SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
Chicago Bridge & Iron Company N.V.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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CHICAGO BRIDGE & IRON COMPANY N.V.
POLARISAVENUE 31
2132 JH HOOFDDORP, THE NETHERLANDS
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 8, 2003
To the Shareholders of:
CHICAGO BRIDGE & IRON COMPANY N.V.
You are hereby notified that the Annual General Meeting of Shareholders of
Chicago Bridge & Iron Company N.V. will be held at Amstel Inter-Continental
Hotel Amsterdam, Prof. Tulpplein 1, 1018 GX Amsterdam, The Netherlands, at 2:00
P.M., local time, on Thursday, May 8, 2003, for the following purposes:
1. To appoint Gerald M. Glenn, Vincent L. Kontny, L. Richard Flury and
Ben A. Guill as members of the Supervisory Board to serve until the Annual
General Meeting of Shareholders in 2006, and until their successors shall
have been duly appointed;
2. To authorize the preparation of the annual accounts and the annual
report in the English language and to adopt the Dutch Statutory Annual
Accounts of the Company for the fiscal year ended December 31, 2002;
3. To discharge the members of the Management Board and the
Supervisory Board from liability in respect of the exercise of their duties
during the fiscal year ended December 31, 2002;
4. To approve the distribution from profits for the year ended
December 31, 2002 in the amount of US$0.24 per share previously paid as
interim distributions;
5. To approve the extension of the authority of the Management Board
to repurchase up to 30% of the issued share capital of the Company until
November 8, 2004;
6. To cancel shares to be acquired by the Company in its own share
capital;
7. To determine the compensation of the Supervisory Directors who are
not employees;
8. To approve the extension of the authority of the Supervisory Board
to issue and/or grant rights on (including options to subscribe) shares of
the Company until May 8, 2008;
9. To approve the extension of the authority of the Supervisory Board
to limit or exclude the preemptive rights of the shareholders of the
Company until May 8, 2008; and
10. To appoint Deloitte & Touche as the Company's independent public
accountants for the fiscal year ending December 31, 2003.
This notification is subject to the convocation for the meeting and the
meeting's official agenda as they will appear or be available under Dutch law.
Copies of the Dutch Statutory Annual Accounts, the annual report of the
Management Board and the list of nominees for the Supervisory Board can be
obtained free of charge by shareholders and other persons entitled to attend
general meetings of shareholders of the Company at the offices of the Company at
Polarisavenue 31, 2132 JH Hoofddorp, The Netherlands and at the Bank of New
York, 620 Avenue of the Americas, New York, New York 10011 from the date hereof
until the close of the Annual Meeting.
Holders of registered shares of record at the close of business on April 1,
2003, are entitled to receive notice of and to vote at the Annual Meeting.
Shareholders must give notice to the Management Board of their intention to
attend the Annual Meeting in writing prior to May 2, 2003. The stock transfer
books will not be closed. Admittance of shareholders and acceptance of written
voting proxies shall be under Dutch law.
REGISTERED SHAREHOLDERS ARE REQUESTED TO COMPLETE, SIGN, DATE AND PROMPTLY
MAIL THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR
MAILING IN THE UNITED STATES.
ROBERT H. WOLFE
Secretary
April 10, 2003
CHICAGO BRIDGE & IRON COMPANY N.V.
PROXY STATEMENT
This proxy statement, which is first being mailed to holders of registered
shares on or about April 10, 2003, is furnished in connection with the
solicitation of proxies on behalf of the Supervisory Board of Chicago Bridge &
Iron Company N.V. ("we", "CB&I" or the "Company"), who ask you to complete,
sign, date and mail the enclosed proxy for use at the Annual General Meeting of
Shareholders to be held May 8, 2003, 2:00 P.M. local time (the "Annual
Meeting"), for the purposes set forth in the foregoing notice.
Each share entitles the holder thereof to one vote on each matter submitted
to a vote at the meeting. All shares represented by proxies duly executed and
received by us within the time indicated on the enclosed proxy (the "Voter
Deadline"), will be voted at the meeting in accordance with the terms of the
proxies. If no choice is indicated on the proxy, the proxyholders will vote for
Messrs. Glenn, Kontny, Flury and Guill for Supervisory Directors and for all
proposals described in this Proxy Statement.
A shareholder may revoke a proxy by submitting a document revoking it or by
submitting a duly executed proxy bearing a later date prior to the Voter
Deadline, or by attending the meeting and voting in person, with regard to which
attending in person the requirements below apply.
Only holders of record of the 44,626,494 registered shares of our share
capital, par value Euro 0.01 (the "Common Stock" or "shares"), issued at the
close of business on April 1, 2003, are entitled to notice of and to vote at the
meeting. Shareholders must give notice in writing to the Management Board of
their intention to attend the Annual Meeting prior to May 2, 2003.
Although there is no quorum requirement under Dutch law, abstentions,
directions to withhold authority to vote for a Supervisory Director nominee or
to withhold authority to vote for all Supervisory Director nominees and "broker
non-votes" (where a named entity holding shares for a beneficial owner has not
received voting instructions from the beneficial owner with respect to a
particular matter and such named entity does not possess or choose to exercise
its discretionary authority with respect thereto) will be considered present at
the meeting but will not be counted to determine the total number of votes cast.
We will bear the cost of soliciting proxies on the accompanying proxy card.
Some of our directors, officers and regular employees may solicit proxies in
person or by mail, telephone or telefax, but will not receive any additional
compensation for their services. We may reimburse brokers and others for their
reasonable expenses in forwarding proxy solicitation material to the beneficial
owners of our shares.
This proxy statement is subject to the convocation for the Annual Meeting
and the Annual Meeting's official agenda as they will appear or be available
under Dutch law. Admittance of shareholders and acceptance of written voting
proxies shall be under Dutch law.
ITEM 1
APPOINTMENT OF DIRECTORS
The general affairs and business of the Company and the Management Board
are supervised by the Board of Supervisory Directors (the "Supervisory Board"),
the members of which are appointed by the general meeting of shareholders. Our
Articles of Association (the "Articles of Association") provide for at least 6
and no more than 12 Supervisory Directors to serve on the Supervisory Board. The
Supervisory Board has determined to increase its size from 9 members to 10
members effective at the time of the Annual Meeting. Under the law of The
Netherlands, a Supervisory Director cannot be a member of the Management Board
of the Company. The general meeting of shareholders appointed Chicago Bridge &
Iron Company B.V. as the sole member of the Management Board.
Members of the Supervisory Board are appointed to serve three-year terms,
with approximately one-third of such members' terms expiring each year. Members
of the Supervisory Board must retire no later than at the general meeting of
shareholders held after a period of three years following their appointment, but
may be re-
elected. Pursuant to our Articles of Association, a member of the Supervisory
Board must resign effective the date of the annual general meeting of
shareholders in the year in which the director attains the age of 72. Pursuant
to the Articles of Association, members of the Supervisory Board may be
suspended or dismissed by the general meeting of shareholders. The Supervisory
Board may make a proposal to the general meeting of shareholders for the
suspension or dismissal of one or more of its members. If such proposal is made
by the Supervisory Board, a simple majority vote of the shareholders is required
to effect a suspension or dismissal. If no such proposal is made, the general
meeting of shareholders by vote of two-thirds of the votes cast at the meeting
if such two-thirds vote constitutes more than one-half of the issued share
capital of the Company (a "Two-thirds Majority of Quorum") is required to effect
a suspension or dismissal. The members of the Supervisory Board may receive such
compensation as may be determined by the general meeting.
As permitted under Dutch law and the Articles of Association, the
Supervisory Board is authorized to make binding nominations of two candidates
for each open position on the Supervisory Board, with the candidate receiving
the greater number of votes being elected. A nomination by the Supervisory Board
is binding on the shareholders unless overridden by a Two-thirds Majority of
Quorum.
Four Supervisory Directors are to be appointed who will serve until the
Annual Meeting in 2006. For one position, the Supervisory Board has proposed the
election of Gerald M. Glenn or Timothy J. Moran. For the second position, the
Supervisory Board has proposed the election of Vincent L. Kontny or Samuel C.
Leventry. For the third position, the Supervisory Board has proposed the
election of L. Richard Flury or David P. Bordages. For the fourth position, the
Supervisory Board, pursuant to the First Reserve Shareholder Agreement (as
hereinafter defined), has proposed the election of Ben A. Guill or Thomas R.
Denison. Messrs. Glenn, Kontny and Guill are presently members of the
Supervisory Board. Mr. Flury has been a consultant to the Supervisory Board
since May, 2002.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPOINTMENT
OF MESSRS. GLENN, KONTNY, FLURY AND GUILL.
Certain information with respect to the nominees for Supervisory Director
and the six Supervisory Directors whose terms do not expire this year is as
follows:
THE FOLLOWING NOMINATIONS ARE MADE FOR THREE-YEAR TERMS EXPIRING IN 2006
FIRST POSITION
First Nominee
Gerald M. Glenn, 60, has served as Chairman of the Supervisory Board of the
Company since April, 1997. He has been President and Chief Executive Officer of
Chicago Bridge & Iron Company since May, 1996 and has been a Managing Director
of Chicago Bridge & Iron Company B.V. since March, 1997. Since April, 1994, Mr.
Glenn has been a principal in the Glenn Group LLC. From November, 1986 to April,
1994, he served as Group President-Fluor Daniel, Inc. Mr. Glenn is a member of
the Supervisory Board's Nominating Committee.
Second Nominee
Timothy J. Moran, 47, has served as Vice President and Treasurer of Chicago
Bridge & Iron Company since August, 2000. Prior to that, Mr. Moran was Vice
President-Area Director of Finance, Eastern Hemisphere from July, 1997 to July,
2000 and Area Director-Finance-Eastern Hemisphere from August, 1995 to June,
1997. Mr. Moran has been employed by Chicago Bridge & Iron Company in various
finance and accounting positions for more than 20 years.
SECOND POSITION
First Nominee
Vincent L. Kontny, 65, has served as a Supervisory Director of the Company
since April, 1997. He recently retired as Chief Operating Officer of Washington
Group International (serving in such position since
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April, 2000), which filed a petition under Chapter 11 of the U.S. Bankruptcy
Code on May 14, 2001. Since 1992 he has been the owner and CEO of the Double
Shoe Cattle Company. Mr. Kontny was President and Chief Operating Officer of
Fluor Corporation from 1990 until September, 1994. Mr. Kontny is Chairman of the
Supervisory Board's Organization and Compensation Committee and is a member of
the Audit Committee and Corporate Governance Committee.
Second Nominee
Samuel C. Leventry, 53, has served as Vice President-Technology Services of
Chicago Bridge & Iron Company since January, 2001. Prior to that, he was Vice
President-Engineering from April, 1997 to January, 2001, Product
Manager-Pressure Vessels and Spheres from April, 1995 to April, 1997 and Product
Engineering Manager-Special Plate Structures for Chicago Bridge & Iron Company.
Mr. Leventry has been employed by Chicago Bridge & Iron Company for over 32
years in various engineering positions.
THIRD POSITION
First Nominee
L. Richard Flury, 55, has served as a consultant to the Supervisory Board
since May, 2002. He retired from his position as Chief Executive, Gas and Power
for BP plc on December 31, 2001, which position he had held since June, 1999.
Prior to the integration of Amoco and BP, which was announced in August, 1998,
he served as Executive Vice President of Amoco Corporation with chief executive
responsibilities for the Exploration and Production sector from January, 1996 to
December, 1998. He also served in various other executive capacities with Amoco
since 1988. He is a director of the Questar Corporation.
Second Nominee
David P. Bordages, 52, has served as Vice President-Human Resources and
Administration of Chicago Bridge & Iron Company since February 25, 2002. Mr.
Bordages was Vice President-Human Resources of the Fluor Corporation from April,
1989 through February, 2002.
FOURTH POSITION
First Nominee
Ben A. Guill, 52, has served as a Supervisory Director of the Company since
January, 2001. He is the President of First Reserve Corporation, a
Connecticut-based private equity investment firm, where he has served since
September, 1998. First Reserve Fund VIII, L.P. is managed by First Reserve
Corporation. Prior to joining First Reserve Corporation, Mr. Guill was a Partner
and Managing Director of Simmons & Company International, an investment banking
firm located in Houston, Texas which focuses on the energy industry. Mr. Guill
had been with Simmons & Company since 1980. He is member of the board of
directors of National-Oilwell, Inc., Superior Energy Services, Inc., Destiny
Resources Services Corp., Dresser, Inc., T3 Energy Services Inc., Transmontaigne
Inc., and Quanta Services, Inc. Mr. Guill received his Bachelor of Arts Degree
from Princeton University and his Masters Degree in Finance from the Wharton
Graduate School of Business at the University of Pennsylvania. He is a member of
the Supervisory Board's Audit Committee and Corporate Governance Committee.
Second Nominee
Thomas R. Denison, 42, is a Managing Director and General Counsel of First
Reserve Corporation, a Connecticut-based equity investment firm, where he has
served since January, 1998. First Reserve Fund VIII, L.P. is managed by First
Reserve Corporation. He was a partner in the international law firm of Gibson,
Dunn & Crutcher LLP from January, 1995 to December, 1997. Mr. Denison received a
B.S. degree in Business Administration from the University of Denver and a J.D.
from the University of Virginia. He currently serves on the Board of Directors
of T3 Energy Services, Inc., a Houston, Texas based manufacturing company.
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SUPERVISORY DIRECTORS TO CONTINUE IN OFFICE WITH TERMS EXPIRING IN 2005
J. Charles Jennett, 62, has served as a Supervisory Director of the Company
since April, 1997. Dr. Jennett is a private engineering consultant. He served as
President of Texas A&M International University from 1996 to 2001, when he
became President Emeritus. He was Provost and Vice President of Academic Affairs
at Clemson University from 1992 through 1996. Dr. Jennett is a member of the
Supervisory Board's Nominating Committee, Organization and Compensation
Committee and Corporate Governance Committee.
Gary L. Neale, 63, has served as a Supervisory Director of the Company
since April, 1997. He is currently President, CEO and Chairman of the Board of
NiSource, Inc., whose primary business is the distribution of electricity and
gas through utility companies. Mr. Neale has served as a director of NiSource,
Inc. since 1991, a director of Northern Indiana Public Service Company since
1989 and a director of Modine Manufacturing Company (heat transfer products)
since 1977. Mr. Neale is Chairman of the Supervisory Board's Corporate
Governance Committee and a member of the Organization and Compensation
Committee.
Marsha C. Williams, 51, has served as a Supervisory Director of the Company
since April, 1997. Since August, 2002, she has served as Executive Vice
President and Chief Financial Officer of Equities Office Properties Trust, a
public real estate investment trust that is an owner and manager of office
buildings. From May, 1998, to August, 2002, she served as Chief Administrative
Officer of Crate & Barrel, a specialty retail company. Prior to that, she served
as Vice President and Treasurer of Amoco Corporation from December, 1997 to May,
1998, and Treasurer from 1993 to 1997. Ms. Williams is a director of Selected
Funds, Davis Funds and Modine Manufacturing Company (heat transfer products).
Ms. Williams is Chairman of the Supervisory Board's Audit Committee and a member
of Corporate Governance Committee.
SUPERVISORY DIRECTORS TO CONTINUE IN OFFICE WITH TERMS EXPIRING IN 2004
Jerry H. Ballengee, 65, has served as a Supervisory Director of the Company
since April, 1997. Since October, 2001 he has served as Chairman of the Board of
Morris Material Handling Company (MMH). Mr. Ballengee served as President and
Chief Operating Officer of Union Camp Corporation from July, 1994 to May, 1999
and served in various other executive capacities and as a member of the Board of
Directors of Union Camp Corporation from 1988 until 1999 when the company was
acquired by International Paper Company. He is Chairman of the Supervisory
Board's Nominating Committee and a member of the Corporate Governance Committee
and Audit Committee.
Anthony P. Banham, 59, is Vice Chairman of Simmons & Company International,
an investment banking firm located in Houston, Texas which focuses on the energy
industry. Mr. Banham has been with Simmons & Company since 1976. Simmons
provided investment banking services to us during 2002 and will provide services
during 2003. Prior to joining Simmons & Company, he spent nine years working for
Hawker Siddeley Aviation Ltd. in a variety of management capacities. He is past
President of the British American Business Association in Houston, Chairman of
the Awty International School Board of Trustees and a member of the Board of
Trustees of the Houston Museum of Natural Science. He is a member of the
Supervisory Board's Corporate Governance Committee.
L. Donald Simpson, 67, has served as a Supervisory Director of the Company
since April, 1997. From December, 1996 to December, 1999, Mr. Simpson served as
Executive Vice President of Great Lakes Chemical Corporation. Prior thereto,
beginning in 1992, he served in various executive capacities at Great Lakes
Chemical Corporation. He is a member of the Supervisory Board's Organization and
Compensation Committee and Corporate Governance Committee.
COMMITTEES OF THE SUPERVISORY BOARD
The Organization and Compensation Committee, which held four meetings in
2002, reviews and makes recommendations concerning compensation philosophy and
guidelines for our executive and managerial group; reviews compensation and
benefit programs for our employees and our subsidiaries; compares such programs
and compensation against market data and makes recommendations as to
modifications; reviews
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recommendations or actions of management concerning benefit plans, incentive
plans, stock option or other stock awards and oversees the administration of
such plans; reviews compensation, awards and grants under corporate benefit
plans for the Chief Executive Officer; reviews management recommendations
concerning compensation for certain other officers; administers the Company's
Long-Term Incentive Plans; and advises as to which key officers of the Company
or its subsidiaries should be offered employment and/or termination agreements.
The Nominating Committee, which held three meetings in 2002, establishes
criteria regarding the size and composition of the Supervisory Board and its
Committees; recommends criteria relating to tenure and eligibility; identifies,
reviews and recommends prospective Supervisory Directors; recommends candidates
for the position of Chief Executive Officer; approves the nominees for new
positions on the Supervisory Board and vacancies on the Supervisory Board; and
advises regarding Supervisory Board compensation. It will consider nominees for
Supervisory Director recommended by shareholders. Recommendations must be
submitted in writing and addressed to the Chairman of the Nominating Committee,
c/o Secretary of the Company, Robert H. Wolfe, Chicago Bridge & Iron Company
N.V., Polarisavenue 31, 2132 JH Hoofddorp, The Netherlands, and set forth the
name, age, business and residential address, principal occupation, number of
shares owned and such other information concerning the nominee as may be
requested by the Nominating Committee.
The Corporate Governance Committee, which held one meeting in 2002,
consists of all the non-management Supervisory Directors. It reviews and makes
recommendations concerning policies and practices of management relating to
corporate governance and responsibilities, and is responsible for the internal
operations of the Supervisory Board.
The Audit Committee, which held four meetings in 2002, is charged with
reviewing the adequacy and effectiveness of our internal auditing, accounting
and financial controls, and coordinating the annual internal audit plan with the
auditing plan of the independent public accountants. The Committee receives
reports from our Internal Audit Department; reviews the annual report to
shareholders and the financial statements contained therein; reviews the results
of the audit performed by our independent public accountants; and acts as
liaison between the independent public accountants and the Supervisory Board.
The Committee makes recommendations concerning the appointment of the
independent public accountant of the Company, the scope of the audit to be
performed and the fees to be paid. The Committee is also authorized to audit and
monitor compliance by us and our subsidiaries with the laws of the various
jurisdictions in which we and our subsidiaries conduct business and to report to
the Supervisory Board and make recommendations with respect to any problems. The
Supervisory Board has determined in accordance with the requirements of Sections
303.01(B)(2)(a) and (3) the New York Stock Exchange, Inc. listing standards,
that each member of the Audit Committee is independent.
REPORT OF THE AUDIT COMMITTEE OF THE SUPERVISORY BOARD OF CHICAGO BRIDGE & IRON
COMPANY N.V.
The following is the report of the Audit Committee with respect to our
audited financial statements for the fiscal year ended December 31, 2002:
The Supervisory Board of Directors has adopted for the Audit Committee
a written charter.
We have reviewed and discussed with management the Company's audited
financial statements as of and for the year ended December 31, 2002.
We have discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61, Communication
with Audit Committees, as amended, by the Auditing Standards Board of the
American Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter
from the independent auditors required by Independence Standard No. 1,
Independence Discussions with Audit Committees, as amended, by the
Independence Standards Board, and have discussed with the auditors the
auditors' independence. The Audit Committee has also reviewed the non-audit
services provided by Deloitte & Touche LLP, as described below, and
considered whether the provision of those services was compatible with
maintaining Deloitte & Touche's independence.
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For 2002, the Company incurred the following fees for services rendered by
Deloitte & Touche LLP:
Audit Fees: The Company incurred $793,000 in fees for audit services
rendered by Deloitte & Touche LLP in connection with the Company's annual
and quarterly financial statements for 2002.
Financial Information, Systems Design and Implementation Fees: The
company incurred no fees for financial information, systems design and
implementation services rendered by Deloitte & Touche LLP during 2002.
All Other Fees: The company incurred $837,000 in fees for services
rendered by Deloitte & Touche LLP during 2002 other than audit and
financial information, systems design and implementation services.
Based on the reviews and discussions referred to above, we recommend to the
Supervisory Board that the financial statements referred to above be included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2002.
Members of the Audit Committee:
Marsha C. Williams (Chairman)
Ben A. Guill
Vincent L. Kontny
Jerry H. Ballengee
INFORMATION REGARDING MEETINGS
The Supervisory Board held four meetings in 2002. Each of the Supervisory
Directors attended at least 75% of the meetings of the Supervisory Board and of
the committees of which he or she was a member.
COMMON STOCK OWNERSHIP BY CERTAIN
PERSONS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to each
person (other than management of the Company) known to the Company to be the
beneficial owner of more than 5% of the Company's issued shares.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
First Reserve Fund VIII, L.P.(1)......................... 13,621,790 30.6%
c/o First Reserve Corporation
475 Steamboat Road
Greenwich, CT 06830
WEDGE Engineering B.V.(2)................................ 3,705,528 8.3%
Keizer Karelweg 474
1181 RL Amstelveen
The Netherlands
Strong Capital Management, Inc.(3)....................... 2,822,646 6.4%
100 Heritage Reserve,
Menomonee Falls, WI 53051
---------------
(1) First Reserve Fund VIII, L.P. is managed by First Reserve Corporation. The
following are executive officers of First Reserve Corporation: William E.
Macaulay is the Chairman, a Managing Director and Chief Executive Officer;
Ben A. Guill is the President and a Managing Director; John A. Hill is Vice
Chairman and a Managing Director; Thomas R. Denison is a Managing Director,
Secretary and General
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Counsel; J. W. G. Will Honeybourne is a Managing Director; Thomas Sikorski is a
Managing Director; and Jennifer K. Zarrilli is Vice President, Treasurer and
Chief Financial Officer. Messrs. Macaulay, Guill and Hill are the directors of
First Reserve Corporation. It is anticipated that pursuant to authority
from First Reserve Corporation's board of directors, Messrs. Macaulay and
Guill may make investment and voting decisions with respect to the shares
owned by First Reserve Fund VIII, L.P. In the absence of Messrs. Macaulay
and Guill, other officers of First Reserve Corporation may, pursuant to
authority from the board of directors, make investment and voting decisions
with respect to such shares. All such persons disclaim beneficial ownership
of the shares held by First Reserve Fund VIII, L.P.
(2) The sole ultimate beneficial owner of WEDGE is Issam M. Fares of Lebanon.
(3) According to a Schedule 13G dated March 21, 2003, filed by Strong Capital
Management, Inc. and it had shared power to vote 2,815,486 shares and shared
power to dispose of 2,822,646 shares.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
On December 28, 2000, we acquired the entire ownership interest of
Howe-Baker International, L.L.C. from WEDGE Group Incorporated ("WEDGE") for a
consideration of 16,293,330 shares, $28 million in cash and the assumption of
certain liabilities (the "HBI Transaction"). Immediately following the HBI
Transaction, First Reserve Fund VIII, L.P. ("First Reserve") acquired from WEDGE
8,646,666 shares. Subsequently, First Reserve acquired from WEDGE 1,060,000
shares.
On February 7, 2001, we acquired substantially all of the assets of the
Engineered Construction Division and the Water Division of Pitt-Des Moines, Inc.
for a consideration of 5,696,344 shares and $40 million in cash (the "PDM
Transaction"). The source of funds for the cash portion of the purchase price
was a private sale of 1,675,384 shares to Farinvest, Ltd., an affiliate of WEDGE
and 3,247,692 shares to First Reserve. First Reserve also acquired a warrant to
purchase, at nominal value, 503,196 shares which has been exercised and a
warrant to purchase 500,000 shares (subject to decrease depending on the number
of shares repurchased by the Company prior to June 30, 2001), which expired
unexercised.
Mr. Guill, Supervisory Director, is President of First Reserve; Mr. Banham,
Supervisory Director, was proposed by First Reserve for Supervisory Director;
and Mr. Denison, nominee proposed by First Reserve for Supervisory Director, is
a Managing Director of First Reserve.
SHAREHOLDER AGREEMENTS
We are party to a Shareholder Agreement dated as of December 28, 2000 (as
amended by an Amendment thereto dated as of February 7, 2001) among First
Reserve, CB&I, and certain of our shareholders (the "First Reserve Shareholder
Agreement"). Under the First Reserve Shareholder Agreement, First Reserve and
its affiliates are subject to certain "standstill" provisions which, without the
written consent of the Supervisory Board, prohibit, among other things, (a) the
purchase of additional shares by First Reserve and its affiliates except in
order to maintain a 10.1% ownership stake (and to allow First Reserve and its
affiliates to participate in certain other transactions approved by the
Supervisory Board, such as a stock split, recapitalization or business
combination), and (b) acquisition proposals, proxy solicitations, group
formation or encouragement of third parties for takeover purposes. In addition,
First Reserve and its affiliates are subject to restrictions on their voting
rights relating to matters presented to our shareholders for vote or approval:
(i) First Reserve and its affiliates are obligated to vote "for" the Supervisory
Board nominees recommended by the Supervisory Board, provided we are in
compliance with our covenants to First Reserve relating to Supervisory Board
representation (see below), and (ii) First Reserve and its affiliates are
obligated to vote "for" any proposal recommended by the Supervisory Board and
"against" any proposal that is not recommended by the Supervisory Board, with
limited exceptions for certain matters as to which First Reserve and its
affiliates have discretionary voting rights. In the case of any business
combination, recapitalization or other transaction that involves the issuance of
Common Stock, if both of the First Reserve designees then serving on the
Supervisory Board vote against approval of such transaction at the Supervisory
Board level, then First Reserve and its affiliates, in any shareholder vote, are
permitted to vote the shares they acquired in
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connection with the PDM acquisition transaction in the same proportion as the
votes of our shareholders, other than First Reserve and WEDGE, who vote upon the
transaction.
Pursuant to the First Reserve Shareholder Agreement, First Reserve has the
right to designate two Supervisory Directors (currently Messrs. Banham and
Guill) so long as First Reserve and its affiliates own at least 3,083,871 of our
issued and outstanding shares and the right to designate one Supervisory
Director as long as First Reserve and its affiliates own at least 10% of our
issued and outstanding shares.
Under the First Reserve Shareholder Agreement and subject to limited
exceptions, First Reserve and its affiliates are subject to restrictions on the
transfer of their shares, including the restriction that, without our consent,
First Reserve and its affiliates may not sell any of their shares to (i) any
person or group who is or would be required to file a Schedule 13D under the
Securities Exchange Act of 1934 (the "Exchange Act"), (ii) any person or group
who would, as a result of such transfer, own more than 10% of our voting
securities, or (iii) a competitor of ours. Certain other sales of shares by
First Reserve and its affiliates will be subject to our right of first offer.
Finally, First Reserve has been granted one additional demand and unlimited
"piggyback" registration rights relating to its shares.
We have agreed under the First Reserve Shareholder Agreement to pay
$400,000 of registration expenses in connection with the exercise by First
Reserve of its demand registration rights, but excluding (i) any sales
commissions or discounts relating to shares being offered by First Reserve, (ii)
any transfer taxes relating to such shares, and (iii) the fees and disbursements
of its legal counsel, which are to be paid by First Reserve. In addition, we are
obligated under the First Reserve Shareholder Agreement to pay registration
expenses with respect to "piggyback" registrations of First Reserve.
First Reserve has made representations and warranties to us in its
Shareholder Agreement that it has no arrangement, contract, understanding or
relationship with WEDGE with respect to voting power or investment power
relating to our shares.
In the event of a breach by First Reserve or any of its affiliates of any
"standstill" or other provision in the First Reserve Shareholder Agreement, we
and/or our other shareholders may seek injunctive relief. However, as the relief
is equitable in nature and at the discretion of the court in which the action is
brought, there can be no assurance that the court will grant such relief.
A Shareholder Agreement dated as of December 28, 2000 (as amended by
amendments thereto dated as of February 7, 2001 and March 19, 2003) among WEDGE,
the Company and certain of our shareholders has been terminated, provided that
pursuant to certain surviving provisions of such Agreement WEDGE and its
affiliates and assignees ("WEDGE Holders") (i) are entitled to one additional
demand and unlimited "piggyback" registration rights relating to their shares as
long as the WEDGE Holders own in the aggregate at least 4% of our issued and
outstanding shares, and (ii) retain the benefit of certain indemnification
provisions.
8
SECURITY OWNERSHIP OF OUR MANAGEMENT
The following table sets forth certain information regarding Common Stock
beneficially owned on March 1, 2003 by each Supervisory Director and each
nominee to be a Supervisory Director, each named executive officer and by all
directors and executive officers as a group.
NUMBER OF PERCENTAGE OF
NAME OF BENEFICIAL OWNER SHARES OWNED(1) STOCK OWNED(2)
------------------------ --------------- --------------
Gerald M. Glenn........................................ 1,783,346 4.0%
Philip K. Asherman..................................... 38,114 *
David P. Bordages...................................... 23,044 *
Stephen P. Crain....................................... 106,530 *
Richard E. Goodrich.................................... 29,253 *
Robert B. Jordan....................................... 328,754 *
Samuel C. Leventry..................................... 21,522 *
Timothy J. Moran....................................... 8,833 *
Tom C. Rhodes.......................................... 10,144 *
Robert H. Wolfe........................................ 122,111 *
Jerry H. Ballengee..................................... 20,234 *
Anthony P. Banham...................................... 2,000 *
Ben A. Guill........................................... 4,000 *
J. Charles Jennett..................................... 15,000 *
Vincent L. Kontny...................................... 13,000 *
Gary L. Neale.......................................... 13,000 *
L. Donald Simpson...................................... 13,000 *
Marsha C. Williams..................................... 15,000 *
L. Richard Flury....................................... 0 *
Thomas R. Denison...................................... 0 *
All directors, nominees for directors and executive
officers as a group (20 in number)................... 2,566,885 5.7%
---------------
* Beneficially owns less than one percent of the Common Stock.
(1) Shares deemed beneficially owned include (i) shares held by immediate family
members, (ii) shares that can be acquired through stock options exercised
through May 8, 2003, (iii) shares subject to a vesting schedule, forfeiture
risk and other restrictions, including restricted stock units for which the
participant has voting rights on the underlying stock, and, in the case of
Mr. Glenn, 1,242,676 shares as to which he has fully vested rights to future
delivery of the shares.
(2) For purposes of this table, a person is deemed to have "beneficial
ownership" of any shares as of a given date which such person has the right
to acquire within 60 days after that date. For purposes of computing the
percentage of outstanding shares held by each person named above on a given
date, any shares that the person or persons have the right to acquire within
60 days after such date is not deemed to be outstanding for the purposes of
computing the percentage ownership of that or any other person.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Supervisory Directors,
executive officers and persons who own more than 10% of the Common Stock to file
initial reports of ownership and reports of changes in ownership of Common Stock
(Forms 3, 4 and 5) with the Securities and Exchange Commission (the "SEC") and
the New York Stock Exchange, Inc. Supervisory Directors, executive officers and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all such forms that they file.
9
To our knowledge, based solely on our review of the copies of such reports
received by us and on written representations by certain reporting persons that
no reports on Form 5 were required, we believe that during the fiscal year ended
December 31, 2002, our Supervisory Directors, executive officers and 10%
shareholders complied with all Section 16(a) filing requirements applicable to
them, except Mr. Kontny, who did not report in a timely fashion on Form 4 two
transactions during 2002 and Mr. Ballengee who did not report in a timely
fashion on Form 4 one transaction during 2002. All transactions involved the
payment or reinvestment of Supervisory Director fees in the form of stock or
phantom stock.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the chief executive
officer and our four other most highly compensated executive officers.
LONG TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- ------------------------- -------
(A) (B) (C) (D) (E) (F) (G)
OTHER RESTRICTED SECURITIES (H) (I)
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($)(3) (# SHARES) ($) ($)(4)
--------------------------- ---- ------- ------- ------------ ---------- ------------ ------- ------------
Gerald M. Glenn, Chairman of the... 2002 575,000 600,000 -- -- 174,128 292,717 94,785
Supervisory Board; President, 2001 500,000 450,000 102,800 204,490 6,760 292,829 57,830
Chief
Executive Officer and Chairman of 2000 475,000 -- -- -- 263,743 386,165 66,000
Chicago Bridge & Iron Company;
and Managing Director of Chicago
Bridge & Iron Company B.V.
Stephen P. Crain, President --..... 2002 253,800 190,000 -- -- 39,852 65,807 35,247
Western Hemisphere Operations 2001 238,924 130,000 84,200 64,450 1,480 65,833 20,561
of Chicago Bridge & Iron Company 2000 225,000 -- -- -- 79,413 84,545 26,000
Robert B. Jordan, Executive Vice... 2002 365,000 350,400 -- -- 84,704 117,767 51,917
President and Chief Operating 2001 330,749 200,000 84,000 90,450 5,220 117,813 28,877
Officer of Chicago Bridge & Iron 2000 315,000 -- -- -- 118,589 155,380 38,000
Company; and Managing Director of
Chicago Bridge & Iron Company B.V.
Richard E. Goodrich, Executive..... 2002 245,500 200,000 -- -- 29,380 15,588 33,207
Vice President and Chief Financial 2001 197,307 122,765 63,718 -- 346 15,594 21,563
Officer of Chicago Bridge & 2000 168,846 59,500 -- -- 3,200 23,250 18,662
Iron Company; and Managing
Director of Chicago Bridge & Iron
Company B.V.
Philip K. Asherman, Executive...... 2002 262,500 200,000 -- -- 40,434 -- 34,500
Vice President and Chief Marketing 2001 145,616 80,000 -- 546,625 36,258 -- 11,062
Officer of Chicago Bridge & Iron
Company; and Managing Director of
Chicago Bridge & Iron Company B.V.
---------------
(1) Bonus amounts include payments under the Incentive Plans (See "Organization
and Compensation Committee Report on Executive Compensation").
(2) Persons for whom no amount is reported did not receive personal benefits,
the value of which exceeded the lesser of $50,000 or 10% of their annual
salary and bonus.
(3) Restricted stock awards or units are valued at the closing price on the date
of grant. Participants receive dividends on the grants reported in this
column. The number and value of the aggregate restricted share holdings at
the end of the last completed fiscal year, based on the NYSE composite
closing price of $15.10/share on December 31, 2002 for each named executive
officer who held such shares are: Gerald M. Glenn, 21,122, $318,940; Stephen
P. Crain, 5,840, $88,180; Robert B. Jordan, 8,894, $134,300; Richard E.
Goodrich, 600, $9,060; and Philip K. Asherman, 26,250, $396,375.
10
(4) The compensation reported for 2002 represents (a) contributions pursuant to
the Chicago Bridge & Iron Savings Plan (the "401(k) Plan") allocated to the
executive officer's account, (b) the cost of allocations to each executive
officer's account in a benefit restoration plan (described under the caption
"Pension and other retirement benefits") for allocations pursuant to the
401(k) Plan which otherwise exceed the maximum limit imposed upon such plan
by the Internal Revenue Code of 1986, as amended (the "Code") and (c)
dividends paid on restricted stock units. For 2002, those three amounts,
expressed in the same order identified above, for each named executive
officer are as follows: Gerald M. Glenn $18,000, $74,250, $2,535; Stephen P.
Crain $18,000, $16,546, $701; Robert B. Jordan $18,000, $32,850, $1,067;
Richard E. Goodrich $18,000, $15,135, $72; Philip K. Asherman, $18,000,
$12,825, $3,675.
MANAGEMENT PLAN
At the time of the initial public offering of the Common Stock by Praxair
in March, 1997, we established the Management Plan and made a contribution to
the Management Plan in the form of 1,851,340 shares allocated as restricted
stock among approximately 52 key management employees. Restrictions on the
Management Plan shares lapsed as to one participant on January 1, 1999, and as
to all other participants except Mr. Glenn and one participant on March 27,
2000. Distribution of benefits to Mr. Glenn is generally scheduled to occur on
the earlier of termination of employment, the first business day after April 1,
2004 or a "Change of Control" provided that dividends are paid on these shares.
EMPLOYEE STOCK PURCHASE PLAN
The Company has adopted a broad-based employee stock purchase plan (the
"Stock Purchase Plan") intended to qualify under Section 423 of the Code.
Pursuant to the Stock Purchase Plan, each employee, including executive
officers, electing to participate is granted an option to purchase shares on a
specified future date at 85% of the fair market value of such shares on the date
of purchase. During specified periods preceding such purchase date, a percentage
of each participating employee's after-tax pay is withheld and used to purchase
as many shares as such funds allow at the discounted purchase price.
LONG-TERM COMPENSATION
The Company's subsidiary, Chicago Bridge & Iron Company, a Delaware
corporation ("Chicago Bridge"), has adopted the Chicago Bridge & Iron 1997
Long-Term Incentive Plan (the "1997 Incentive Plan") and the Chicago Bridge &
Iron 1999 Long-Term Incentive Plan (the "1999 Incentive Plan" and, together with
the 1997 Incentive Plan, the "Incentive Plans"). The Incentive Plans are
so-called "omnibus" plans which provide long-term compensation in the form of
non-qualified options to purchase shares; qualified "incentive" options to
purchase shares; restricted shares; restricted stock units; "performance shares"
paying out a variable number of shares depending on goal achievement; and
"performance units," which involve cash payments based on either the value of
the shares or appreciation in the price of the shares upon achievement of
specific financial goals.
11
OPTIONS AND STOCK APPRECIATION RIGHTS
The following tables summarize option grants and exercises pursuant to the
Incentive Plans during the fiscal year 2002 to and by the executive officers
named in the Summary Compensation Table above (the "named executive officers"),
and the value of the options held by such persons at the end of fiscal 2002.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
GRANT VALUE
INDIVIDUAL GRANTS DATE
-------------------------------------------------------------------------------------------------- -----------
(A) (B) (D) (E) (F)
NUMBER OF (C)
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/ GRANT DATE
OPTIONS/SARS SARS GRANTED EXERCISE OR PRESENT
GRANTED TO EMPLOYEES BASE PRICE EXPIRATION VALUE
NAME (# SHARES)(1) IN FISCAL YEAR ($/SHARE) DATE ($)(2)
---- ------------- -------------- ----------- ---------- -----------
Gerald M. Glenn........................ 9,014 1.0% 12.99 2/13/12 46,240
163,142 18.2% 13.55 2/21/12 898,910
1,972 0.2% 13.83 2/22/12 10,810
Stephen P. Crain....................... 2,026 0.2% 12.99 2/13/12 10,390
37,204 4.1% 13.55 2/21/12 204,990
622 0.07% 13.83 2/22/12 3,410
Robert B. Jordan....................... 3,626 0.4% 12.99 2/13/12 18,600
75,206 8.4% 13.55 2/21/12 414,385
872 0.1% 13.83 2/22/12 4,780
5,000 0.6% 14.12 9/10/12 26,000
Richard E. Goodrich.................... 480 0.05% 12.99 2/13/12 2,460
27,700 3.1% 13.55 2/21/12 152,630
1,200 0.1% 14.75 6/1/12 6,920
Philip K. Asherman..................... 36,934 4.1% 13.55 2/21/12 203,510
3,500 0.4% 13.95 7/1/12 18,620
---------------
(1) The options which expire on February 21, 2012, vest in four equal annual
installments beginning February 21, 2004. All other options vest in seven
years but may vest in three years from the date of grant if the holder has
held continuously until such date shares of stock awarded as performance
shares or shares granted as restricted stock for which restrictions have
lapsed.
(2) The estimated grant date present value reflected in the previous table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value
of the options reflected in the previous table include the following:
Exercise prices on the options of $12.99, $13.55, $13.83, $14.75, $13.95,
and $14.12 for the February 13, February 21, February 22, June 1, July 1,
and September 10 grants, respectively, equal to the fair market value of the
underlying stock on the date of grant.
An option term of 10 years on all grants.
Interest rates of 4.91%, 4.93%, 4.65% and 3.87% that represent the interest
rate on a U.S. treasury security on the date of grants in February, June,
July and September, respectively, with a maturity date corresponding to that
of the option terms.
Volatilities of 42.60%, 42.42%, 42.43%, 41.14%, 40.70% and 40.53% calculated
using daily stock prices for the three-year period prior to the grant dates.
12
Dividends at the rate of $0.12 per share representing the annualized
dividends paid with respect to a share at the dates of each option grant.
Reductions of approximately 11.10% for the February 21 grant and 13.52% for
all other grants to reflect the probability of forfeiture due to termination
prior to vesting, and approximately 14.47% for the February 21 and 14.28%
all other grants to reflect the probability of a shortened option term due
to termination of employment prior to the option expiration date.
The ultimate values of the options will depend on the future market price of the
Company's stock, which cannot be forecast with reasonable accuracy. The actual
value, if any, an optionee will realize upon exercise of an option will depend
on the excess of the market value of the Company's Common Stock over the
exercise price on the date the option is exercised.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END (#) FY-END ($)
(a) (b) -------------------- --------------------
SHARES (c) (d) (e)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
---- ------------ ------------ -------------------- --------------------
Gerald M. Glenn................ 0 NA 414,588/689,534 3,016,987/3,782,401
Stephen P. Crain............... 0 NA 62,822/194,638 485,945/1,114,390
Robert B. Jordan............... 0 NA 97,250/422,071 799,866/2,482,182
Richard E. Goodrich............ 0 NA 12,500/109,796 103,206/580,444
Philip K. Asherman............. 0 NA 0/76,692 0/83,933
---------------
(1) Value is based on the NYSE composite closing price of $15.10 per share on
December 31, 2002.
PENSION AND OTHER RETIREMENT BENEFITS
Effective January 1, 1997, the Company adopted the Chicago Bridge & Iron
Savings Plan (the "401(k) Plan"), a tax qualified defined contribution pension
plan for eligible employees, including, but not limited to, the named executive
officers. Such plan consists of a typical voluntary pretax salary deferral
feature under Section 401(k) of the Internal Revenue Code of 1986, as amended
(the "Code"); a dollar-for-dollar Company matching contribution applicable to
such employee deferrals up to 3% of a participating employee's considered
earnings; a basic additional Company contribution of 5% of each participating
employee's considered earnings; and an additional discretionary Company
profit-sharing contribution. The 401(k) Plan provides that the Company may, at
the discretion of management, make certain of its matching contributions or
additional discretionary profit sharing contributions in a uniform manner in the
form of either cash or shares.
The 401(k) Plan substantially replaced the CBI 401(k) Pay Deferral Plan and
CBI Pension Plan, each adopted by the Company's former parent, CBI Industries,
Inc. The CBI Pension Plan (the "Pension Plan") was non-contributory and covered
substantially all salaried employees and certain hourly employees of the Company
and its participating subsidiaries. Since December 31, 1996, no employees of the
Company participated in the Pension Plan who were not already participants as of
December 31, 1996. No further benefits accrue under the provisions of the
Pension Plan's normal benefit formulas for employees participating as of
December 31, 1996. Instead, benefits accrued as of that date were computed and
increased at a rate of 5% per year (not compounded) or fraction thereof of
continuing service, to a maximum of three additional years. The December 31,
1996 accrued pension benefit was based on credited service and average earnings
over the high three consecutive year period and is subject to an offset
adjustment for each individual for
13
primary social security benefits and a portion of the value of benefits under
the terminated CBI Salaried Employee Stock Ownership Plan (1987) previously
sponsored by CBI Industries, Inc. The estimated annual benefit payable upon
retirement at normal retirement age for Stephen P. Crain, the only executive
officer who participates in the plan, is $16,673.
The Code limited the compensation used to determine benefits under the
401(k) Plan to $200,000 for 2002. Chicago Bridge adopted the Chicago Bridge &
Iron Company Excess Benefit Plan through which it contributes benefits which
would be paid under the 401(k) Plan in the absence of the IRS limit. Such
contributions are paid into a trust, with an independent trustee, established
for this purpose.
TERMINATION AND EMPLOYMENT AGREEMENTS
On September 7, 2000 the Organization and Compensation Committee authorized
the Company to enter into change of control severance agreements with Messrs.
Crain, Jordan, Asherman and Wolfe and a change of control severance agreement on
similar terms with Mr. Glenn. Each agreement provides that upon the executive's
termination of employment with the Company by the Company without "cause," or by
the executive with "good reason," within three years following a "Change of
Control," the executive will be entitled to a lump sum payment of three times
the sum of his annual base salary plus target bonus. The executive will also be
entitled to a continuation of medical and other benefits for a three-year period
after termination of employment, payment of deferred compensation (to the extent
not paid upon the "Change of Control"), payment of unvested plan benefits, and
Company-provided outplacement services.
In addition, upon a "Change of Control," the executive will be entitled to
preservation of salary, bonus, retirement, welfare and fringe benefits at levels
not less than immediately before the "Change of Control," and will generally be
entitled to receive upon the "Change of Control," without regard to termination
of employment, a payment of minimum pro-rata target bonus, vesting in options,
restricted stock and performance shares, and an immediate lump sum cash payment
of the value of all performance shares assuming achievement of target
performance goals.
The agreements provide that the Company will pay an amount necessary to
reimburse each employee, on an after-tax basis, for any excise tax due under
Section 4999 of the Code as a result of such payment being treated as a
"parachute payment" under Section 280G of the Code. The Company will also
reimburse the executive's costs incurred to obtain benefits under the agreements
as long as the executive had a reasonable basis for the action or was acting in
good faith. The Company must maintain a letter of credit and escrow in force to
secure this obligation for legal fee reimbursement. The agreements impose a
confidentiality obligation on each executive during employment and after
termination of employment, and subjects the executive to a noncompetition
covenant during employment and for one year following termination (regardless
whether there is a "Change of Control").
For purposes of these agreements, "cause" includes conviction of a felony
or of a crime involving moral turpitude, or willful misconduct or breach of the
agreement that results in material financial detriment to the Company, but cause
does not include negligence, actions taken in good faith, actions indemnifiable
by the Company, or known to the Company for more than a year before the
purported termination. "Good reason" for termination generally includes any
adverse changes in the executive's duties, title, reporting requirements or
responsibilities; failure by the Company to provide the compensation bonus and
other payments and plan and fringe benefits and perquisites contemplated by the
agreement; and relocation without consent to an office more than 50 miles from
the executive's current office. However, with respect to the "Change of Control"
occurring upon consummation of the HBI Transaction, the PDM Transaction and
subsequent related share transfers, "good reason" does not include failure to
provide minimum bonus but only failure to provide minimum bonus opportunity, and
does not include failure to provide each plan and fringe benefit and perquisite
but only benefits and perquisites of equivalent value in the aggregate. For Mr.
Glenn, "good reason" includes his resignation for any reason during a 60-day
period beginning 30 days after the closing of a "Major Change of Control." The
HBI Transaction, the PDM Transaction and subsequent related share transfers were
not a "Major Change of Control" for such purpose. In all other respects, Mr.
Glenn's agreement is identical to that of the other executive officers.
14
Under the Agreements, "Change of Control" generally is defined as the
acquisition by any person or group of 25% (50% to be a "Major" change) or more
of the beneficial interest in the equity of the Company; failure of the current
Supervisory Board (and members nominated by at least 75% of the then-current
Supervisory Board members) to comprise at least 50% of the Supervisory Board;
Supervisory Board or shareholder approval of a merger or reorganization or
consolidation resulting in less than 75% (50% to be a "Major" change) continuing
ownership by the pre-merger shareholders; or Supervisory Board or shareholder
approval of any transaction as a result of which the Company does not own at
least 70% of Chicago Bridge, or Chicago Bridge does not own at least 75% of its
subsidiary, Chicago Bridge & Iron Company (Delaware). A "Change of Control" also
includes the failure of WEDGE or First Reserve to comply with their respective
Shareholder Agreements, or collective ownership by WEDGE and First Reserve of
more than 66.5% of the equity of the Company.
At the time of their initial employment, the Company entered into
employment arrangements with Messrs. Glenn, Jordan, Goodrich and Wolfe to serve
the Company as President and Chief Executive Officer, Vice
President -- Operations, Vice President, and Vice President -- General Counsel
and Secretary. Pursuant to these arrangements, Mr. Glenn's base salary was
$400,000 per year, Mr. Jordan's base salary was $265,000 per year, Mr.
Goodrich's base salary was $150,000 per year and Mr. Wolfe's base salary was
$175,000 per year. Such arrangements do not establish any required term of
employment, but provide for, among other things, participation in Company bonus
and incentive compensation programs and change of control benefits that are now
represented by the arrangements described above.
COMPENSATION OF DIRECTORS
Supervisory Directors who are not employees of the Company receive an
annual retainer of $22,000, paid in quarterly installments, $1,500 for
attendance at each Supervisory Board meeting, and an annual grant of options,
which vest after one year, to purchase 4,000 shares at an exercise price equal
to the fair market value of the shares at the time of the grant. Supervisory
Directors who are chairman of Supervisory Board committees receive an additional
annual retainer of $3,000. Those who serve on Supervisory Board committees
received $1,000 for each committee meeting attended. Supervisory Directors may
elect to receive their compensation in Common Stock and may elect to defer their
compensation. In addition, a Supervisory Director may direct that up to 8% of
his or her director's fees be applied to purchase shares at 85% of the closing
price per share on the New York Stock Exchange, Inc. on the first trading day
following the end of each calendar quarter. Shares are delivered either at the
time of purchase or at a specified future date. Supervisory Directors who are
full-time employees of the Company receive no compensation for serving as
Supervisory Directors.
CERTAIN TRANSACTIONS
Several of our executive officers are indebted to the Company pursuant to
Senior Executive Relocation Loan agreements entered into in 2001 and generally
maturing in 2005 in connection with the move of our administrative offices to
The Woodlands, Texas as follows:
LARGEST AMOUNT AMOUNT
OUTSTANDING SINCE OUTSTANDING AS OF
NAME POSITION JANUARY 1, 2002 MARCH 1, 2003 INTEREST RATE
---- ------------------------ ----------------- ----------------- -------------
Gerald M. Glenn......... President, Chief $3,000,000 $3,000,000 0%
Executive Officer &
Chairman
Stephen P. Crain........ President -- Western $ 700,000 $ 700,000 0%
Hemisphere Operations
Robert B. Jordan........ Executive Vice President $ 700,000 $ 700,000 0%
and Chief Operating
Officer
Robert H. Wolfe......... Vice President, General $ 700,000 $ 700,000 0%
Counsel and Secretary
15
ORGANIZATION AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
TO OUR SHAREHOLDERS
COMMITTEE ROLE IN OVERSEEING EXECUTIVE COMPENSATION POLICY
Our Organization & Compensation Committee (the "Committee") consists of
four members of the Supervisory Board. None of the Committee's members are our
current or former employees or have any "interlocking relationships" for
purposes of the proxy disclosure rules(1) of the United States Securities and
Exchange Commission (SEC).
A primary role of the Committee is to determine and oversee the
administration of compensation for our executive officers. The Committee
approves the design of, assesses the effectiveness of, and administers, reviews
and approves all salary arrangements and other remuneration for executive
officers. The Committee evaluates executive performance in reviewing and
approving executive compensation.
The Committee made certain compensation decisions for our 2002 fiscal year
as described below.
COMPENSATION PHILOSOPHY
We are committed to increasing shareholder value by growing our business in
the global marketplace. The Committee seeks to ensure that our compensation
policies and practices are used effectively to support the achievement of our
short- and long-term business objectives.
Our overall compensation philosophy is to remain competitive with
comparable companies while focusing on performance-based compensation. This
philosophy is premised on the fact that we must compete with a wide variety of
construction, engineering, heavy industrial and related firms in order to
attract and develop a pool of talented employees. The philosophy also
acknowledges the need to focus employees on financial performance. Our
compensation philosophy includes the following factors:
- Programs that will attract new talent and retain key people;
- Competitive pay with significant focus on incentive compensation;
- Equity compensation for top managers to motivate value creation for all
shareholders; and
- Plans with a higher percentage of pay "at-risk" (based on performance)
than typical marketplace practices.
In evaluating competitive practices, we consider competitive market data
provided by an independent compensation consultant, Hewitt Associates LLC of
Lincolnshire, Illinois. The data provided compares our compensation practices to
a group of "comparator" companies. These are companies that tend to have
national and international business operations and lines of business, and also
include companies operating in the same geographic areas and competing for
management employees in the same areas of expertise as we do. The Committee
reviews and approves the selection of comparator companies based on its
assessment of the comparability of the above factors. In 2002, the Committee
reviewed the selection of comparator companies in light of the above factors.
The companies chosen for the comparator group used for compensation
purposes generally are not the same companies that comprise the peer group index
in the Performance Graph included in this Proxy Statement. Considering the
factors described above, the Committee believes that our most direct competitors
for executive talent are not necessarily all of the companies that would be
included in a peer group established for comparing shareholder returns.
---------------
(1) The relevant SEC rule, Item 402(j) of Regulation S-K does not define the
term "interlocking relationship."
16
The four key elements of our executive compensation are base salary, annual
incentives, long-term incentives and benefits. These key elements are addressed
separately below. In determining compensation, the Committee considers all
elements of an executive officer's total compensation package.
BASE SALARIES
The Committee regularly reviews each executive officer's base salary. Base
salaries for executive officers are initially determined by evaluating
executives' levels of responsibility, prior experience, breadth of knowledge,
internal equity and external pay practices.
Base salaries provide the underlying level of compensation security to
executives and allow us to attract competent executive talent and maintain a
stable management team. Base salaries also allow executives to be rewarded for
individual performance based on our evaluation process. Base salary increases
for individual performance reward executives for achieving goals that may not be
immediately evident in common financial measurements.
Individual performance is evaluated based on sustained levels of individual
contribution. When evaluating individual performance, the Committee considers
the executive's efforts in promoting our values; safety; continuing educational
and management training; improving quality; developing relationships with
clients, suppliers and employees; demonstrating leadership abilities among
coworkers; and other goals.
Base salaries are targeted at approximately the 50th percentile of the
compensation data supplied by Hewitt on the comparator companies. Overall,
executive salaries were increased in 2002 at a rate comparable to the increases
provided at other companies and are near median market levels. Salaries of
individual executives may be greater or less than the median of salaries of
their counterparts at comparator companies, due to differences in individual
performance, experience and knowledge, and the Committee's comparison of the
responsibilities of the position with the responsibilities of similar positions
at comparator companies.
In 2002, Mr. Glenn received an increase in his rate of base salary to
$575,000 per year, or an increase of 15.00% from his 2001 base rate of $500,000
per year. This increase was based on an evaluation of Mr. Glenn's performance,
considered in light of the above-described factors and individual performance
goals set for him by the Committee. He actually received total base salary
payments of $575,000.
ANNUAL INCENTIVES
We adopted an Incentive Compensation Plan (the "Bonus Plan") which took
effect in fiscal 1997, and was revised in 1999. The Bonus Plan is an annual
short-term cash incentive plan covering a group consisting of our executive
officers and executive officers of our principal operating subsidiaries, and
other designated key management employees. The Bonus Plan is based on our annual
operating plan, arrived at as a result of discussion and analysis of the
business plans within our principal operating subsidiaries. Payment of bonuses
is based on attaining specific corporate-wide financial and non-financial goals
approved by the Committee, and other factors described below, and is payable
following the end of the fiscal year. The goals are set from year to year, at
the beginning of each year (subject to modifications relating to extraordinary
events), upon management's recommendation and approval by the Committee.
For 2002, under the Bonus Plan, a target bonus, generally expressed as a
percent of salary, was established for each participating employee at the
beginning of the year based on position, responsibilities and grade level. The
bonus could be earned from three sources: achievement of the corporate goals,
achievement of a participant's designated business unit performance goals (if
applicable) and achievement of individual performance goals. Each of these
sources consisted of a total bonus "pool," an amount that could range from zero
to 200% of the aggregate of all participants' target amounts for that source.
The total pool for achievement of the corporate goals was approved by the
Committee, and the respective pools for business unit and individual performance
were determined by management. A percentage of individual target bonus
opportunity was allocated to each bonus source as appropriate. The CEO's
individual performance bonus, if any, is determined by the Committee. The
Committee has discretion to reduce any bonus otherwise determined pursuant to
the Bonus Plan.
17
For fiscal 2002, Mr. Glenn and the other executive officers received bonus
payments pursuant to the Bonus Plan. Mr. Glenn received a bonus payment of
$600,000. Mr. Glenn's bonus payment was above his target bonus and reflects the
achievement of the corporate financial goal for 2002. In 2002, Mr. Glenn's
annual bonus payment represented 104.3% of his base salary and depending on
achievement of the respective goals under the Bonus Plan, could have ranged from
0% to 200% of his base salary. Mr. Glenn's bonus is somewhat above the median of
annual incentive compensation paid to other executives at comparator companies
for 2002. The amount of Mr. Glenn's bonus was determined by the committee based
on a combination of the degree of achievement of the corporate goals, as applied
to all Bonus Plan participants, and the achievement of individual goals set for
Mr. Glenn in areas including but not limited to leadership, ethics, safety
performance, financial performance, initiatives for new business development,
integration of acquired businesses, management development of the other
executives, and development and execution of strategic initiatives.
LONG-TERM INCENTIVES
In keeping with our commitment to provide a total compensation package that
favors at-risk components of pay, long-term incentives traditionally have
comprised a significant portion of an executive's total compensation package.
The Committee's objective is to provide executives with long-term incentive
award opportunities that are at or above the median of comparator companies,
with the actual realization of the opportunity dependent on the degree of
achieving the performance or other conditions of the award. As a key element of
this objective, it is the desire of the Committee to encourage continued
executive ownership of incentive award stock in order to align their long-term
interests with those of other shareholders.
Long-term incentives are provided pursuant to our Long-Term Incentive Plan
("Incentive Plan"). In 1999, we adopted and our shareholders approved a new
Incentive Plan. In 2000, we adopted and our shareholders approved an amendment
to the Incentive Plan. When awarding long-term incentives, the Committee
considers executives' levels of responsibility, prior experience, historical
award data, various performance criteria and compensation practices at
comparator companies. The Incentive Plan permits the award of qualified or
nonqualified stock options, restricted stock and performance shares. The
long-term incentives awarded in 2002 were limited to nonqualified stock options
and restricted stock.
Stock options are granted under the Incentive Plan at an option price not
less than the fair market value of the Common Stock on the date of grant.
Accordingly, stock options generally have value only if the stock price
appreciates from the date the options are granted. This design focuses
executives on the creation of shareholder value over the long term,
identification with shareholders' interests, and encourages equity ownership. In
February, 2002, the Committee received and reviewed a report from Hewitt
Associates LLC assessing the competitiveness of compensation for our senior
management positions and granted annual awards of stock options to senior
executives under the Incentive Plan. These awards become exercisable beginning
February 21, 2003, at a rate of 25% of such options on such date and an
additional 25% on February 21 of each of the following three years. In order to
provide employees with an incentive to retain ownership of vested shares
acquired from prior restricted stock or performance share grants, the Committee
approved in 1999 a program pursuant to the Incentive Plan to grant nonqualified
stock options ("retention options") upon the vesting of performance shares or
restricted stock. Retention options cover 40% of the shares that vest under such
awards. The retention options become vested and exercisable on the seventh
anniversary of date of grant. However, this vesting and exercisability is
accelerated to the third anniversary of date of grant, if the participant still
retains ownership of 100% of the vested shares in connection with which the
retention options have been awarded.
Restricted stock represents the right of the participant to vest in a share
of Common Stock upon lapse of restrictions and upon conditions set by the
Committee. Restricted stock is awarded as an incentive for retention and
performance of both newly hired and continuing key managers. Such award is
subject to forfeiture during the period of restriction. Participants are paid
cash amounts corresponding to the time and amount of actual dividends paid on
outstanding shares of Common Stock. Restricted stock becomes unrestricted upon
vesting. In 2002, awards of restricted stock were limited to certain newly hired
key managers upon their employment. These awards will vest at a rate of 25% of
the share units awarded on each of the first four anniversaries of the date of
the award. In 2002, Mr. Glenn was granted nonqualified stock options to
18
purchase 163,142 shares with an exercise price of $13.55. Mr. Glenn was also
granted retention options to purchase 9,014 shares with an exercise price of
$12.99 and 1,972 shares with an exercise price of $13.83. The Committee believes
the size and estimated value of the foregoing grants and awards is slightly
below the median of comparator companies.
Mr. Glenn currently owns or has beneficial ownership of 1,783,346 shares of
the Common Stock. The Committee believes that this equity interest provides an
appropriate link to the interests of shareholders.
In 2002, the Committee approved and we agreed to a change in outstanding
long-term incentive arrangements with Mr. Glenn. As a special incentive to
performance and our success in the period during the initial public offering of
the Common Stock by Praxair, Inc., our former parent company, a designated group
of management employees, including Mr. Glenn, received from Praxair a grant of
shares under the Chicago Bridge & Iron Management Defined Contribution Plan
("Management Plan"). The Management Plan, as amended, and our agreements with
Mr. Glenn, called for Mr. Glenn's receipt of his Management Plan shares and
certain additional restricted shares to occur on April 1, 2002, or upon a change
of control or termination of employment, if earlier. After thorough discussion,
and considering the advice of its outside consultants and legal counsel, the
Committee determined that it was in our and the shareholders' best interest that
Mr. Glenn retain such share interests for a longer period of time and remain in
our employment. Accordingly, on February 21, 2002, we entered into an agreement
with Mr. Glenn whereby receipt of such shares would be deferred until the first
business day after April 1, 2004, or upon a change of control or termination of
employment, if earlier.
BENEFITS
In general, benefits provide a safety net of protection against financial
catastrophes that can result from illness, disability, or death. The benefits we
offer to key executives are generally those we offer to the employees generally
with some variation to promote replacement of benefit opportunities lost to
regulatory limits. Data provided to the Committee under a study conducted for it
by Hewitt Associates LLC indicates that the nature and value of the benefits we
provide are competitive and in line with those offered by the comparator
companies and those within our industry.
INTERNAL REVENUE CODE 162(m) CONSIDERATIONS
Section 162(m) of the Code provides that compensation in excess of
$1,000,000 annually for any of the five most highly-paid executive officers will
not be deductible for purposes of U.S. corporate income taxes unless it is
"performance-based" compensation and is paid pursuant to a plan meeting certain
requirements of the Code. The Committee's primary obligation is to promote,
recognize and reward performance that increases shareholder value, and
accordingly will continue to rely on performance-based compensation programs
which are designed to achieve that goal. The Committee believes that all
compensation paid in respect of 2002 and earlier years was deductible, primarily
because the aggregate amount of such compensation for each executive officer was
below the $1 million threshold under Section 162(m). The Bonus Plan and 1999
Long-Term Incentive Plan were designed in a form that payments under such plans
would qualify as deductible performance-based compensation. Certain compensation
pursuant to prior plans in future years may not be deductible to the extent such
compensation causes the $1,000,000 threshold to be exceeded for any of our five
highest paid executive officers. The Committee intends to give appropriate
consideration to the requirements of Section 162(m) in the operation of the Plan
and Program, but will also exercise its discretion to determine, according to
our best overall interests, whether to satisfy such requirements.
19
CONCLUSION
The Committee believes these executive compensation policies and programs
serve the interests of us and of our shareholders effectively. The various pay
vehicles offered are appropriately balanced to provide increased motivation for
executives to contribute to our overall future success, thereby enhancing our
value for the shareholders' benefit.
The Committee will continue to monitor the effectiveness of our total
compensation program to meet our current needs.
Vincent L. Kontny (Chairman)
Gary L. Neale
Dr. J. Charles Jennett
L. Donald Simpson
20
STOCK PERFORMANCE CHART
The Stock Performance Chart below shall not be deemed incorporated by
reference by a general statement incorporating by reference this proxy statement
into any filing under the Securities Act of 1933 or under the Exchange Act
except to the extent we specifically incorporate this information by reference,
and shall not otherwise be deemed filed under such Acts. There can be no
assurance that the Common Stock performance will continue into the future with
the same or similar trends depicted in the graph below. We will not make or
endorse any predictions as to future performance of the Common Stock.
The chart below compares the cumulative total shareholder return on the
Common Stock from December 31, 1997 to the end of the last fiscal year with the
cumulative total return on the Dow Jones Heavy Construction Industry Index
("Peer Group Index") and the Russell 2000 Index for the same period. The
comparison assumes $100 was invested in the Common Stock, the Peer Group Index
and the Russell 2000 Index on December 31, 1997, and reinvestment of all
dividends.
COMPARISON OF TOTAL RETURNS
VALUE FOR EACH ONE HUNDRED DOLLARS INVESTED ON DECEMBER 31, 1997
(GAINS IN STOCK PRICE, DIVIDENDS AND REINVESTED DIVIDENDS)
(PERFORMANCE GRAPH)
--------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------
Chicago Bridge &
Iron Company N.V. 100.00 76.36 87.84 116.29 174.73 199.34
Peer Group Index 100.00 117.86 124.92 143.93 150.01 124.69
Russell 2000 Index 100.00 97.20 116.24 111.22 112.36 88.11
21
ITEM 2
ADOPTION OF ANNUAL ACCOUNTS
At the Annual Meeting, the shareholders will be asked to authorize the
preparation of the annual accounts and annual report in the English language and
to adopt the Dutch Statutory Annual Accounts of the Company for the fiscal year
ended December 31, 2002 (the "Annual Accounts"), as required under Dutch law and
the Articles of Association.
The Annual Accounts are prepared in accordance with Dutch law and
International Accounting Standards ("IAS"). However, the Annual Accounts are
substantially similar to the financial statements contained in our 2002 Annual
Report to Shareholders (the "Annual Report") accompanying this Proxy Statement,
which were prepared in accordance with generally accepted accounting principles
in the United States ("U.S. GAAP"). The Annual Accounts contain certain
disclosures not required under U.S. GAAP. In addition, the Management Report
required by Dutch law, substantially similar to the Management's Discussion and
Analysis of Results of Operations and Financial Condition included in the Annual
Report, also contains information included in our Annual Report on Form 10-K and
other information required by Dutch law.
The affirmative vote of a majority of the votes cast at the Annual Meeting
is required to adopt the Annual Accounts.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ADOPTION
OF THE ANNUAL ACCOUNTS, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED
UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
ITEM 3
DISCHARGE OF THE MEMBERS OF THE MANAGEMENT BOARD AND
THE SUPERVISORY BOARD FROM LIABILITY
Under Dutch law, the Annual Meeting may discharge the members of the
Management Board and the Supervisory Board from liability in respect of the
exercise of their managing and supervisory duties during the financial year
concerned. The discharge is without prejudice to the provisions of the law of
The Netherlands relating to liability upon bankruptcy and does not extend to
matters not disclosed to shareholders.
It is proposed that the shareholders resolve to discharge the Management
Board and the Supervisory Board from liability in respect of the exercise of
their managing and supervisory duties.
The affirmative vote of a majority of the votes cast at the Annual Meeting
is required to so discharge the Management Board and the Supervisory Board.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE DISCHARGE
OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD, AND PROXIES EXECUTED AND RETURNED
WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREIN.
ITEM 4
DISTRIBUTION FROM PROFITS
The Articles of Association provide that the general meeting of
shareholders may, with certain restrictions, resolve to make distributions from
profits. As permitted under the Articles of Association, interim dividends were
paid in 2002 on March 29, June 28, September 30 and December 30 ("interim
dividends").
It is proposed that the shareholders resolve to make a distribution of 2002
profits in the amount of $0.24 per share, previously paid as interim dividends,
and transfer the balance of the profits to retained earnings.
22
The affirmative vote of a majority of the votes cast at the Annual Meeting
is required to resolve on the distribution from profits.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
DISTRIBUTION FROM PROFITS EQUAL TO INTERIM DIVIDENDS, AND PROXIES EXECUTED AND
RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
ITEM 5
EXTENSION OF AUTHORITY OF MANAGEMENT BOARD TO REPURCHASE UP TO 30%
OF OUR ISSUED SHARE CAPITAL UNTIL NOVEMBER 8, 2004
Under Dutch law and the Articles of Association, the Management Board may,
with the prior approval of the Supervisory Board, and subject to certain Dutch
statutory provisions, be authorized to repurchase issued shares on behalf of the
Company in amounts, at prices and in the manner authorized by the general
meeting of shareholders. Adoption of this proposal will allow us to have the
flexibility to repurchase our shares without the expense of calling special
shareholder meetings. Such authorization may not continue for more than 18
months, but may be given on an annual rolling basis. At the 2002 Annual Meeting,
the general meeting of shareholders authorized the Management Board to
repurchase up to 30% of our issued share capital in open market purchases,
through privately negotiated transactions, or by means of a self-tender offer or
offers, at prices ranging up to 150% of the market price at the time of the
transaction. As of March 15, 2003, we had repurchased no shares under this
authority. Such authority expires on November 10, 2003.
The Management Board believes that the Company would benefit by extending
such authority of the Management Board to repurchase shares in our share
capital. For example, to the extent the Management Board believes that our
shares may be undervalued at the market levels at which it is then trading,
repurchases of our own share capital may represent an attractive investment for
the Company. Such shares, to the extent they are not canceled pursuant to the
authority requested in Item 6 below, could be used for any valid corporate
purpose, including use under our compensation plans, sale in connection with the
exercise of outstanding options, or for acquisitions, mergers or similar
transactions. The reduction in our issued capital resulting from any such
purchases (assuming such repurchased shares are subsequently canceled) will
increase the proportionate interest of the remaining shareholders in our net
worth and whatever further profits we may earn. However, the number of shares
repurchased, if any, and the timing and manner of any repurchases would be
determined by the Management Board, with the prior approval of the Supervisory
Board, in light of prevailing market conditions, our available resources and
other factors that cannot now be predicted. The nominal value of the shares to
be acquired by the Company, already held by the Company or held by a subsidiary,
may never exceed 10% of the issued share capital.
In order to provide us with sufficient flexibility, the Management Board
proposes that the general meeting of shareholders grant extended authority for
the repurchase of up to 30% of the current issued share capital (or over
thirteen million shares) in the open market, through privately negotiated
transactions, or by means of a self-tender offer or offers, at prices ranging up
to 150% of the market price at the time of the transaction. Such authority would
extend for eighteen months from the date of the Annual Meeting until November 8,
2004.
The affirmative vote of a majority of the votes cast at the meeting is
required to adopt the proposal to grant extended authority to the Management
Board until November 8, 2004 to repurchase up to 30% of our issued share capital
on behalf of the Company in the open market, through privately negotiated
transactions, or by means of a self-tender offer or offers, at prices ranging up
to 150% of the market price at the time of the transaction.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL
TO GRANT EXTENDED AUTHORITY TO THE MANAGEMENT BOARD TO REPURCHASE SHARES OF OUR
SHARE CAPITAL, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS
CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
23
ITEM 6
CANCELLATION OF SHARES TO BE ACQUIRED BY THE COMPANY IN ITS OWN SHARE CAPITAL
Under Dutch law and the Articles of Association, the Company may hold no
more than 10% of its issued share capital at any time. In order to allow
implementation of proposed repurchases contemplated by the authorization
requested in Item 5 above which would be in excess of 10% (and up to 30%) of the
then issued share capital, we must dispose of or cancel shares which have been
repurchased. The Management Board, with the prior approval of the Supervisory
Board and subject to certain Dutch statutory conditions, is requesting a
resolution on the prospective cancellation of shares so that the Management
Board will have the ability to implement any proposed repurchases in excess of
10% (and up to 30%) of the current issued share capital in an efficient manner
without the delay and expense of calling special shareholders meetings.
Prospective cancellation of shares shall occur if and when the Company
holds in excess of 9% of its then issued share capital, at which time we will
cancel all or a portion of such shares, as determined by the Management Board.
We propose to cancel such shares in two tranches, or such higher number of
tranches as the Management Board shall determine, with no tranche to exceed 10%
of the then issued share capital of the Company. The total number of shares to
be prospectively canceled by us will not exceed 20% of the current issued share
capital, or a total of approximately 8,900,000 shares.
With regard to the requirements of Sections 2:99 and 2:100 Dutch Civil
Code, the resolution to cancel shares prospectively held by the Company of its
share capital will become effective after filing thereof with the Commercial
Register and after expiry of a two-month period following publication of such
filing in a daily newspaper distributed nationally in The Netherlands, provided
no opposition is instituted by creditors against such resolution. If opposition
is instituted, such resolution shall become effective as soon as possible, with
due observance of the law. Upon effectiveness of such resolution, the capital
decrease will be filed with the Commercial Register, our shareholder register
will reflect the cancellation of registered shares, and bearer share
certificates and registered share certificates, if any, will be destroyed. The
above-mentioned filing with the Commercial Register will show which number of
shares will have been canceled in the relevant tranche. For every cancellation
tranche, a filing will be made.
The affirmative vote of a majority of the votes cast, or the affirmative
vote of 2/3 of the votes cast if less than 50% of the issued capital is
represented at the meeting, is required to adopt the proposal to prospectively
cancel shares to be acquired by the Company of its share capital.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL
TO PROSPECTIVELY CANCEL SHARES TO BE ACQUIRED BY THE COMPANY OF ITS SHARE
CAPITAL, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY
INSTRUCTIONS ARE INDICATED THEREON.
ITEM 7
DETERMINE THE COMPENSATION OF SUPERVISORY DIRECTORS
WHO ARE NOT EMPLOYEES
Under our Articles of Association, the shareholders determine the
compensation of Supervisory Directors, including changes to their compensation.
As approved by shareholders in 1997 and 2000, Supervisory Directors who are not
employees receive an annual retainer of $22,000, a meeting attendance fee of
$1,500 and an annual grant of options to purchase 4,000 shares. Committee
chairmen receive an annual retainer of $3,000 and committee members receive a
meeting attendance fee of $1,000. Supervisory Director fees are more fully
described under the caption "Compensation of Directors".
We propose to increase the remuneration of Supervisory Directors who are
not employees so that each director will receive an annual retainer of $25,000,
a meeting attendance fee of $1,500 and an annual grant of 2,200 units or shares
of restricted stock to vest after one year. Committee chairmen will receive an
annual retainer of $5,000 and committee members will receive a meeting
attendance fee of $1,000.
24
The affirmative vote of a majority of the votes cast is required to adopt
the proposal to establish the compensation of Supervisory Directors who are not
employees.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL
TO ESTABLISH COMPENSATION OF SUPERVISORY DIRECTORS WHO ARE NOT EMPLOYEES, AND
PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE
INDICATED THEREON.
ITEM 8
EXTENSION OF AUTHORITY OF SUPERVISORY BOARD TO
ISSUE SHARES UNTIL MAY 8, 2008
At the Annual Meeting, the shareholders will be asked to resolve on a
further extension of the designation of the Supervisory Board to issue and/or
grant rights on (including options to subscribe) shares for a five-year period
from the date of the Annual Meeting until May 8, 2008. A designation may be
effective for up to five years and may be renewed on an annual rolling basis. At
the 2002 annual meeting, the shareholders designated the Supervisory Board for a
five-year period to issue and/or grant rights on (including options to
subscribe) shares. This five-year period will expire on May 10, 2007. (For a
discussion of preemptive rights held by shareholders, see Item 9 below.)
The affirmative vote of a majority of the votes cast at the Annual Meeting,
or the affirmative vote of 2/3 of the votes cast if less than 50% of the issued
capital is represented at the meeting, is required to extend the authorization
of the Supervisory Board to issue and/or to grant rights on (including options
to subscribe) shares for a five-year period from the date of the Annual Meeting
until May 8, 2008.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
DESIGNATION OF THE SUPERVISORY BOARD TO ISSUE AND/OR GRANT RIGHTS ON (INCLUDING
OPTIONS TO SUBSCRIBE) SHARES UNTIL MAY 8, 2008, AND PROXIES EXECUTED AND
RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
ITEM 9
EXTENSION OF AUTHORITY OF SUPERVISORY BOARD TO LIMIT OR EXCLUDE
PREEMPTIVE RIGHTS UNTIL MAY 8, 2008
Under Dutch law and the Articles of Association, shareholders have a pro
rata preemptive right of subscription, inter alia, to any shares issued for cash
unless such right is limited or eliminated. Shareholders have no pro rata
preemptive subscription right with respect to any shares issued for
consideration other than cash or pursuant to certain employee stock plans. If
designated for this purpose at the Annual Meeting, the Supervisory Board has the
power to limit or eliminate such preemptive rights. A designation may be
effective for up to five years and may be renewed on an annual rolling basis in
combination with the designation discussed above under Item 8. At the 2002
Annual Meeting, the shareholders authorized the Supervisory Board for a
five-year period to limit or exclude from time to time the preemptive rights of
shareholders. This five-year period will expire on May 10, 2007.
At the Annual Meeting, shareholders will be asked to resolve on a further
extension of this designation for a five-year period from the date of the Annual
Meeting until May 8, 2008.
The affirmative vote of a majority of the votes cast at the Annual Meeting,
or the affirmative vote of 2/3 of the votes cast if less than 50% of the issued
capital is represented at the meeting, is required to resolve on
25
the designation of the Supervisory Board to limit or exclude the preemptive
rights of shareholders for a five-year period from the date of the Annual
Meeting until May 8, 2008.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE EXTENSION
OF THE DESIGNATION OF THE SUPERVISORY BOARD TO LIMIT OR EXCLUDE PREEMPTIVE
RIGHTS OF SHAREHOLDERS UNTIL MAY 8, 2008, AND PROXIES EXECUTED AND RETURNED WILL
BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
ITEM 10
APPOINTMENT OF OUR INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Supervisory Board has recommended that Deloitte
& Touche be appointed as the Company's independent accountants for the year
ending December 31, 2003. Deloitte & Touche has acted as the Company's
independent public accountants since 2002. Representatives of Deloitte & Touche
are expected to be present at the Annual Meeting. They will have an opportunity
to make a statement, if they desire, and are expected to be available to respond
to appropriate questions.
The affirmative vote of a majority of the votes cast at the Annual Meeting
is required to appoint Deloitte & Touche as our independent public accountants
for the next year.
THE SUPERVISORY BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
APPOINTMENT OF DELOITTE & TOUCHE'S AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR 2003, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS
CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
SHAREHOLDER PROPOSALS
Any proposal of a shareholder intended to be presented at the 2004 Annual
Meeting of Shareholders must be received at our principal executive offices no
later than December 10, 2003, if the proposal is to be considered for inclusion
in our proxy statement relating to such meeting, without prejudice to
shareholder rights to cause a general meeting of shareholders to be convened
under article 34.2 of the Articles of Association.
By Order of the Board of Supervisory
Directors
Gerald M. Glenn
Chairman of the Board of Supervisory
Directors
Amsterdam, The Netherlands
April 10, 2003
26
--------------------------------------------------------------------------------
CHICAGO BRIDGE & IRON COMPANY N.V.
VOTING INSTRUCTION CARD
(MUST BE PRESENTED AT THE MEETING OR RECEIVED BY MAIL PRIOR TO
THE CLOSE OF BUSINESS ON MAY 2, 2003)
The undersigned registered holder of Shares of New York Registry (each
representing one Common Share of EUR 0.01 nominal amount of Chicago Bridge &
Iron Company N.V.), hereby appoints The Bank of New York, as New York Transfer
Agent and Registrar, through its agent, as the proxy of the undersigned to
attend and address the Annual General Meeting of Shareholders of Chicago Bridge
& Iron Company N.V. to be held in Amsterdam, The Netherlands on May 8, 2003 and,
in general, to exercise all rights the undersigned could exercise in respect of
such Common Shares if personally present thereat upon all matters which may
properly come before such Meeting and every adjournment thereof, and instructs
such proxy to endeavor, in so far as practicable, to vote or cause to be voted
on a poll (if a poll shall be taken) the Common Shares of Chicago Bridge & Iron
Company N.V. represented by Shares of New York Registry registered in the name
of the undersigned on the books of the New York Transfer Agent and Registrar as
of the close of business on April 1, 2003, at such Meeting in respect of the
resolutions specified on the reverse side hereof.
NOTES: 1. Please direct your proxy how it is to vote by placing an X in the
appropriate box opposite the resolutions specified on the reverse side
hereof.
2. If no instructions are given on this voting instruction card, then
the shares will be voted for Messrs. Glenn, Kontny, Flury and Guill
and FOR Items 2-10.
3. This Voting Instruction Card is solicited by the Supervisory Board
of the Company.
CHICAGO BRIDGE & IRON COMPANY
P.O. BOX 11436
NEW YORK, N.Y. 10203-0436
To change your address, please mark this box. [ ]
To include any comments, please mark this box. [ ]
PLEASE COMPLETE AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT PROMPTLY
IN THE ACCOMPANYING ENVELOPE.
--------------------------------------------------------------------------------
The Supervisory Board recommends a vote for members first listed at each
position and for Items 2-11.
1. To appoint Gerald M. Glenn, Vincent L. Kontny, L. Richard Flury and Ben A.
Guill as members of the Supervisory Board to serve until the Annual General
Meeting of Shareholders in 2006, and until their successors shall have been
duly appointed;
First Position: a) Gerald M. Glenn
OR
b) Timothy J.P. Moran
Second Position: c) Vincent L. Kontny
OR
d) Samuel C. Leventry
Third Position: e) L. Richard Flury
OR
f) David P. Bordages
Fourth Position: g) Ben A. Guill
OR
h) Thomas R. Denison
2. To authorize the preparation of the annual accounts and the annual report in
the English language and to adopt the Dutch Statutory Annual Accounts of the
Company for the fiscal year ended December 31, 2002;
3. To discharge the members of the Management Board and the Supervisory Board
from liability in respect of the exercise of their duties during the fiscal
year ended December 31, 2002;
4. To approve the distribution from profits for the year ended December 31,
2002 in the amount of US$0.24 per share previously paid as interim
dividends;
5. To approve the extension of the authority of the Management Board to
repurchase up to 30% of the issued share capital of the Company until
November 8, 2004;
6. To cancel shares to be acquired by the Company in its own share capital;
7. To determine the compensation of the Supervisory Directors who are not
employees;
8. To approve the extension of the authority of the Supervisory Board to issue
and/or grant rights on (including options to subscribe) shares of the
Company until May 8, 2008
9. To approve the extension of the authority of the Supervisory Board to limit
or exclude the preemptive rights of the shareholders of the Company until
May 8, 2008; and
10. To approve the appointment of Deloitte & Touche as the Company's independent
public accountants for the fiscal year ending December 31, 2003
-- DETACH PROXY CARD HERE --
[ ] MARK, SIGN, DATE AND RETURN [X]
THE PROXY CARD PROMPTLY Votes must be indicated
USING THE ENCLOSED ENVELOPE. [X] in Black or Blue ink.
WITHHOLD
AUTHORITY
FOR FOR FOR
1.
a) Glenn [ ] OR b) Moran [ ] [ ]
c) Kontny [ ] OR d) Leventry [ ] [ ]
e) Flury [ ] OR f) Bordages [ ] [ ]
g) Guill [ ] OR h) Denison [ ] [ ]
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
2. [ ] [ ] [ ] 7. [ ] [ ] [ ]
3. [ ] [ ] [ ] 8. [ ] [ ] [ ]
4. [ ] [ ] [ ] 9. [ ] [ ] [ ]
5. [ ] [ ] [ ] 10. [ ] [ ] [ ]
6. [ ] [ ] [ ]
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The Voting Instruction must be signed by the
person in whose name the relevant Receipt is
registered on the books of the Depositary.
In the case of a Corporation, the Voting
Instruction must be executed by a duly
authorized Officer or Attorney.
Date Share Owner sign here Co-Owner sign here
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