstanding after the transaction.)
(B) a change in effective control of the Company (or any affiliate which either employs the
Executive or is a direct or indirect parent of such employer) by which:
(1) any one person, or more than one person acting as a group, acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the Company (or such an
affiliate) possessing Thirty Percent (30%) or more of the total voting power of the
stock of the Company (or such an affiliate); or
(2) a majority of members of the Board of Directors is replaced during any
12-month period by Directors whose appointment or election is not endorsed by a
majority of the members of the Board of Directors before the date of the appointment
or election.
6
(C) a change in the ownership of a substantial portion of the assets of the Company (or any
affiliate which either employs the Executive or is a direct or indirect parent of such employer) by
which any one person, or more than one person acting as a group, acquires (or has acquired during
the 12-month period ending on the date of the most recent acquisition by such person or persons)
assets from the Company (or such an affiliate) that have a total gross fair market value equal to
or more than Forty Percent (40%) of the total gross fair market value of all of the assets of the
Company (or such an affiliate) immediately prior to such acquisition or acquisitions. For this
purpose, gross fair market value means the value of the assets of the corporation, or the value of
the assets being disposed of, determined without regard to any liabilities associated with such
assets.
For purposes of this definition, persons will be considered to be acting as a group if they are
owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock,
or similar business transaction with the Company. If a person, including an entity, owns stock in
both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or
similar transaction, such shareholder is considered to be acting as a group with other shareholders
only with respect to the ownership in that corporation before the transaction giving rise to the
change and not with respect to the ownership interest in the other corporation.
(v)
Compensation if Terminated Outside of Protected Period
. If, at any time other
than during the Protected Period, the Executives employment is terminated by the Company without
Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason within
6 months of the condition giving rise to the good reason, Executive shall be entitled to receive:
(A) the Accrued Rights;
(B) subject to Executives (x) continued compliance with the provisions of Sections 10 and 11
and (y) execution and delivery of a general release of claims against the Company and its
affiliates in a form reasonably acceptable to the Company, payment in one lump sum of:
(1) 100% of the greater of the current Base Salary or Executives highest Base
Salary paid within the Employment Term; plus
(2) 100% of Executives Target Annual Bonus;
payable to Executive in one lump sum immediately following the expiration of the revocation period
provided for in such release, but in no event later than two and a half (2-1/2) months after the
end of the year in which the Executives Termination of Employment occurred; and
(C) continued coverage under the Companys group health plans during the twelve (12) months
following Executives Date of Termination on the same basis as active employees of the Company.
(vi)
Compensation if Terminated during Protected Period
. If, during the Protected
Period, either the Executives employment is Terminated by the Company without
7
Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason,
Executive shall be entitled to receive:
(A) the Accrued Rights;
(B) subject to Executives (x) continued compliance with the provisions of Sections 10 and 11
and (y) execution and delivery of a general release of claims against the Company and its
affiliates in a form reasonably acceptable to the Company, payment in one lump sum of:
(1) 100% of the greater of the current Base Salary or Executives highest Base
Salary paid within the Employment Term; plus
(2) 100% of Executives Target Annual Bonus;
payable generally within ten (10) business days after Executives Date of Termination, or, if
later, upon the expiration of the revocation period provided for in such release, except when such
payment is delayed and paid in accordance with Section 9(b) for a determination under Section 9,
but in no event later than two and a half (2-1/2) months after the end of the year in which the
Executives Termination of Employment occurred; and
(C) continued coverage under the Companys group health plans during the twelve (12) months
following Executives Date of Termination on the same basis as active employees of the Company.
Following Executives Termination of Employment by the Company without Cause (other than by
reason of Executives death or Disability) or by Executives resignation for Good Reason, except as
set forth in this Section 8(c), Executive shall have no further rights to any compensation or any
other benefits under this Agreement.
d.
Expiration of Employment Term
.
(i)
Election Not to Renew the Employment Term
. In the event either party provides the
other with the Non-Renewal Notice pursuant to Section 1, unless Executives employment is earlier
terminated pursuant to paragraphs (a), (b) or (c) of this Section 8, the expiration of the
Employment Term and the Executives Termination of Employment hereunder (whether or not Executive
continues as an employee of the Company thereafter) shall be deemed to occur on the close of
business on the last day of such Employment Term and Executive shall be entitled to receive the
Accrued Rights. The Companys providing of a Non-Renewal Notice under Section 1 shall not
prejudice in any way Executives right to assert an event of Good Reason (as such term is defined
above), whether related to such Non-Renewal Notice or otherwise, at any time during the Employment
Term.
Following such termination of Executives employment hereunder, except as set forth in this
Section 8(d)(i), Executive shall have no further rights to any compensation or any other benefits
under this Agreement.
8
(ii)
Continued Employment Beyond the Expiration of the Employment Term
. Unless the
parties otherwise agree in writing, continuation of Executives employment with the Company beyond
the expiration of the Employment Term shall be deemed an employment at-will and shall not be deemed
to extend any of the provisions of this Agreement and Executives employment may thereafter be
terminated at will by either Executive or the Company; provided that the provisions of Sections 10,
11 and 12 of this Agreement shall survive any termination of this Agreement or Executives
Termination of Employment hereunder.
e.
Notice of Termination
. Any purported Termination of Employment by the Company or
by Executive (other than due to Executives death) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 13(i) hereof. For purposes of
this Agreement, a Notice of Termination shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for Termination of Employment under the
provision so indicated.
f.
Board/Committee Resignation
. Upon termination of Executives employment for any
reason, Executive agrees to resign, as of the date of such termination and to the extent
applicable, from the Board (and any committees thereof) and the Board of Directors (and any
committees thereof) of any of the Companys affiliates.
9.
Conditional Reduction in Payments
.
a. Notwithstanding anything in this Agreement to the contrary, in the event that it shall be
determined (as hereafter provided) that any payment or distribution provided for pursuant to the
terms of this Agreement for the benefit of Executive, when aggregated with any other payments or
benefits received or receivable by Executive (individually and collectively, a Payment), would
constitute parachute payments within the meaning of Section 280G of the Code, and would be
subject to the excise tax imposed by Section 4999 of the Code or to any similar tax imposed by
state or local law, or to any interest or penalties with respect to such taxes (such tax or taxes,
together with any such interest and penalties, being hereafter collectively referred to as the
Excise Tax), then Executives payments under Section 8 hereof shall be either:
(i) delivered in full, or
(ii) reduced to the minimum extent necessary so that no portion of the Payment, after
such reduction, constitutes an Excess Parachute Payment (as defined in Section 280G(b) of
the Code) (the amount of such reduction shall be referred to as the Excess Amount);
whichever of the foregoing amounts, taking into account the applicable federal, state and local
income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis of the
greatest amount of benefits, notwithstanding that all or some portion of such benefits may be
taxable under Section 4999 of the Code.
b. All determinations required to be made under this Section 9, including whether an Excise
Tax is payable by Executive and the amount of such Excise Tax and whether
9
a reduction in the Payment is to be made and the amount of such Excess Amount, if any, shall
be made by a nationally recognized accounting firm proposed by the Company and reasonably
acceptable to Executive (which accounting firm shall be the Accounting Firm hereunder). The
Company or Executive shall direct the Accounting Firm to submit its determination and detailed
supporting calculations to both the Company and Executive within 30 calendar days after the Date of
Termination, if applicable, and any other time or times as may be requested by the Company or
Executive. The Company shall pay Executives payments under Section 8 hereof, as reduced or not
reduced pursuant to the final determination of the Accounting Firm and Subsection 9(a) above, no
later than the later of (x) the time otherwise required hereunder or (y) five business days after
receipt of such determination. If the Accounting Firm determines that no Excise Tax is payable by
Executive, it shall, at the same time as it makes such determination, furnish the Company and
Executive an opinion that Executive has substantial authority not to report any Excise Tax on
Executives federal, state or local income or other tax return.
c. As a result of the uncertainty in the application of Section 4999 of the Code and the
possibility of similar uncertainty regarding applicable state or local tax law at the time of any
determination by the Accounting Firm hereunder, it is possible that, pursuant to a final
determination of a court or an Internal Revenue Service proceeding which has been finally and
conclusively resolved, an Excess Parachute Payment was received by Executive which would have been
intended to be reduced by the Excess Amount pursuant to Subsection 9(a) above. In such case, then
such amount received by Executive shall be deemed to be an overpayment, and Executive shall repay
the amount equal to the Excess Amount (to the extent received by Executive) to the Company on
demand (but no less than ten days after Executive receives written demand).
d. The Company and Executive shall each provide the Accounting Firm access to and copies of
any books, records and documents in the possession of the Company or Executive, as the case may be,
reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determinations and calculations contemplated by
Subsection 9(b). Any determination by the Accounting Firm as to the amount of any Excess Amount
shall be binding upon the Company and Executive.
e. The fees and expenses of the Accounting Firm for its services in connection with the
determinations and calculations contemplated by Subsection 9(b) shall be borne by the Company.
10.
Non-Competition
.
a. Executive acknowledges and recognizes the highly competitive nature of the businesses of
the Company and its affiliates and accordingly agrees as follows:
(i) During the Employment Term and the twelve (12) months following the date of Executives
Termination of Employment (the Restricted Period), Executive will not, whether on Executives own
behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture,
association, corporation or other business organization, entity or enterprise whatsoever
(Person), directly or indirectly solicit or assist in soliciting in
10
competition with the Company, the business of any client or customer or prospective client or
customer:
(A) with whom Executive had personal contact or dealings on behalf of the Company during the
one year period preceding the earlier of the Executives Termination of Employment or such
solicitation;
(B) with whom employees reporting to Executive have had personal contact or dealings on behalf
of the Company during the one year immediately preceding the Executives Termination of Employment;
or
(C) for whom Executive had direct or indirect responsibility during the one year immediately
preceding Executives Termination of Employment.
(ii) During the Restricted Period, Executive will not directly or indirectly:
(A) engage in (1) the business of manufacturing equipment used in (x) the production, storage
and end-use of hydrocarbon and industrial gases business or (y) low temperature and cryogenic
applications, (2) any other businesses which the Company or its subsidiaries engage in during the
term of Executives employment with the Company and (3) any businesses which, as of the date of
Executives Termination of Employment, the Company or its subsidiaries both (x) have specific plans
to conduct in the future (and as to which Executive is aware of such planning) and (y) have
allocated or invested capital as of the date of such Termination of Employment (a Competitive
Business);
(B) enter the employ of, or render any services to, any Person (or any division or controlled
or controlling affiliate of any Person) who or which engages in a Competitive Business;
(C) acquire a financial interest in, or otherwise become actively involved with, any
Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer,
director, principal, agent, trustee or consultant; or
(D) interfere with, or attempt to interfere with, business relationships (whether formed
before, on or after the date of this Agreement) between the Company or any of its affiliates and
customers, clients, suppliers, partners, members or investors of the Company or its affiliates.
(iii) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or
indirectly own, solely as an investment, securities of any Person engaged in the business of the
Company or its affiliates which are publicly traded on a national or regional stock exchange or
quotation system or on the over-the-counter market if Executive (i) is not a controlling person of,
or a member of a group which controls, such person and (ii) does not, directly or indirectly, own
5% or more of any class of securities of such Person.
(iv) During the Restricted Period, Executive will not, whether on Executives own behalf or on
behalf of or in conjunction with any Person, directly or indirectly:
11
(A) solicit or encourage any employee of the Company or its affiliates to leave the employment
of the Company or its affiliates; or
(B) hire any such employee who was employed by the Company or its affiliates as of the date of
Executives Termination of Employment with the Company or who left the employment of the Company or
its affiliates coincident with, or within one year prior to or after, the termination of
Executives employment with the Company.
(v) During the Restricted Period, Executive will not, directly or indirectly, solicit or
encourage to cease to work with the Company or its affiliates any consultant then under contract
with the Company or its affiliates.
b. It is expressly understood and agreed that although Executive and the Company consider the
restrictions contained in this Section 10 to be reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive, the provisions of
this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum
time and territory and to such maximum extent as such court may judicially determine or indicate to
be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the other restrictions
contained herein.
11.
Confidentiality; Intellectual Property
.
a.
Confidentiality
.
(i) Executive will not at any time (whether during or after Executives employment with the
Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person
other than the Company; or (y) disclose, divulge, reveal, communicate, share, transfer or provide
access to any Person outside the Company (other than its professional advisers who are bound by
confidentiality obligations or other than in performing his or her duties on behalf of the Company
consistent with Company policies), any non-public, proprietary or confidential
informationincluding without limitation trade secrets, know-how, research and development,
software, databases, inventions, processes, formulae, technology, designs and other intellectual
property, information concerning finances, investments, profits, pricing, costs, products,
services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting,
training, advertising, sales, marketing, promotions, government and regulatory activities and
approvals concerning the past, current or future business, activities and operations of the
Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any
of same to the Company on a confidential basis (Confidential Information) without the prior
written authorization of the Board or a duly authorized committee thereof.
(ii) Confidential Information shall not include any information that is (a) generally known
to the industry or the public other than as a result of Executives breach of this covenant or any
breach of other confidentiality obligations by third parties; (b) made
12
legitimately available to Executive by a third party without breach of any confidentiality
obligation; or (c) required by law to be disclosed; provided that Executive shall give prompt
written notice to the Company of such requirement, disclose no more information than is so
required, and cooperate with any attempts by the Company to obtain a protective order or similar
treatment.
(iii) Upon termination of Executives employment with the Company for any reason, Executive
shall (x) cease and not thereafter commence use of any Confidential Information or intellectual
property (including without limitation, any patent, invention, copyright, trade secret, trademark,
trade name, logo, domain name or other source indicator) owned or used by the Company, its
subsidiaries or affiliates; (y) immediately destroy, delete, or return to the Company, at the
Companys option, all originals and copies in any form or medium (including memoranda, books,
papers, plans, computer files, letters and other data) in Executives possession or control
(including any of the foregoing stored or located in Executives office, home, laptop or other
computer, whether or not Company property) that contain Confidential Information or otherwise
relate to the business of the Company, its affiliates and subsidiaries, except that Executive may
retain only those portions of any personal notes, notebooks and diaries that do not contain any
Confidential Information; and (z) notify and fully cooperate with the Company regarding the
delivery or destruction of any other Confidential Information of which Executive is or becomes
aware.
b.
Intellectual Property
.
(i) If Executive has created, invented, designed, developed, contributed to or improved any
works of authorship, inventions, intellectual property, materials, documents or other work product
(including without limitation, research, reports, software, databases, systems, applications,
presentations, textual works, content, or audiovisual materials) (Works), either alone or with
third parties, at any time during Executives employment by the Company and within the scope of
such employment and/or with the use of any of the Companys resources (Company Works), Executive
shall promptly and fully disclose same, to the best of his or her knowledge, to the Company and
hereby irrevocably assigns, transfers and conveys, to the maximum extent permitted by applicable
law, all rights and intellectual property rights therein (including rights under patent, industrial
property, copyright, trademark, trade secret, unfair competition and related laws) to the Company
to the extent ownership of any such rights does not vest originally in the Company.
(ii) Executive shall take all reasonably requested actions and execute all reasonably
requested documents (including any licenses or assignments required by a government contract) at
the Companys expense (but without further remuneration) to assist the Company in validating,
maintaining, protecting, enforcing, perfecting, recording, patenting or registering any of the
Companys rights in the Company Works.
(iii) Executive shall not improperly use for the benefit of, bring to any premises of,
divulge, disclose, communicate, reveal, transfer or provide access to, or share with the Company
any confidential, proprietary or non-public information or intellectual property relating to a
former employer or other third party without the prior written permission of such third party.
Executive hereby indemnifies, holds harmless and agrees to defend the Company
13
and its officers, directors, partners, employees, agents and representatives from any breach
of the foregoing covenant. Executive shall comply with all relevant policies and guidelines of the
Company, including regarding the protection of confidential information and intellectual property
and potential conflicts of interest. Executive acknowledges that the Company may amend any such
policies and guidelines from time to time, and that Executive remains at all times bound by their
most current version.
(iv) The provisions of Section 11 shall survive the Executives Termination of Employment for
any reason.
12.
Specific Performance
. Executive acknowledges and agrees that the Companys
remedies at law for a breach or threatened breach of any of the provisions of Section 10 or Section
11 would be inadequate and the Company would suffer irreparable damages as a result of such breach
or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law, the Company, without posting any
bond, shall be entitled to cease making any payments or providing any benefit otherwise required by
this Agreement and obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any other equitable remedy which may then
be available.
13.
Miscellaneous
.
a.
Governing Law
. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to conflicts of laws principles thereof.
b.
Dispute Resolution
. Except as otherwise provided in Section 12 of this Agreement,
any controversy, dispute, or claim arising out of, in connection with, or in relation to, the
interpretation, performance or breach of this Agreement, including, without limitation, the
validity, scope, and enforceability of this section, may at the election of any party, be solely
and finally settled by arbitration conducted in Cleveland, Ohio, by and in accordance with the then
existing rules for commercial arbitration of the American Arbitration Association, or any successor
organization and with the Expedited Procedures thereof (collectively, the Rules). Each of the
parties hereto agrees that such arbitration shall be conducted by a single arbitrator selected in
accordance with the Rules; provided that such arbitrator shall be experienced in deciding cases
concerning the matter which is the subject of the dispute. Any of the parties may demand
arbitration by written notice to the other and to the Arbitrator set forth in this Section 13(b)
(Demand for Arbitration). Each of the parties agrees that if possible, the award shall be made
in writing no more than 30 days following the end of the proceeding. Any award rendered by the
arbitrator(s) shall be final and binding and judgment may be entered on it in any court of
competent jurisdiction. Each of the parties hereto agrees to treat as confidential the results of
any arbitration (including, without limitation, any findings of fact and/or law made by the
arbitrator) and not to disclose such results to any unauthorized person. The parties intend that
this agreement to arbitrate be valid, enforceable and irrevocable. In the event of any arbitration
with regard to this Agreement, each party shall pay its own legal fees and expenses except to the
extent set forth in Section 13(p), provided, however, that the Company agrees to pay the cost of
the Arbitrators fees.
14
c.
Entire Agreement/Amendments
. This Agreement contains the entire understanding of
the parties with respect to the employment of Executive by the Company. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. This Agreement may not be
altered, modified, or amended except by written instrument signed by the parties hereto.
d.
No Waiver
. The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of such partys rights or deprive
such party of the right thereafter to insist upon strict adherence to that term or any other term
of this Agreement.
e.
Severability
. In the event that any one or more of the provisions of this
Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions of this Agreement shall not be affected
thereby.
f.
Assignment
. This Agreement, and all of Executives rights and duties hereunder,
shall not be assignable or delegable by Executive. Any purported assignment or delegation by
Executive in violation of the foregoing shall be null and void ab initio and of no force and
effect. This Agreement may be assigned by the Company to a person or entity which is an affiliate
or a successor in interest to substantially all of the business operations of the Company. The
Company will require any person or entity which is an affiliate or a successor in interest to
substantially all of the business operations of the Company to assume all obligations of the
Company under this Agreement.
g.
Set Off; No Mitigation
. The Companys obligation to pay Executive the amounts
provided and to make the arrangements provided hereunder shall be subject to bona fide set off,
counterclaim or recoupment in good faith of amounts owed by Executive to the Company or its
affiliates. Executive shall not be required to mitigate the amount of any payment provided for
pursuant to this Agreement by seeking other employment.
h.
Successors; Binding Agreement
. This Agreement shall inure to the benefit of and be
binding upon personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
i.
Notice
. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand or overnight courier or three days after it has been mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the respective addresses
set forth below in this Agreement, or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
15
If to the Company:
Chart Industries, Inc.
One Infinity Corporate Centre Drive, Suite 300
Garfield Heights, Ohio 44125
Facsimile: (440) 753-1491
Attention: Chief Financial Officer and General Counsel
If to Executive:
To the most recent address of Executive set forth in the personnel records
of the Company.
j.
Executive Representation
. Executive hereby represents to the Company that the
execution and delivery of this Agreement by Executive and the Company and the performance by
Executive of Executives duties hereunder shall not constitute a breach of, or otherwise
contravene, the terms of any employment agreement or other agreement or policy to which Executive
is a party or otherwise bound.
k.
Prior Agreements
. This Agreement supercedes all prior agreements and
understandings (including verbal agreements) between Executive and the Company and/or its
affiliates regarding the terms and conditions of Executives employment with the Company and/or its
affiliates, except that this Agreement does not supercede any stock option agreement, performance
unit agreement, or indemnification agreement.
l.
Cooperation
. Executive shall provide Executives reasonable cooperation in
connection with any action or proceeding (or any appeal from any action or proceeding) which
relates to events occurring during Executives employment hereunder. This provision shall survive
any termination of this Agreement.
m.
Withholding Taxes
. The Company may withhold from any amounts payable under this
Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any
applicable law or regulation.
n.
Counterparts
. This Agreement may be signed in counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.
o.
Compliance with Section 409A
. Notwithstanding anything herein to the contrary, (i)
if at the time of Executives Termination of Employment with the Company Executive is a specified
employee as defined in Section 409A of the Code, and the deferral of the commencement of any
payments or benefits otherwise payable hereunder as a result of such Termination of Employment is
necessary in order to prevent the imposition of any accelerated or additional tax under Section
409A of the Code, then the Company will defer the commencement of the payment of any such payments
or benefits hereunder (without any reduction in such payments or benefits ultimately paid or
provided to Executive) until the date that is six months following Executives Termination of
Employment with the Company (or the earliest date as is permitted under Section 409A of the Code)
and (ii) if any other payments of money or other
16
benefits due to Executive hereunder could cause the application of an accelerated or
additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if
deferral will make such payment or other benefits compliant under Section 409A of the Code, or
otherwise such payment or other benefits shall be restructured, to the extent possible, in a
manner, determined by the Board or any duly authorized committee thereof, that does not cause such
an accelerated or additional tax or result in an additional cost to the Company. The Company shall
consult with Executive in good faith regarding the implementation of the provisions of this Section
13(o); provided that neither the Company nor any of its employees or representatives shall have any
liability to Executive with respect thereto.
p.
Enforcement Costs
. The Company is aware that upon the occurrence of a Change in
Control the Board of Directors or a shareholder of the Company may then cause or attempt to cause
the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt
to cause the Company to institute, or may institute, litigation or arbitration seeking to have this
Agreement declared unenforceable, or may take, or attempt to take, other action to deny Executive
the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement
could be frustrated. It is the intent of the Company that Executive not be required to incur the
expenses associated with the enforcement of Executives rights under this Agreement by litigation,
arbitration or other legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to Executive hereunder, nor be bound to negotiate any
settlement of Executives rights hereunder under threat of incurring such expenses. Accordingly,
if at any time following a Change in Control, it should appear to Executive that the Company has
failed to comply with any of its obligations under this Agreement or the Company or any other
person takes any action to declare this Agreement void or unenforceable, or institutes any
litigation, arbitration or other legal action designed to deny, diminish or recover from Executive
the benefits intended to be provided to Executive hereunder, and Executive has complied with all of
Executives obligations under Sections 10 and 11, then the Company irrevocably authorizes Executive
from time to time to retain counsel of Executives choice at the expense of the Company as provided
in this Section 13(p) to represent Executive in connection with the initiation or defense of any
litigation, arbitration or other legal action, whether by or against the Company or any Director,
officer, shareholder or other person affiliated with the Company, in any jurisdiction. The
Companys obligations under this Section 13(p) shall not be conditioned on Executives success in
the prosecution or defense of any such litigation, arbitration or other legal action.
Notwithstanding any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to Executive entering into an attorney-client
relationship with such counsel, and in that connection the Company and Executive agree that a
confidential relationship shall exist between Executive and such counsel. The reasonable fees and
expenses of counsel selected from time to time by Executive as hereinabove provided shall be paid
or reimbursed to Executive by the Company on a regular, periodic basis no later than 30 days after
presentation by Executive of a statement or statements prepared by such counsel in accordance with
its customary practices, up to a maximum aggregate amount of $500,000, provided that Executive
presents such statement(s) no later than 30 days prior to the end of Executives taxable year
following the year in which such expenses were incurred. Notwithstanding the foregoing, this
Section 13(p) shall not apply at any time unless a Change in Control has occurred.
17
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year
first above written.
|
|
|
|
|
CHART INDUSTRIES, INC.
(Company)
|
|
KENNETH J. WEBSTER
(Executive)
|
|
|
|
|
|
By:
|
|
/s/ Michael F. Biehl
|
|
/s/ Kenneth J. Webster
|
|
|
|
|
|
Name:
|
|
Michael F. Biehl
|
|
|
|
|
|
|
|
Title:
|
|
Executive Vice President, Chief Financial
Officer & Treasurer
|
|
|
18