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-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PYJMIUv/hYawZLctCSWnWaBB92VD1gxhCfvYkUNYEHrLZoOYWDUfoh77xZjijTJD QadXnZJkrMHWffSxn2ndlQ== 0000950129-05-002272.txt : 20050311 0000950129-05-002272.hdr.sgml : 20050311 20050311165900 ACCESSION NUMBER: 0000950129-05-002272 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050311 DATE AS OF CHANGE: 20050311 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHICAGO BRIDGE & IRON CO N V CENTRAL INDEX KEY: 0001027884 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION SPECIAL TRADE CONTRACTORS [1700] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12815 FILM NUMBER: 05676130 BUSINESS ADDRESS: STREET 1: P O BOX 74658 CITY: 1075 AD AMSTERDAM STATE: P8 ZIP: 00000 MAIL ADDRESS: STREET 1: POLARISAVENUE 31 STREET 2: 2132 JH HOOFDORP CITY: THE NETHERLANDS 10-K 1 h23159e10vk.htm CHICAGO BRIDGE & IRON COMPANY N.V. - DECEMBER 31, 2004 e10vk

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2004

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 1-12815

CHICAGO BRIDGE & IRON COMPANY N.V.


Incorporated in The Netherlands		IRS Identification Number: not applicable

Polarisavenue 31
2132 JH Hoofddorp
The Netherlands
31-23-5685660
(Address and telephone number of principal executive offices)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class:		Name of each exchange on which registered:
Common Stock; Euro .01 par value		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: none

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) YES þ NO o

Aggregate market value of common stock held by non-affiliates, based on a New York Stock Exchange closing price of $27.85 as of June 30, 2004, was $1,329,418,051.

The number of shares outstanding of a single class of common stock as of March 1, 2005 was 48,479,383.

DOCUMENTS INCORPORATED BY REFERENCE


Portions of the 2004 Annual Report to Shareholders		Part I and Part II
Portions of the 2005 Proxy Statement		Part III

CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES

Table of Contents


	Page

Part I.

Item 1. Business		3
Item 2. Properties		20
Item 3. Legal Proceedings		22
Item 4. Submission of Matters to a Vote of Security Holders		23

Part II.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		24
Item 6. Selected Financial Data		24
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 7A. Quantitative and Qualitative Disclosures About Market Risk		24
Item 8. Financial Statements and Supplementary Data		24
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		24
Item 9A. Controls and Procedures		24
Item 9B. Other Information		25

Part III.

Item 10. Directors and Executive Officers of the Registrant		25
Item 11. Executive Compensation		29
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		29
Item 13. Certain Relationships and Related Transactions		29
Item 14. Principal Accountant Fees and Services		29

Part IV.

Item 15 Exhibits and Financial Statement Schedules		30

Signatures		31
The Company's 1997 Long-Term Incentive Plan
1999 Long-Term Incentive Plan
Savings Plan
Portion of 2004 Annual Report to Shareholders
List of Significant Subsidiaries
Consent and Report of Independent Registered Public Accounting Firm
Certification Pursuant to Section 302
Certification Pursuant to Section 302
Certification pursuant to Section 906
Certification pursuant to Section 906

PART I

Item 1. Business

Founded in 1889, CB&I is one of the world’s leading engineering, procurement and construction (EPC) companies, specializing in lump-sum turnkey projects for customers that produce, process, store and distribute the world’s natural resources. With more than 60 locations and approximately 11,000 employees throughout the world, we capitalize on our global expertise and local knowledge to reliably and safely deliver projects virtually anywhere. CB&I is a fully integrated EPC service provider, offering a complete package of conceptual design, engineering, procurement, fabrication, field erection, mechanical installation and commissioning. Our projects include hydrocarbon processing plants, liquefied natural gas (LNG) terminals and peak shaving plants, offshore structures, pipelines, bulk liquid terminals, water storage and treatment facilities, and other steel structures and their associated systems. We also provide a broad range of repair and maintenance services, including complete turnarounds for petroleum refining and petrochemical plants. During 2004, we worked on more than 700 contracts for customers in a variety of industries. Over the last several years, our customers have included:

•   large U.S., multinational and state-owned oil companies, such as Shell, ExxonMobil, Marathon, Valero Refining Company, Premcor, BP, ConocoPhillips, Saudi Aramco and PDVSA;

•   leading EPC companies, such as Chiyoda, Bechtel, KBR and Technip;

•   LNG and natural gas producers and distributors, such as Dominion, Yankee Gas and Woodside Energy; and

•   municipal and private water companies.

We had revenue of approximately $1.9 billion and net income of approximately $65.9 million in 2004. Our revenue increased 18% between 2003 and 2004. Our backlog was $2.3 billion at December 31, 2004. We employed approximately 11,000 persons worldwide as of December 31, 2004.

Services

We provide a wide range of innovative and value-added EPC services, including:

Process and Technology. We provide EPC services for customers in the hydrocarbon industry, specializing in natural gas processing plants, refinery and petrochemical process units, and hydrogen and synthesis gas plants. We also provide offshore structures for oil and gas production and pipelines for product distribution. Natural gas processing plants treat natural gas to meet pipeline requirements and to recover valuable liquids and other enhanced products, through such technologies as cryogenic separation, amine treating, dehydration and liquids fractionation. Refinery and petrochemical process units enable customers to extract products from the top and middle streams of the crude oil barrel using technologies such as electrical desalting, catalytic reforming, vacuum and atmospheric distillation, fuels and distillate hydrotreating, hydrodesulfurization, alkylation and isomerization. Synthesis gas plants generate

industrial gases for use in a variety of industries through technologies such as steam methane and auto-thermal reforming, partial oxidation reactors and pressure swing adsorption purification.

Low Temperature/Cryogenic Tanks and Systems. These facilities are used primarily for the storage and handling of liquefied gases. We specialize in providing refrigerated turnkey terminals and tanks. Refrigerated tanks are built from special steels and alloys that have properties to withstand cold temperatures at the storage pressure. These systems usually include special refrigeration systems to maintain the gases in liquefied form at the storage pressure. Applications extend from low temperature (+30 F to –100 F) to cryogenic (-100 F to –423 F). Customers in the petroleum, chemical, petrochemical, specialty gas, natural gas, power generation and agricultural industries use these tanks and systems to store and handle liquefied gases such as LNG, methane, ethane, ethylene, LPG, propane, propylene, butane, butadiene, anhydrous ammonia, oxygen, nitrogen, argon and hydrogen.

Pressure Vessels. Pressure vessels are built primarily from high strength carbon steel plates which have been formed in one of our fabrication shops and are welded together at the job site. Pressure vessels are constructed in a variety of shapes and sizes, some weighing in excess of 700 tons, with wall thickness in excess of four inches. Existing customers represent a cross-section of the petroleum, petrochemical, chemical, and pulp and paper industries, where process applications of high pressure and/or temperature are required. Typical pressure vessel usage includes process and storage vessels in the petroleum, petrochemical, and chemical industry; digesters in the pulp and paper industry; and egg-shaped digesters for wastewater treatment. We have designed and erected pressure vessels throughout the world.

Standard Tanks. Our standard tanks include above ground storage systems and water storage and treatment structures. Aboveground storage tanks are sold primarily to customers operating in the petroleum, petrochemical and chemical industries around the world. This industrial customer group includes nearly all of the major oil and chemical companies on every continent. Above ground tanks can be used for storage of crude oil, refined products such as gasoline, raw water, potable water, chemicals, petrochemicals and a large variety of feedstocks for the manufacturing industry. The water storage line includes single pedestal spheroid, fluted column and concrete elevated tanks, as well as standpipes and reservoirs. These structures have a capacity range of 25,000 gallons to in excess of 30,000,000 gallons. Water storage structures provide potable water reserves and supply pressure to the water distribution system. The water treatment line includes solids contact clarifiers and standpipe mixing systems.

Specialty and Other Structures. Our specialty and other structures are marketed to a diverse group of customers. Examples of specialty structures include processing facilities or components used in the iron, aluminum and mining industries, hydroelectric structures such as penstocks and spiral cases and other unique engineered structures.

Repairs and Turnarounds. Repair, maintenance and modification services are performed primarily on flat bottom tanks and pressure vessels for customers in the petroleum, chemical, petrochemical and water industries. A turnaround is a planned shutdown of a refinery, chemical plant or other process unit for repair and maintenance of equipment and associated systems. The work is usually scheduled on a multi-shift, seven day-per-week basis to minimize downtime of the facility. Personnel, materials and equipment must come together at precisely the right time to accomplish this labor-intensive operation. This service often requires short cycle times and

unique construction procedures. We offer this service to our customers in the petroleum, petrochemical and chemical industries throughout the world.

Certain Acquisitions

On April 29, 2003, we acquired certain assets and assumed certain liabilities of Petrofac Inc., an EPC company serving the hydrocarbon processing industry for consideration of $26.6 million including transaction costs. The acquired operations located in Tyler, Texas have been fully integrated within our North America segment’s CB&I Howe-Baker unit and expand our capacity to engineer, fabricate and install EPC projects for the oil refining, oil production, gas treating and petrochemical industries.

On May 30, 2003, we acquired certain assets and assumed certain liabilities of John Brown Hydrocarbons Limited (“John Brown”), for consideration of $29.6 million including transaction costs, net of cash acquired. John Brown provides comprehensive engineering, program and construction management services for the offshore, onshore and pipeline sectors of the hydrocarbon industry, as well as for LNG terminals and flue gas desulfurization plants. The acquired operations, located in London, Moscow, the Caspian Region and Canada, have been integrated into our Europe, Africa, Middle East segment. This addition has strengthened our international engineering and execution platform and expanded our capabilities into the upstream oil and gas sector.

Competitive Strengths

We believe that our core competencies enable us to deliver to our customers the best overall combination of experience, reliability, quality and performance which produces a lower-risk, higher value equation for our customers. These core competencies, which we believe are significant competitive strengths, include:

Worldwide Record of Excellence. We have established a record as a leader in the international engineering and construction industry by providing consistently superior project performance for more than 115 years. Our acquisitions over the past five years have further enhanced our capabilities for excellence in project design and execution.

Fully-Integrated Specialty EPC Provider. We are one of a very few global EPC providers that can deliver a project from conception to commissioning, including conceptual design, detail engineering, procurement, fabrication, field erection, mechanical installation, start-up assistance and operator training. We generally engineer what we build and build what we engineer, which allows us to provide our customers with innovative engineering solutions, aggressive schedules and work plans, and optimal quality and reliability.

Global Execution Capabilities. With a global network of some 60 sales and operations offices and established labor and supplier relationships, we have the ability to rapidly mobilize people, materials and equipment to execute projects in locations ranging from highly industrialized countries to some of the world’s most remote regions. We completed more than 700 projects in approximately 45 different countries in 2004. Our global reach makes us an attractive partner for large, global energy and industrial companies with geographically dispersed operations and also allows us to allocate our internal resources to geographies and industries with the greatest current demand. At the same time, because of our long-standing presence in

numerous markets around the world, we have a prominent position as a local contractor in those markets.

History of Innovation. We have established a reputation for technical innovation ever since we introduced the first floating roof tank to the petroleum industry in 1923. We have since maintained a strong culture of developing technological innovations and currently possess approximately 70 active U.S. patents. We develop innovative technologies on behalf of our customers that are immediately applicable to improving hydrocarbon processing, storage technology and field erection procedures. We are equipped with well-established technology and proprietary know-how in refinery processes, desalting/dehydration, synthesis gas production, gas-to-liquids processing and sulfur removal and recovery processes, an important element for the production of low sulfur transportation fuels.

Our in-house engineering team includes internationally recognized experts in site-erected metal plate structures, pre-stress concrete structures, stress analysis, metallurgy, nondestructive examination, and cryogenic storage and processing. Many of our senior engineers are long-standing members of committees that have helped develop worldwide standards for storage structures and process vessels for the petroleum and water industries, including the American Petroleum Institute, American Water Works Association and American Society of Mechanical Engineers.

Strong Focus on Project Risk Management. We are experienced in managing the risk associated with bidding on and executing complex projects. Our position as a fully-integrated EPC service provider, combined with our experience in risk management and active project cost control, allows us to execute global projects on a competitively bid fixed-price, lump-sum basis. Lump-sum contracting enables us to achieve historically higher returns versus those available from variable cost (cost-plus) contracts and provides significant advantages to the customer in terms of cost and schedule control. In addition, our ability to execute lump-sum contracts provides us with access to a growing segment of the E&C market that is demanding these types of contracts.

Strong Health, Safety and Environmental (“HSE”) Performance. Success in our industry depends in part on strong HSE performance. Because of our long and outstanding safety record, we are sometimes invited to bid on projects for which other competitors do not qualify. According to the Bureau of Labor Statistics, the Lost Workday Case Incidence Rate for construction companies similar to CB&I was 3.9 per 100 full-time employees for 2003 (the last reported year), while our rate for 2004 was only 0.06 per 100. Our excellent HSE performance also translates directly to lower cost, timely completion of projects, and reduced risk to our employees, subcontractors and customers.

Management Team with Extensive Engineering & Construction Industry Experience. Members of our senior leadership team have an average of more than 25 years of experience in the E&C industry. Our experience, particularly in risk management and project execution, enables us to recognize and capitalize upon attractive opportunities in our primary end markets.

Growth Strategy

We intend to increase shareholder value through the execution of the following growth strategies:

Leveraging the Strengths of Our Acquisitions. Our acquisitions over the past five years have broadened our capabilities and resources to meet customer needs in our end markets. We expect to leverage any acquisitions across our global sales and execution platform. We will also focus on imparting best practices and technologies from each business throughout the organization.

Expanding our Market Share in the High-Growth Energy Infrastructure Business. Growth in LNG trade (approximately 7.3% per year since 1993, according to CEDIGAZ) has created strong global demand for LNG transportation and storage systems. We intend to utilize our substantial expertise and experience in LNG and cryogenic systems to expand our presence in the worldwide sales of LNG infrastructure facilities. We have long been a leader in the turnkey design and construction of low temperature and cryogenic (“LT&C”) storage facilities, having engineered and constructed nearly 200 LNG tanks, more than 175 LT&C terminals and over 1,100 LT&C tanks. We expect that growing worldwide demand for natural gas, and the need to monetize stranded gas reserves, will create opportunities for our gas processing and gas-to-liquids technologies. In addition, we expect greater opportunities for refinery revamp and expansion projects prompted by more stringent environmental regulations for transportation fuels.

Marketing our Expanded Capabilities. We will continue to expand our marketing programs to identify and capitalize on attractive customer bases and end markets. We will focus our sales and marketing resources on cultivating and expanding relationships with select strategic customers within our target market segments. We have assigned senior members of our sales and marketing staff to pursue targeted prospects in high potential markets, focusing in particular on LNG projects and lump-sum turnkey EPC opportunities. We believe that our ability to identify attractive customers and rapid growth markets will provide a competitive advantage during changing market conditions.

Continuing to Improve Project Execution and Cost Control. Consistently profitable EPC companies deliver projects at or above the initial estimated margin by effectively managing the construction process and controlling direct costs. We intend to maintain and enhance our successful track record in project execution through training and the application of best practices. In addition, identifying and controlling non-project expenses and capital expenditures is an essential part of our ongoing efforts to improve our profitability and return on investment. Current programs include controlling staffing levels, limiting capital spending through short-term rentals, and careful control of precontract expenses. Moreover, strategic investments in information technology have enabled us to lower communication costs, achieve a common reporting platform and deliver engineering documents electronically on a worldwide basis.

Creating Growth from Acquisitions and Other Business Combinations. We will continue to pursue growth through selective acquisitions of businesses or assets that will expand or complement our current portfolio of services and meet our stringent acquisition criteria.

Competition

We believe we are a leading competitor worldwide in many of the services we provide. Price, quality, reputation, safety record and timeliness of completion are the principal

competitive factors within the industry. There are numerous regional, national and international competitors that offer services similar to ours.

Marketing And Customers

Through our global network of sales offices, we contract directly with hundreds of customers in a targeted range of industries that produce, process, store and distribute the world’s natural resources. We rely primarily on direct contact between our technically qualified sales and engineering staff and our customers’ engineering and contracting departments. Dedicated sales representatives are located in each of our global offices.

Our significant customers, with many of whom we have had longstanding relationships, are primarily in the hydrocarbon sector and are inclusive of both major petroleum companies (i.e., Shell, ExxonMobil and ConocoPhillips) and large EPC companies (i.e., Chiyoda, Bechtel, KBR and Technip).

We are not dependent upon any single customer on an ongoing basis and the loss of any single customer would not have a material adverse effect on our business. No single customer accounted for over 10% of our revenue in either of the last two years.

Segment Financial Information

Financial information by geographic area of operation can be found in our 2004 Annual Report to Shareholders and is incorporated herein by reference.

Backlog/New Business Taken

We had a backlog of work to be completed on contracts of $2.3 billion as of December 31, 2004 compared with $1.6 billion as of December 31, 2003. Due to the timing of awards and the long-term nature of some of our projects, certain backlog of our work may not be completed in the current fiscal year. New business taken was $2.6 billion for the year ended December 31, 2004 compared with $1.7 billion for the year ended December 31, 2003.

New Business Taken


	Years Ended December 31,
	2004		2003
	(in thousands)
North America	$	1,448,055	$	1,105,369
Europe, Africa, Middle East		962,299		380,493
Asia Pacific		135,226		147,238
Central and South America		68,969		75,110


Total New Business Taken	$	2,614,549	$	1,708,210

Types Of Contracts

Contracts are usually awarded on a competitive bid basis. We are primarily a fixed-price, lump-sum contractor. Our significant experience in estimating and controlling project costs, combined with our knowledge of international logistics and execution, enable us to define and control the risks of fixed-price contracts.

Raw Materials And Suppliers

The principal raw materials that we use are metal plate, structural steel, pipe, fittings and selected engineered equipment such as pumps, valves, compressors, motors and electrical and instrumentation components. Most of these materials are available from numerous suppliers worldwide with some furnished under negotiated supply agreements. We anticipate being able to obtain these materials for the foreseeable future. The price, availability and schedule validities offered by our suppliers, however, may vary significantly from year to year due to various factors. These include supplier consolidations, supplier raw material shortages and costs, surcharges, supplier capacity, customer demand, market conditions and any duties and tariffs imposed on the materials.

We make planned use of subcontractors where it assists us in meeting our clients’ requirements with regard to schedule, cost or technical expertise. These subcontractors may range from small local entities to companies with global capabilities, some of which may be utilized on a repetitive or preferred basis. We anticipate being able to locate and contract with qualified subcontractors in all global areas where we do business.

Environmental Matters

Our operations are subject to extensive and changing U.S. federal, state and local laws and regulations and laws outside the U.S. establishing health and environmental quality standards, including those governing discharges and pollutants into the air and water and the management and disposal of hazardous substances and wastes. This exposes us to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such substances or wastes.

In connection with the historical operation of our facilities, substances which currently are or might be considered hazardous were used or disposed of at some sites that will or may require us to make expenditures for remediation. In addition, we have agreed to indemnify parties to whom we have sold facilities for certain environmental liabilities arising from acts occurring before the dates those facilities were transferred. We are not aware of any manifestation by a potential claimant of its awareness of a possible claim or assessment with respect to any such facility.

We believe that we are currently in compliance, in all material respects, with all environmental laws and regulations. We do not anticipate that we will incur material capital expenditures for environmental controls or for investigation or remediation of environmental conditions during 2005 or 2006.

Patents

We hold patents and licenses for certain items incorporated into our structures. However, none is so essential that its loss would materially affect our business.

Employees

We employed approximately 11,000 persons as of December 31, 2004. The percentage of our worldwide employees represented by unions generally ranges between 5 and 10 percent. Our unionized subsidiary, CBI Services, Inc., has agreements with various unions representing groups of its employees. The largest agreement is with the Boilermakers Union which represents some of our welders. We have multiple contracts with various Boilermakers Unions across the country, and each contract generally has a three-year term.

We enjoy good relations with our unions and have not experienced a significant work stoppage in any of our facilities in over ten years. Additionally, to preserve our project management and technological expertise as core competencies, we recruit, develop and maintain ongoing training programs for engineers and field supervision personnel.

RISK FACTORS

Any of the following risks (which are not the only risks we face), if they materialize, could adversely affect our business, financial condition or operating results.

Risk Factors Relating to Our Business

Our Revenue, Cash Flow and Earnings May Fluctuate Creating Potential Liquidity Issues and Possible Under-Utilization of our Assets.

Our revenue, cash flow and earnings may fluctuate from quarter to quarter due to a number of factors. Our revenue, cash flow and earnings are dependent upon major construction projects in cyclical industries, including the hydrocarbon refining, natural gas and water industries. The selection of, timing of or failure to obtain projects, delays in awards of projects, cancellations of projects or delays in completion of contracts could result in the under-utilization of our assets and reduce our cash flows. Moreover, construction projects for which our services are contracted may require significant expenditures by us prior to receipt of relevant payments by a customer and may expose us to potential credit risk if such customer should encounter financial difficulties. Such expenditures could reduce our cash flows and necessitate increased borrowings under our credit facilities (interest payments on our outstanding debt during 2004 totaled approximately $5.5 million). Finally, the winding down or completion of work on significant projects that were active in previous periods will reduce our revenue and earnings if such significant projects have not been replaced in the current period.

Our Revenue and Earnings May Be Adversely Affected by a Reduced Level of Activity in the Hydrocarbon Industry.

In recent years, demand from the worldwide hydrocarbon industry has been the largest generator of our revenue. Numerous factors influence capital expenditure decisions in the hydrocarbon industry, including:

•   current and projected oil and gas prices;

•   exploration, extraction, production and transportation costs;

•   the discovery rate of new oil and gas reserves;

•   the sale and expiration dates of leases and concessions;

•   local and international political and economic conditions, including war or conflict;

•   technological advances; and

•   the ability of oil and gas companies to generate capital.

In addition, changing taxes, price controls and laws and regulations may reduce the level of activity in the hydrocarbon industry. These factors are beyond our control. Reduced activity in the hydrocarbon industry would result in a reduction of our revenue and earnings and possible under-utilization of our assets.

We Could Lose Money if We Fail to Accurately Estimate Our Costs or Fail to Execute Within Our Cost Estimates on Fixed-Price, Lump-Sum Contracts.

Most of our net revenue is derived from fixed-price, lump-sum contracts. Under these contracts, we perform our services and provide our products at a fixed price and, as a result, benefit from cost savings, but we may be unable to recover for any cost overruns. If our cost estimates for a contract are inaccurate, or if we do not execute the contract within our cost estimates, cost overruns may cause us to incur losses or cause the project not to be as profitable as we expected. This, in turn, could negatively impact our cash flow and earnings. The revenue, cost and gross profit realized on such contracts can vary, sometimes substantially, from the original projections due to changes in a variety of factors, including but not limited to:

•   unanticipated technical problems with the structures or systems being supplied by us, which may require that we spend our own money to remedy the problem;

•   changes in the costs of components, materials or labor;

•   difficulties in obtaining required governmental permits or approvals;

•   changes in local laws and regulations;

•   changes in local labor conditions;

•   project modifications creating unanticipated costs;

•   delays caused by local weather conditions; and

•   our suppliers’ or subcontractors’ failure to perform.

These risks are exacerbated if the duration of the project is long-term because there is an increased risk that the circumstances upon which we based our original bid will change in a manner that increases its costs. In addition, we sometimes bear the risk of delays caused by unexpected conditions or events.

Under our percentage-of-completion accounting method, the use of estimated cost to complete each contract is a significant variable in the process of determining income earned for a particular period.

Our Acquisition Strategy Involves a Number of Risks.

We intend to pursue growth through the opportunistic acquisition of companies or assets that will enable us to expand our project types to provide more cost-effective customer solutions. We routinely review potential acquisitions. However, we may be unable to implement this growth strategy if we cannot reach agreement on potential strategic acquisitions on acceptable terms or for other reasons. Moreover, our acquisition strategy involves certain risks, including:

•   difficulties in the integration of operations and systems;

•   the key personnel and customers of the acquired company may terminate their relationships with the acquired company;

•   we may experience additional financial and accounting challenges and complexities in areas such as tax planning, treasury management and financial reporting;

•   we may assume or be held liable for risks and liabilities (including for environmental-related costs) as a result of our acquisitions, some of which we may not discover during our due diligence;

•   our ongoing business may be disrupted or receive insufficient management attention; and

•   we may not be able to realize the cost savings or other financial benefits we anticipated.

Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on attractive terms. Moreover, to the extent an acquisition transaction financed by non-equity consideration results in additional goodwill, it will reduce our tangible net worth, which might have an adverse effect on our credit and bonding capacity.

Our Projects Expose Us to Potential Professional Liability, Product Liability, or Warranty or Other Claims.

We engineer and construct (and our structures typically are installed in) large industrial facilities in which system failure can be disastrous. We may also be subject to claims resulting from the subsequent operations of facilities we have installed. In addition, our operations are subject to the usual hazards inherent in providing engineering and construction services, such as the risk of work accidents, fire or explosion. These hazards can cause personal injury and loss of

life, business interruptions, property damage, pollution and environmental damage. We may be subject to claims as a result of these hazards.

Notwithstanding that we generally will not accept liability for consequential damages in our contracts, any catastrophic occurrence in excess of insurance limits at projects where our structures are installed or services are performed could result in significant professional liability, product liability or warranty or other claims against us. Such liabilities could potentially exceed our current insurance coverage and the fees we derive from those structures and services. Such claims could also make it difficult for us to obtain adequate insurance coverage in the future at a reasonable cost. Clients or subcontractors that have agreed to indemnify us against such losses may refuse or be unable to pay us. A partially or completely uninsured claim, if successful and of significant magnitude, could result in substantial losses and reduce cash available for our operations.

We Are Exposed to Potential Environmental Liabilities.

We are subject to environmental laws and regulations, including those concerning:

•   emissions into the air;

•   discharge into waterways;

•   generation, storage, handling, treatment and disposal of waste materials; and

•   health and safety.

Our businesses often involve working around and with volatile, toxic and hazardous substances and other highly regulated materials, the improper characterization, handling or disposal of which could constitute violations of U.S. federal, state or local laws and regulations and laws outside the U.S., and result in criminal and civil liabilities. Environmental laws and regulations generally impose limitations and standards for certain pollutants or waste materials and require us to obtain a permit and comply with various other requirements. Governmental authorities may seek to impose fines and penalties on us, or revoke or deny issuance or renewal of operating permits, for failure to comply with applicable laws and regulations. We are also exposed to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such substances or materials.

The environmental health and safety laws and regulations to which we are subject are constantly changing, and it is impossible to predict the effect of such laws and regulations on us in the future. We cannot assure you that our operations will continue to comply with future laws and regulations or that these laws and regulations will not cause us to incur significant costs or adopt more costly methods of operation.

In connection with the historical operation of our facilities, substances that currently are or might be considered hazardous were used or disposed of at some sites that will or may require us to make expenditures for remediation. In addition, we have agreed to indemnify parties to whom we have sold facilities for certain environmental liabilities from acts occurring before the dates those facilities were transferred.

Although we maintain liability insurance, this insurance is subject to coverage limitations, deductibles and exclusions and may exclude coverage for losses or liabilities relating to pollution damage. We may incur liabilities that may not be covered by insurance policies, or, if covered, the dollar amount of such liabilities may exceed our policy limits. Such claims could also make it more difficult for us to obtain adequate insurance coverage in the future at a reasonable cost. A partially or completely uninsured claim, if successful and of significant magnitude, could cause us to suffer a significant loss and reduce cash available for our operations.

Certain Remedies Ordered in a Federal Trade Commission Order Could Adversely Effect Us.

In October 2001, the U.S. Federal Trade Commission (the “FTC” or the “Commission”) filed an administrative complaint (the “Complaint”) challenging our February 2001 acquisition of certain assets of the Engineered Construction Division of Pitt-Des Moines, Inc. (“PDM”) that we acquired together with certain assets of the Water Division of PDM (The Engineered Construction and Water Divisions of PDM are hereafter sometimes referred to as the “PDM Divisions”). The Complaint alleged that the acquisition violated Federal antitrust laws by threatening to substantially lessen competition in four specific markets in which both CB&I and PDM had competed in the United States: liquefied nitrogen, liquefied oxygen and liquefied argon (LIN/LOX/LAR) storage tanks; liquefied petroleum gas (LPG) storage tanks; liquefied natural gas (LNG) storage tanks and associated facilities; and field erected thermal vacuum chambers (used for the testing of satellites).

On June 12, 2003, an FTC Administrative Law Judge ruled that our acquisition of PDM assets threatened to substantially lessen competition in the four markets identified above in which both CB&I and PDM participated and ordered us to divest within 180 days of a final order all physical assets, intellectual property and any uncompleted construction contracts of the PDM Divisions that we acquired from PDM to a purchaser approved by the FTC that is able to utilize those assets as a viable competitor.

We appealed the ruling to the full Federal Trade Commission. In addition, the FTC Staff appealed the sufficiency of the remedies contained in the ruling to the full Federal Trade Commission. On January 6, 2005, the Commission issued its Opinion and Final Order. According to the FTC’s Opinion, we would be required to divide our industrial division, including employees, into two separate operating divisions, CB&I and New PDM, and to divest New PDM to a purchaser approved by the FTC within 180 days of the Order becoming final.

We believe that the FTC’s Order and Opinion are inconsistent with the law and the facts presented at trial and in the appeal to the Commission. Therefore, we have filed with the FTC a petition to reconsider the FTC Order and Opinion. If our petition is unsuccessful, we intend to file a notice of appeal of the FTC Order and Opinion with the United States Court of Appeals. We are not required to divest any assets until we have exhausted all appeal processes available to us, including the United States Supreme Court. Because the remedies described in the Order and Opinion are neither consistent nor clear, we have not been able to quantify the potential effect on our financial statements. However, the remedies contained in the Order, depending on how and to the extent they are implemented, could have an adverse effect on us, including an expense relating to a potential write-down of the net book value of divested assets.

We Cannot Predict the Outcome of the Current Investigation by the Antitrust Division of the U.S. Department of Justice in Philadelphia.

We were served with a subpoena for documents on July 23, 2003 by the Philadelphia office of the U.S. Department of Justice, Antitrust Division (“DOJ”), seeking documents that are in part related to matters that were the subject of testimony in the FTC proceeding, as well as documents relating to our Water Division. In addition to the requested documents, certain of our current and former employees have testified before the investigative grand jury. We are cooperating fully with the investigation. We cannot assure you that proceedings will not result from this investigation.

We Are and Will Continue to be Involved in Litigation That Could Negatively Impact Our Earnings and Financial Condition.

We have been and may from time to time be named as a defendant in legal actions claiming damages in connection with engineering and construction projects and other matters. These are typically claims that arise in the normal course of business, including employment-related claims and contractual disputes or claims for personal injury (including asbestos-related lawsuits) or property damage which occur in connection with services performed relating to project or construction sites. Contractual disputes normally involve claims relating to the performance of equipment, design or other engineering services or project construction services provided by our subsidiaries. Management does not currently believe that pending contractual, personal injury or property damage claims will have a material adverse effect on our earnings or liquidity; however, such claims could have such an effect in the future. We may incur liabilities that may not be covered by insurance policies, or, if covered, the dollar amount of such liabilities may exceed our policy limits or fall below applicable deductibles. A partially or completely uninsured claim, if successful and of significant magnitude, could cause us to suffer a significant loss and reduce cash available for our operations.

We May Not Be Able to Fully Realize the Revenue Value Reported in Our Backlog.

We have a backlog of work to be completed on contracts. Backlog develops as a result of new business taken, which represents the revenue value of new project commitments received by us during a given period. Backlog consists of projects which have either (i) not yet been started or (ii) are in progress and are not yet complete. In the latter case, the revenue value reported in backlog is the remaining value associated with work that has not yet been completed. From time to time, projects are cancelled that appeared to have a high certainty of going forward at the time they were recorded as new business taken. In the event of a project cancellation, we may be reimbursed for certain costs but typically have no contractual right to the total revenue reflected in our backlog. In addition to being unable to recover certain direct costs, cancelled projects may also result in additional unrecoverable costs due to the resulting under-utilization of our assets.

Political and Economic Conditions, Including War or Conflict, in Foreign Countries in Which We Operate Could Adversely Affect Us.

A significant number of our projects are performed outside the United States, including in developing countries with political and legal systems that are significantly different from those found in the United States. We expect non-U.S. sales and operations to continue to contribute

materially to our earnings for the foreseeable future. Non-U.S. contracts and operations expose us to risks inherent in doing business outside the United States, including:

•   unstable economic conditions in the non-U.S. countries in which we make capital investments, operate and sell products and services;

•   the lack of well-developed legal systems in some countries in which we operate, which could make it difficult for us to enforce our contracts;

•   expropriation of property;

•   restriction on the right to convert or repatriate currency; and

•   political upheaval and international hostilities, including risks of loss due to civil strife, acts of war, guerrilla activities, insurrections and acts of terrorism.

Political instability risks may arise from time to time on a country-by-country (not geographic segment) basis where we happen to have a large active project. For example, disruptions caused by terrorist activity in Saudi Arabia in May 2004 caused us to incur additional costs and experience unexpected difficulties in completing a significant project in that country. However, having reduced our current activity in Venezuela to a low level, having only smaller active projects in Saudi Arabia and having no current projects in Iraq, we do not believe we have any material risks at the present time attributable to political instability.

We Are Exposed to Possible Losses from Foreign Exchange Risks.

We are exposed to market risk from changes in foreign currency exchange rates. Our exposure to changes in foreign currency exchange rates arises from receivables, payables and firm commitments from international transactions, as well as intercompany loans used to finance non-U.S. subsidiaries. We may incur losses from foreign currency exchange rate fluctuations if we are unable to convert foreign currency in a timely fashion. We seek to minimize the risks from these foreign currency exchange rate fluctuations through a combination of contracting methodology and, when deemed appropriate, use of foreign currency forward contracts. Regional differences have little bearing on how we view or handle our currency exposure, as we approach all these activities in the same manner. We do not use financial instruments for trading or speculative purposes.

We Have a Risk that Our Goodwill and Indefinite-Lived Intangible Assets May be Impaired and Result in a Charge to Income.

We have accounted for our acquisitions using the “purchase” method of accounting. Under the purchase method we recorded, at fair value, assets acquired and liabilities assumed, and we recorded as goodwill the difference between the cost of acquisitions and the sum of the fair value of tangible and identifiable intangible assets acquired, less liabilities assumed. Indefinite-lived intangible assets were segregated from goodwill and recorded based upon expected future recovery of the underlying assets. At December 31, 2004, our goodwill balance was $233.4 million, attributable to the excess of the purchase price over the fair value of assets acquired relative to acquisitions within our North America segment and our Europe, Africa, Middle East segment. Our indefinite-lived intangible assets balance as of December 31, 2004

was $24.9 million primarily attributable to tradenames purchased in conjunction with the 2000 Howe-Baker International acquisition. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” our recorded goodwill and indefinite-lived intangible asset balances are not amortized but instead are subject to an impairment review on at least an annual basis. Since our adoption of SFAS No. 142 during the first quarter of 2002, we have had no indicators of impairment. In the future, if our goodwill or other intangible assets were determined to be impaired, the impairment would result in a charge to income from operations in the year of the impairment with a resulting decrease in our recorded net worth.

If We Are Unable to Retain Key Personnel, Our Business Could be Adversely Affected.

Our business is dependent, to a large degree, upon the continued service of key members of our management. Our future success will also depend on our ability to attract, retain and motivate highly skilled personnel in various areas, including engineering, project management and senior management. If we do not succeed in retaining and motivating our current employees and attracting new high quality employees, our business could be adversely affected.

Uncertainty in Enforcing United States Judgments Against Netherlands Corporations, Directors and Others Could Create Difficulties for Holders of Our Securities.

We are a Netherlands company and a significant portion of our assets are located outside the United States. In addition, certain members of our management and supervisory boards may be residents of countries other than the United States. As a result, effecting service of process on each person may be difficult, and judgments of United States courts, including judgments against us or members of our management or supervisory boards predicated on the civil liability provisions of the federal or state securities laws of the United States, may be difficult to enforce.

There Are Risks Related to Our Previous Use of Arthur Andersen LLP as Our Independent Public Accountant.

In June 2002, Arthur Andersen LLP, our former independent public accountant, was convicted of federal obstruction of justice charges arising from the Federal government’s investigation of Enron Corp. and subsequently has ceased practicing before the Securities and Exchange Commission (“SEC”). Although we replaced Arthur Andersen with Deloitte & Touche LLP effective May 10, 2002 as our principal independent public accountant, we have not engaged Deloitte & Touche to re-audit our consolidated financial statements for the fiscal year ended December 31, 2001.

You may be unable to seek remedies against Arthur Andersen under applicable securities laws for any untrue statement of a material fact contained in our past financial statements audited by Arthur Andersen or any omission of a material fact required to be stated in those financial statements. Also, it is unlikely that any assets would be available from Arthur Andersen to satisfy any claims.

Risk Factors Associated with Our Common Stock

Certain Provisions of Our Articles of Association and Netherlands Law May Have Possible Anti-Takeover Effects.

Our Articles of Association and the applicable law of The Netherlands contain provisions that may be deemed to have anti-takeover effects. Among other things, these provisions provide for a staggered board of Supervisory Directors, a binding nomination process and supermajority voting requirements in the case of shareholder approval for certain significant transactions. Such provisions may delay, defer or prevent a takeover attempt that a shareholder might consider in the best interests of our shareholders. In addition, certain United States tax laws, including those relating to possible classification as a “controlled foreign corporation” described below, may discourage third parties from accumulating significant blocks of our common shares.

Existing Shareholders May Sell Their Shares, Which Could Depress the Market Price of Our Common Stock.

Our executive officers and directors own approximately 1,000,000 of our common shares that are immediately eligible to be sold into the public market pursuant to Rule 144 under the Securities Act of 1933. Our insider trading policy permits our officers and directors to establish pre-approved stock trading plans pursuant to Rule 10b5-1 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”). If these shareholders sell a large number of these shares, including any sales under a Rule 10b5-1 sales plan, the market price of our common stock could decline.

We Have a Risk of Being Classified as a Controlled Foreign Corporation and Certain Shareholders Who Do Not Beneficially Own Shares May Lose the Benefit of Withholding Tax Reduction or Exemption Under Dutch Legislation.

As a company incorporated in The Netherlands, we would be classified as a “controlled foreign corporation” for United States federal income tax purposes if any United States person acquires 10% or more of our common shares (including ownership through the attribution rules of Section 958 of the Internal Revenue Code of 1986, as amended (the “Code”), each such person, a “U.S. 10% Shareholder”) and the sum of the percentage ownership by all U.S. 10% Shareholders exceeds 50% (by voting power or value) of our common shares. We do not believe we are a “controlled foreign corporation.” However, we may be determined to be a controlled foreign corporation in the future. In the event that such a determination were made, all U.S. 10% Shareholders would be subject to taxation under Subpart F of the Code. The ultimate consequences of this determination are fact-specific to each U.S. 10% Shareholder, but could include possible taxation of such U.S. 10% Shareholder on a pro rata portion of our income, even in the absence of any distribution of such income.

Under the double taxation convention in effect between The Netherlands and the United States (the “Treaty”), dividends paid by CB&I N.V. to a resident of the United States (other than an exempt organization or exempt pension organization) are generally eligible for a reduction of the 25% Netherlands withholding tax to 15%, or in the case of certain U.S. corporate shareholders owning at least 10% of the voting power of CB&I N.V., 5%, unless the common shares held by such resident are attributable to a business or part of a business that is, in whole or in part, carried on through a permanent establishment or a permanent representative in The

Netherlands. Dividends received by exempt pension organizations and exempt organizations, as defined in the Treaty, are completely exempt from the withholding tax. A holder of common shares other than an individual will not be eligible for the benefits of the Treaty if such holder of common shares does not satisfy one or more of the tests set forth in the limitation on benefits provisions of Article 26 of the Treaty. According to an anti-dividend stripping provision, no exemption from, reduction of, or refund of, Netherlands withholding tax will be granted if the ultimate recipient of a dividend paid by CB&I N.V. is not considered to be the beneficial owner of such dividend. The ability of a holder of common shares to take a credit against its U.S. taxable income for Netherlands withholding tax may be limited.

If We Need to Sell or Issue Additional Common Shares to Finance Future Acquisitions, Your Share Ownership Could be Diluted.

Part of our business strategy is to expand into new markets and enhance our position in existing markets throughout the world through acquisition of complementary businesses. In order to successfully complete targeted acquisitions or fund our other activities, we may issue additional equity securities that could dilute our earnings per share and your share ownership.

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K and the documents incorporated in this report by reference contains forward-looking statements. You should read carefully any statements containing the words “expect,” “believe,” “anticipate,” “project,” “estimate,” “predict,” “intend,” “should,” “could,” “may,” “might,” or similar expressions or the negative of any of these terms.

Forward-looking statements involve known and unknown risks and uncertainties. In addition to the material risks listed under “Risk Factors” that may cause our actual results, performance or achievements to be materially different from those expressed or implied by any forward-looking statements, the following factors could also cause our results to differ from such statements:

•   our ability to realize cost savings from our expected execution performance of contracts;

•   the uncertain timing and the funding of new contract awards, and project cancellations and operating risks;

•   cost overruns on fixed price, target price or similar contracts;

•   risks associated with percentage of completion accounting;

•   our ability to settle or negotiate unapproved change orders and claims;

•   changes in the costs or availability of or delivery schedule for components and materials and labor;

•   increased competition;

•   fluctuating revenue resulting from a number of factors, including the cyclical nature of the individual markets in which our customers operate;

•   lower than expected activity in the hydrocarbon industry, demand from which is the largest component of our revenue;

•   lower than expected growth in our primary end markets, including but not limited to LNG and clean fuels;

•   risks inherent in our acquisition strategy and our ability to obtain financing for proposed acquisitions;

•   our ability to integrate and successfully operate acquired businesses and the risks associated with those businesses;

•   adverse outcomes of pending claims or litigation or the possibility of new claims or litigation;

•   the ultimate outcome or effect of the pending FTC order and DOJ investigation on our business, financial condition and results of operations;

•   lack of necessary liquidity to finance expenditures prior to the receipt of payment for the performance of contracts and to provide bid and performance bonds and letters of credit securing our obligations under our bids and contracts;

•   proposed and actual revisions to U.S. and non-U.S. tax laws, and interpretation of said laws, and U.S. tax treaties with non-U.S. countries (including The Netherlands), that seek to increase income taxes payable;

•   political and economic conditions including, but not limited to, war, conflict or civil or economic unrest in countries in which we operate; and

•   a downturn or disruption in the economy in general.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future performance or results. We are not obligated to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should consider these risks when reading any forward-looking statements.

Item 2. Properties

We own or lease the properties used to conduct our business. The capacities of these facilities depend upon the components of the structures being fabricated and constructed. As the mix of structures is constantly changing, the extent of utilization of these facilities cannot be accurately stated. We believe these facilities are adequate to meet our current requirements. The following list summarizes our principal properties:


Location	Type of Facility	Interest
North America
Beaumont, Texas	Engineering, fabrication facility, operations and administrative office	Owned


Location	Type of Facility	Interest
Clive, Iowa	Fabrication facility, warehouse, operations and administrative office	Owned
Everett, Washington	Fabrication facility, warehouse, operations and administrative office	Leased
Fort Saskatchewan, Canada	Warehouse, operations and administrative office	Owned
Franklin, Tennessee	Warehouse	Owned
Houston, Texas ⁽¹⁾	Engineering, fabrication facility, warehouse, operations and administrative office	Owned
Houston, Texas	Engineering and administrative office	Leased
Kankakee, Illinois	Warehouse	Owned
Liberty, Texas	Fabrication facility	Leased
Niagara Falls, Canada	Engineering and administrative office	Leased
Pittsburgh, Pennsylvania	Engineering, operations and administrative office	Leased
Pittsburgh, Pennsylvania	Warehouse	Owned
Plainfield, Illinois ⁽²⁾	Engineering, operations and administrative office	Leased
Provo, Utah	Fabrication facility, warehouse, operations and administrative office	Owned
Richardson, Texas	Engineering and administrative office	Leased
San Luis Obispo, California	Warehouse and fabrication facility	Owned
Tyler, Texas	Engineering, fabrication facility, operations and administrative office	Owned
Warren, Pennsylvania	Fabrication facility	Leased
The Woodlands, Texas	Engineering, operations and administrative office	Owned

Europe, Africa, Middle East
Al Aujam, Saudi Arabia	Fabrication facility and warehouse	Owned
Dubai, United Arab Emirates	Engineering, operations, administrative office and warehouse	Leased
Hoofddorp, The Netherlands	Principal executive office	Leased
London, England	Engineering, operations and administrative office	Leased
Secunda, South Africa	Fabrication facility and warehouse	Leased

Asia Pacific
Bangkok, Thailand	Administrative office	Leased
Batangas, Philippines	Fabrication facility and warehouse	Leased
Blacktown, Australia	Engineering, operations and administrative office	Leased
Jakarta, Indonesia	Sales office	Leased
Kwinana, Australia	Fabrication facility, warehouse and administrative office	Owned
Shanghai, China	Sales office	Leased
Tokyo, Japan	Sales office	Leased

Central and South America
Caracas, Venezuela	Administrative and engineering office	Leased
Puerto Ordaz, Venezuela	Fabrication facility and warehouse	Leased

⁽¹⁾ Warehouse and administrative office are held for sale.

⁽²⁾ Sold and leased back to us on June 30, 2001.

We also own or lease a number of sales, administrative and field construction offices, warehouses and equipment maintenance centers strategically located throughout the world.

Item 3. Legal Proceedings

Antitrust Proceedings.

In addition, we were served with a subpoena for documents on July 23, 2003 by the Philadelphia office of the U.S. Department of Justice, Antitrust Division, seeking documents that

are in part related to matters that were the subject of testimony in the FTC proceeding, as well as documents relating to our Water Division. In addition to the requested documents, certain of our current and former employees have testified before the investigative grand jury. We are cooperating fully with the investigation. We cannot assure you that proceedings will not result from this investigation.

Environmental Matters. Our operations are subject to extensive and changing U.S. federal, state and local laws and regulations and laws outside the U.S. establishing health and environmental quality standards, including those governing discharges and pollutants into the air and water and the management and disposal of hazardous substances and wastes. This exposes us to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such substances or wastes.

Other. We are a defendant in a number of lawsuits arising in the normal course of business, including among others, lawsuits wherein plaintiffs allege exposure to asbestos due to work we may have performed at various locations. We have never been a manufacturer, distributor or supplier of asbestos products, and we have in place appropriate insurance coverage for the type of work that we have performed. During 2004, we were named as a defendant in additional asbestos-related lawsuits. To date, the claims which have been resolved have been dismissed or settled without a material impact on our operating results or financial position and we do not currently believe that unresolved asserted claims will have a material adverse effect on our future results of operations or financial position. As a matter of standard policy, we continually review our litigation accrual and as further information is known on pending cases, increases or decreases, as appropriate, may be recorded in accordance with SFAS No. 5, “Accounting for Contingencies.”

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter ended December 31, 2004.

PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Information required by this item can be found in the 2004 Annual Report to Shareholders and is incorporated herein by reference.

Item 6. Selected Financial Data

Information required by this item can be found in the 2004 Annual Report to Shareholders and is incorporated herein by reference.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Information required by this item can be found in the 2004 Annual Report to Shareholders and is incorporated herein by reference.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

Information required by this item can be found in the 2004 Annual Report to Shareholders and is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

Consolidated financial statements and Report of Independent Registered Public Accounting Firm can be found in the 2004 Annual Report to Shareholders and are incorporated herein by reference.

Quarterly financial data can be found in the 2004 Annual Report to Shareholders and is incorporated herein by reference.

Additional financial information and schedules can be found in Part IV of this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

During 2004, there were no disagreements with our independent registered public accounting firm, Deloitte & Touche LLP, on accounting principles or practices, financial statement disclosures, or auditing scope or procedures.

Item 9A. Controls and Procedures

Management’s Report on Internal Control Over Financial Reporting

Information required by this section of item 9A can be found in the 2004 Annual Report to Shareholders and is incorporated herein by reference.

Attestation Report of the Independent Registered Public Accounting Firm

Our management’s assessment of the effectiveness of our internal control our financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as indicated in their report, which can be found in the 2004 Annual Report to shareholders and is incorporated herein by reference.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this annual report on Form 10-K, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon such evaluation, the CEO and CFO have concluded that, as of the end of such period, our disclosure controls and procedures are effective to ensure information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the three month period ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

The Company has adopted a code of ethics that applies to the CEO, the CFO and the Corporate Controller, as well as the Company’s directors and all employees. This code of ethics can be found at our Internet website “www.cbi.com” and is incorporated herein by reference.

The following table sets forth certain information regarding the Supervisory Directors of Chicago Bridge & Iron Company N.V. (“CB&I N.V.”), the executive officers of Chicago Bridge & Iron Company (“CBIC”) and certain Managing Directors of Chicago Bridge & Iron Company B.V. (“CB&I B.V.”). As permitted under the law of The Netherlands, CB&I N.V. does not have executive officers. CB&I B.V. is the Managing Director of CB&I N.V.


Name	Age		Position(s)
Gerald M. Glenn		62	Chairman of the Supervisory Board of CB&I N.V.;
			Chairman, President and Chief Executive Officer and Director of CBIC; Chairman, President and Chief Executive Officer and Managing Director of CB&I B.V.
Jerry H. Ballengee		67	Supervisory Director
L. Richard Flury		57	Supervisory Director
J. Charles Jennett		64	Supervisory Director
Vincent L. Kontny		67	Supervisory Director
Gary L. Neale		65	Supervisory Director
L. Donald Simpson		69	Supervisory Director
Marsha C. Williams		53	Supervisory Director
Philip K. Asherman		54	Executive Vice President and Chief Marketing Officer of CBIC; Managing Director of CB&I B.V.
David P. Bordages		54	Vice President — Human Resources and Administration of CBIC; Nominee for Supervisory Director
Stephen P. Crain		51	President — Western Hemisphere Operations of CBIC
Richard E. Goodrich		61	Executive Vice President and Chief Financial Officer of CBIC; Managing Director of CB&I B.V.
Robert B. Jordan		55	Executive Vice President and Chief Operating Officer of CBIC
Tom C. Rhodes		51	Vice President, Corporate Controller and Chief Accounting Officer of CBIC
Walter G. Browning		57	Secretary of CB&I N.V.;Vice President, General Counsel and Secretary of CBIC; Secretary of CB&I B.V.
Samuel C. Leventry		55	Nominee for Supervisory Director (Vice President, Technology Services)
Richard A. Byers		57	Nominee for Supervisory Director (Vice President and Treasurer of CBIC)

There are no family relationships between any executive officers and Supervisory Directors. Executive officers of CBIC are elected annually by the CBIC Board of Directors. The Managing Directors of CB&I B.V. serve until successors are elected.

GERALD M. GLENN has served as Chairman of the Supervisory Board of CB&I N.V. since April 1997. He has been President and Chief Executive Officer of CBIC since May 1996, and has been a Managing Director of CB&I 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.

JERRY H. BALLENGEE 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 to 1999 when the company was acquired by International Paper Company.

L. RICHARD FLURY has served as a Supervisory Director of the Company since May 8, 2003 and was a consultant to the Supervisory Board from May 2002 to May 2003. 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, 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 both the Questar Corporation and Callon Petroleum Company.

J. CHARLES JENNETT 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.

VINCENT L. KONTNY has served as a Supervisory Director of the Company since April 1997. He retired in 2002 as Chief Operating Officer of Washington Group International (serving in such position since 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.

GARY L. NEALE has served as a Supervisory Director of the Company since April 1997. He is currently CEO and Chairman of the Board of NiSource, Inc., whose primary business is the transportation and distribution of natural gas and generation and distribution of electricity. 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.

L. DONALD SIMPSON 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.

MARSHA C. WILLIAMS 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 Equity 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).

PHILIP K. ASHERMAN has been Executive Vice President and Chief Marketing Officer of CBIC since August 2001 and a Managing Director of CB&I B.V. since October 2004. From May 2001 to July 2001, he was Vice President — Strategic Sales, Eastern Hemisphere of CBIC. Prior thereto, Mr. Asherman was Senior Vice President of Fluor Global Services and held other executive positions with Fluor Daniel, Inc. operating subsidiaries.

DAVID P. BORDAGES has been the Vice President — Human Resources and Administration of CBIC since February 2002. Prior to that time, Mr. Bordages was Vice President — Human Resources of the Fluor Corporation from April 1989 through February 2002.

STEPHEN P. CRAIN has been President-Western Hemisphere Operations of CBIC since August 2001. From November 2000 to July 2001, he was Executive Vice President and Chief Marketing Officer of CBIC. From July 1997 to November 2000, Mr. Crain was Vice President — Global Sales and Marketing of CBIC. Prior to that time, Mr. Crain was employed by CBIC or its affiliates in an executive or management capacity.

RICHARD E. GOODRICH has been the Executive Vice President and Chief Financial Officer of CBIC since July 2001 and a Managing Director of a CB&I B.V. since October 2004. From November 2000 to July 2001, he was Group Vice President — Western Hemisphere Operations of CBIC. From February 1999 to November 2000, Mr. Goodrich was Vice President — Financial Operations of CBIC. Mr. Goodrich was the Vice President — Area Director of Finance, Western Hemisphere for CBIC from June 1998 through February 1999. Prior to that time, Mr. Goodrich was the Director of Strategic Planning — Energy and Chemicals Group of Fluor Daniel, Inc.

ROBERT B. JORDAN has been an Executive Vice President of CBIC since November 2000 and the Chief Operating Officer of CBIC since March 2000. From February 1998 to November 2000, Mr. Jordan was Vice President — Operations of CBIC. From May 1996 to February 1998, Mr. Jordan was the Senior Vice President — Sales and Operations for the Process Division of BE&K Incorporated located in Birmingham, Alabama. Prior to that time, Mr. Jordan was the Senior Vice President — Sales and Operations for the Process and Industrial Division of Rust Engineering & Construction Inc.

TOM C. RHODES has been the Corporate Controller of CBIC since August 2001. From November 2000 to August 2001, Mr. Rhodes was Vice President — Financial Operations for CBIC and from February 1999 to November 2000, he was Vice President — Area Director of Finance, Western Hemisphere of CBIC. Prior to that time, he was Finance Director of Americas Region for Fluor Daniel, Inc.

WALTER G. BROWNING has been the Vice President, General Counsel and Secretary of CBIC since March 2004 and has served as Secretary of CB&I N.V. since March 2004. From February 2002 to March 2004, Mr. Browning served as Assistant General Counsel-Western Hemisphere of CBIC. From 1997 to 2002, Mr. Browning was in private law practice. From 1976 to 1997, Mr. Browning served in various legal positions with Rust International, including as its Senior Vice President and General Counsel.

SAMUEL C. LEVENTRY has served as Vice President — Technology Services of CBIC since January 2001. From 1997 to 2001 Mr. Leventry served as Vice President —Engineering

for CBIC and from 1995 to 1997 he was Product Manager — Pressure Vessels and Spheres for CBIC. Prior to that time, he was Product Engineering Manager — Special Plate Structures for CBIC. Mr. Leventry has been employed by CBIC for more than 34 years in various engineering positions.

RICHARD A. BYERS has served as Vice President and Treasurer of CBIC since November 2003. From April 1987 to March 2002, Mr. Byers was Chief Financial Officer of Pitt-Des Moines, Inc.

Information appearing under “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s 2005 Proxy Statement is incorporated herein by reference.

Item 11. Executive Compensation

Information appearing under “Executive Compensation” in the 2005 Proxy Statement is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information appearing under “Common Stock Ownership By Certain Persons and Management” in the 2005 Proxy Statement is incorporated herein by reference.

The following table summarizes information, as of December 31, 2004, relating to our equity compensation plans pursuant to which grants of options or other rights to acquire our common shares may be granted from time to time.

Equity Compensation Plan Information

Number of securities to be

Weighted-average

issued upon exercise of

exercise price of

outstanding options, warrants

outstanding options,

Number of securities remaining available for

Plan Category

and rights

warrants and rights

future issuance under equity compensation plans

Equity compensation plans approved by security holders

2,154,392

12.38

1,952,107

Equity compensation plans not approved by security holders

N/A

Total

2,154,392

12.38

1,952,107

Item 13. Certain Relationships and Related Transactions

Information appearing under “Certain Transactions” in the 2005 Proxy Statement is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

Information appearing under “Committees of the Supervisory Board — Audit Fees” in the 2005 Proxy Statement is incorporated herein by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules

Financial Statements

The following consolidated financial statements and Report of Independent Registered Public Accounting Firm previously incorporated by reference under Item 8 of Part II of this report are herein incorporated by reference.

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Income — For the years ended December 31, 2004, 2003 and 2002

Consolidated Balance Sheets — As of December 31, 2004 and 2003

Consolidated Statements of Cash Flows — For the years ended December 31, 2004, 2003 and 2002

Consolidated Statements of Changes in Shareholders’ Equity — For the years ended December 31, 2004, 2003 and 2002

Notes to Consolidated Financial Statements

Financial Statement Schedules

Supplemental Schedule II — Valuation and Qualifying Accounts and Reserves for each of the years ended December 31, 2004, 2003 and 2002 can be found on page 33 of this report.

Schedules, other than the one above, have been omitted because the schedules are either not applicable or the required information is shown in the financial statements or notes thereto previously incorporated by reference under Item 8 of Part II of this report.

Quarterly financial data for the years ended December 31, 2004 and 2003 is shown in the Notes to Consolidated Financial Statements previously incorporated by reference under Item 8 of Part II of this report.

Our interest in 50 percent or less owned affiliates, when considered in the aggregate, does not constitute a significant subsidiary; therefore, summarized financial information has been omitted.

Exhibits

The Exhibit Index on page 34 and Exhibits being filed are submitted as a separate section of this report.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		Chicago Bridge & Iron Company N.V.

Date: March 11, 2005	/s/ Richard E. Goodrich

		By: Chicago Bridge & Iron Company B.V.
		Its: Managing Director
		Richard E. Goodrich
		Managing Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 11, 2005.


Signature		Title
/s/ Gerald M. Glenn		Chairman of the Supervisory Board
		of Registrant, and President, Chief
Gerald M. Glenn		Executive Officer of CBIC
		(Principal Executive Officer)

/s/ Richard E. Goodrich		Executive Vice President and Chief
		Financial Officer of CBIC
Richard E. Goodrich		(Principal Financial Officer)

/s/ Tom C. Rhodes		Vice President and Corporate
		Controller of CBIC
Tom C. Rhodes		(Principal Accounting Officer)

/s/ Jerry H. Ballengee		Supervisory Director

Jerry H. Ballengee

/s/ L. Richard Flury		Supervisory Director

L. Richard Flury

/s/ J. Charles Jennett		Supervisory Director

J. Charles Jennett

/s/ Vincent L. Kontny		Supervisory Director

Vincent L. Kontny


Signature		Title
/s/ Gary L. Neale		Supervisory Director

Gary L. Neale

/s/ L. Donald Simpson		Supervisory Director

L. Donald Simpson

/s/ Marsha C. Williams		Supervisory Director

Marsha C. Williams

Registrant’s Agent for Service in the United States

/s/ Walter G. Browning

Walter G. Browning

Schedule II. Supplemental Information on Valuation and Qualifying
Accounts and Reserves

CHICAGO BRIDGE & IRON COMPANY N.V.
Valuation and Qualifying Accounts and Reserves
For Each of the Three Years Ended December 31, 2004
(in thousands)


Column A	Column B		Column C		Column D			Column E
			Additions
	Balance		Charged to					Balance
	At		Costs and					at
Descriptions	January 1		Expenses		Deductions⁽¹⁾			December 31
Allowance for doubtful accounts
2004	$	1,178	$	826	$	(1,278	)	$	726
2003		2,274		684		(1,780	)		1,178
2002		1,256		2,564		(1,546	)		2,274

⁽¹⁾ Deductions generally represent utilization of previously established reserves or adjustments to reverse unnecessary reserves due to subsequent collections.

EXHIBIT INDEX


3⁽¹⁶⁾		Amended Articles of Association of the Company (English translation)

4.1⁽²⁾		Specimen Stock Certificate

10.1⁽²⁾		Form of Indemnification Agreement between the Company and its Supervisory and Managing Directors

10.2 ⁽³⁾		The Company’s Annual Incentive Compensation Plan

10.3 ⁽¹⁾		The Company’s 1997 Long-Term Incentive Plan As amended May 1, 2002

10.4 ⁽³⁾		The Company’s Deferred Compensation Plan

		(a) Amendment of Section 4.4 of the CB&I Deferred Compensation Plan ⁽¹⁴⁾

10.5 ⁽⁷⁾		The Company’s Management Defined Contribution Plan As amended September 1, 1999

		(a) Agreement between the Company and Gerald M. Glenn dated September 1, 1999 ⁽⁷⁾

		(b) Amended Agreement between the Company and Gerald M. Glenn dated February 21, 2002 ⁽¹¹⁾

		(c) Amended Agreement between the Company and Gerald M. Glenn dated May 8, 2003 ⁽¹⁴⁾

10.6 ⁽³⁾		The Company’s Excess Benefit Plan

		(a) Amendments of Sections 2.13 and 4.3 of the CB&I Excess Benefit Plan ⁽¹⁶⁾

10.7 ⁽²⁾		Form of the Company’s Supplemental Executive Death Benefits Plan

10.8 ⁽²⁾		Employment Agreements Including Special Stock-Based, Long-Term Compensation Related to the Common Share Offering between the Company and Certain Executive Officers

10.9 ⁽⁶⁾		Form of Amended Termination Agreements between the Company and Certain Executive Officers

10.10 ⁽²⁾		Separation Agreement

10.11 ⁽²⁾		Form of Amended and Restated Tax Disaffiliation Agreement

10.12 ⁽²⁾		Employee Benefits Separation Agreement


10.13 ⁽²⁾		Conforming Agreement

10.15 ⁽⁴⁾		The Company’s Supervisory Board of Directors Fee Payment Plan

10.16 ⁽⁴⁾		The Company’s Supervisory Board of Directors Stock Purchase Plan

10.17 ⁽¹⁾		The Chicago Bridge & Iron 1999 Long-Term Incentive Plan As Amended May 1, 2002.

10.18 ⁽⁵⁾		The Company’s Incentive Compensation Program

10.19 ⁽⁶⁾		The Company’s Equity Forward Purchase Contract

10.20 ⁽⁸⁾		Change of Control Severance Agreements between the Company and Certain Executive Officers

10.20(a) ⁽⁹⁾		Waiver to Certain Sections of Change of Control Severance Agreements between the Company and Certain Executive Officers

10.21 ⁽¹⁰⁾		Senior Executive Relocation Loan Agreements between the Company and Certain Executive Officers.

		(a) Agreement between the Company and Gerald M. Glenn dated September 13, 2001

		(b) Agreement between the Company and Stephen P. Crain dated September 13, 2001

		(c) Agreement between the Company and Robert B. Jordan dated September 13, 2001

		(d) Agreement between the Company and Robert H. Wolfe dated September 13, 2001

10.23 ⁽¹³⁾		Three-Year Revolving Credit Facility Agreement dated August 22, 2003

		(a) Amendment to Three-Year Revolving Credit Facility Agreement dated January 12, 2004 ⁽¹³⁾

		(b) Amendment to the Three-Year and Five-Year Credit Agreements ⁽¹⁶⁾

10.24 ⁽¹³⁾		Five-Year Revolving Credit Facility Agreement dated August 22, 2003

		(a) Amendment to the Three-Year and Five-Year Credit Agreements ⁽¹⁶⁾

10.25 ⁽¹⁾		Chicago Bridge & Iron Savings Plan as amended and restated as of January 1, 1997 and including the First, Second, Third, Fourth and Fifth Amendments

		(a) Sixth Amendment to the Chicago Bridge & Iron Savings Plan ⁽¹⁾

		(b) Seventh Amendment to the Chicago Bridge & Iron Savings Plan ⁽¹⁾

13 ⁽¹⁾		Portion of the 2004 Annual Report to Shareholders

16 ⁽¹²⁾		Letter Regarding Change in Certifying Auditor


21 ⁽¹⁾		List of Significant Subsidiaries

23 ⁽¹⁾		Consent and Report of the Independent Registered Public Accounting Firm

31.1 ⁽¹⁾		Certification Pursuant to Rule 13A-14 of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 ⁽¹⁾		Certification Pursuant to Rule 13A-14 of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 ⁽¹⁾		Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 ⁽¹⁾		Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1 ⁽¹¹⁾		Letter to Securities and Exchange Commission regarding Arthur Andersen

______________________

⁽¹⁾ Filed herewith

⁽²⁾ Incorporated by reference from the Company’s Registration Statement on Form S-1 (File No. 333-18065)

⁽³⁾ Incorporated by reference from the Company’s 1997 Form 10-K dated March 31, 1998

⁽⁴⁾ Incorporated by reference from the Company’s 1998 Form 10-Q dated November 12, 1998

⁽⁵⁾ Incorporated by reference from the Company’s 1999 Form 10-Q dated May 14, 1999

⁽⁶⁾ Incorporated by reference from the Company’s 1999 Form 10-Q dated August 13, 1999

⁽⁷⁾ Incorporated by reference from the Company’s 1999 Form 10-Q dated November 12, 1999

⁽⁸⁾ Incorporated by reference from the Company’s 2000 Form 10-K dated March 29, 2001

⁽⁹⁾ Incorporated by reference from the Company’s 2001 Form 10-Q dated August 14, 2001

⁽¹⁰⁾ Incorporated by reference from the Company’s 2001 Form 10-Q dated November 14, 2001

⁽¹¹⁾Incorporated by reference from the Company’s 2001 Form 10-K dated April 1, 2002

⁽¹²⁾ Incorporated by reference from the Company’s 2002 Form 10-Q dated May 14, 2002

⁽¹³⁾ Incorporated by reference from the Company’s 2003 Form 10-Q dated November 13, 2003

⁽¹⁴⁾ Incorporated by reference from the Company’s 2003 Form 10-K dated March 21, 2004

⁽¹⁵⁾ Incorporated by reference from the Company’s 2004 Form 10-Q dated May 10, 2004

⁽¹⁶⁾ Incorporated by reference from the Company’s 2004 Form 10-Q dated August 9, 2004

EX-10.3 2 h23159exv10w3.txt THE COMPANY'S 1997 LONG-TERM INCENTIVE PLAN Exhibit 10.3 CHICAGO BRIDGE & IRON 1997 LONG-TERM INCENTIVE PLAN CHICAGO BRIDGE & IRON COMPANY (ADOPTED JANUARY 17, 1997, AS AMENDED THROUGH MAY 1, 2002 TABLE OF CONTENTS ARTICLE 1. - CHICAGO BRIDGE & 1997 IRON LONG-TERM INCENTIVE PLAN................ 1 1.1. ESTABLISHMENT OF THE PLAN.............................................. 1 1.2. OBJECTIONS OF THE PLAN................................................. 1 1.3. DURATION OF THE PLAN................................................... 1 ARTICLE 2. - DEFINITIONS........................................................ 1 2.1. "AFFILIATE"............................................................ 1 2.2. "AWARD"................................................................ 1 2.3. "AWARD AGREEMENT"...................................................... 1 2.4. "BENEFICIAL OWNER" OR "BENEFICIAL OWNERSHIP"........................... 1 2.5. "BOARD" OR "BOARD OF DIRECTORS"........................................ 1 2.6. "CB&I"................................................................. 2 2.7. "CHANGE IN CONTROL".................................................... 2 2.8. "CODE"................................................................. 2 2.9. "COMMITTEE"............................................................ 2 2.10. "COMPANY"........................................................... 2 2.11. "DIRECTOR".......................................................... 2 2.12. "DISABILITY"........................................................ 2 2.13. "EFFECTIVE DATE".................................................... 3 2.14. "EMPLOYEE".......................................................... 3 2.15. "EXCHANGE ACT"...................................................... 3 2.16. "FAIR MARKET VALUE"................................................. 3 2.17. "FISCAL YEAR"....................................................... 3 2.18. "INCENTIVE STOCK OPTION" OR "ISO"................................... 3 2.19. "INSIDER"........................................................... 3 2.20. "NAMED EXECUTIVE OFFICER"........................................... 3 2.21. "NONEMPLOYEE DIRECTOR".............................................. 3 2.22. "NONQUALIFIED STOCK OPTION" OR "NQSO".............................. 3 2.23. "OPTION"............................................................ 3 2.24. "OPTION PRICE"...................................................... 3 2.25. "OPTIONEE".......................................................... 3 2.26. "PARTICIPANT"....................................................... 3 2.27. "PERFORMANCE-BASED EXCEPTION"....................................... 4 2.28. "PERFORMANCE SHARE"................................................. 4 2.29. "PERFORMANCE UNIT".................................................. 4 2.30. "PERIOD OF RESTRICTION"............................................. 4 2.31. "PERSON"............................................................ 4 2.32. "RESTRICTED STOCK".................................................. 4 2.33. "RESTRICTED STOCK SHARES"........................................... 4 2.34. "RESTRICTED STOCK UNITS"............................................ 4 2.35. "RETIREMENT"........................................................ 4 2.36. "SHARES"............................................................ 4 2.37. "SUBSIDIARY"........................................................ 4 2.38. "SUPERVISORY BOARD"................................................. 5 2.39. "VESTING DATE"...................................................... 5 ARTICLE 3. - ADMINISTRATION..................................................... 5 3.1. THE COMMITTEE.......................................................... 5

i 3.2. AUTHORITY OF THE COMMITTEE............................................. 5 3.3. DECISIONS BINDING...................................................... 5 ARTICLE 4. - SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS...................... 5 4.1. NUMBER OF SHARES AVAILABLE FOR GRANTS.................................. 5 4.2. ADJUSTMENTS IN AUTHORIZED SHARES....................................... 6 4.3. FRACTIONAL SHARES...................................................... 6 ARTICLE 5. - ELIGIBILITY AND PARTICIPATION...................................... 6 5.1. ELIGIBILITY............................................................ 6 5.2. ACTUAL PARTICIPATION................................................... 6 ARTICLE 6. - STOCK OPTIONS...................................................... 7 6.1. GRANT OF OPTIONS....................................................... 7 6.2. AWARD AGREEMENT........................................................ 7 6.3. OPTION PRICE........................................................... 7 6.4. DURATION OF OPTIONS.................................................... 7 6.5. EXERCISE OF OPTIONS.................................................... 7 6.6. PAYMENT................................................................ 7 6.7. RESTRICTIONS ON SHARE TRANSFERABILITY.................................. 8 6.8. TERMINATION OF EMPLOYMENT.............................................. 8 6.9. NONTRANSFERABILITY OF OPTIONS.......................................... 8 ARTICLE 7. - RESTRICTED STOCK................................................... 8 7.1. GRANT OF RESTRICTED STOCK.............................................. 8 7.2. RESTRICTED STOCK AGREEMENT............................................. 8 7.3. TRANSFERABILITY........................................................ 9 7.4. OTHER RESTRICTIONS..................................................... 9 7.5. VOTING RIGHTS.......................................................... 9 7.6. DIVIDEND AND OTHER DISTRIBUTIONS....................................... 9 7.7. TERMINATION OF EMPLOYMENT.............................................. 10 7.8. RIGHTS PERSONAL TO PARTICIPANT......................................... 10 ARTICLE 8. - PERFORMANCE UNITS AND PERFORMANCE SHARES........................... 10 8.1. GRANT OF PERFORMANCE UNITS/SHARES...................................... 10 8.2. VALUE OF PERFORMANCE UNITS/SHARES...................................... 10 8.3. EARNING OF PERFORMANCE UNITS/SHARES.................................... 10 8.4. FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES................. 11 8.5. TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT...... 11 8.6. TERMINATION OF EMPLOYMENT FOR OTHER REASONS............................ 11 8.7. NONTRANSFERABILITY..................................................... 11 ARTICLE 9. - PERFORMANCE MEASURES............................................... 12 ARTICLE 10. - BENEFICIARY DESIGNATION........................................... 12 ARTICLE 11. - DEFERRALS......................................................... 12 ARTICLE 12. - RIGHTS OF EMPLOYEES............................................... 13 12.1. EMPLOYMENT.......................................................... 13 12.2. PARTICIPATION....................................................... 13

ii ARTICLE 13. - CHANGE IN CONTROL................................................. 13 13.1. TREATMENT OF OUTSTANDING AWARDS........................................ 13 13.2. TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL PROVISIONS............................................................. 13 ARTICLE 14. - AMENDMENT, MODIFICATION, AND TERMINATION.......................... 13 14.1. AMENDMENT, MODIFICATION, AND TERMINATION............................... 13 14.2. ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR NONRECURRING EVENTS.................................................... 14 14.3. AWARDS PREVIOUSLY GRANTED.............................................. 14 14.4. COMPLIANCE WITH CODE SECTION 162(M).................................... 14 ARTICLE 15. - WITHHOLDING....................................................... 14 15.1. TAX WITHHOLDING........................................................ 14 15.2. SHARE WITHHOLDING...................................................... 14 ARTICLE 16. - INDEMNIFICATION................................................... 15 ARTICLE 17. - SUCCESSORS........................................................ 15 ARTICLE 18. - LEGAL CONSTRUCTION................................................ 15 18.1. GENDER AND NUMBER...................................................... 15 18.2. SEVERABILITY........................................................... 15 18.3. REQUIREMENTS OF LAW.................................................... 15 18.4. SECURITIES LAW COMPLIANCE.............................................. 15 18.5. GOVERNING LAW.......................................................... 15

iii ARTICLE 1. - CHICAGO BRIDGE & IRON LONG-TERM INCENTIVE PLAN 1.1. ESTABLISHMENT OF THE PLAN. Chicago Bridge & Iron Company, a Delaware corporation, a wholly owned subsidiary of Chicago Bridge & Iron Company N.V., a Dutch corporation, hereby establishes an incentive compensation plan to be known as the "Chicago Bridge & Iron 1997 Long-Term Incentive Plan" (hereinafter referred to as the "Plan"), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, Performance Shares and Performance Units. The Plan shall become effective as of the consummation of the initial public offering of Chicago Bridge & Iron Company N.V. (the "Effective Date") and shall remain in effect as provided in Section 1.3 hereof. 1.2. OBJECTIONS OF THE PLAN. The objectives of the Plan are to optimize the profitability and growth of CB&I, the Company and their respective Subsidiaries, through incentives which are consistent with CB&I's goals and which link the personal interests of Participants to those of the Company's stockholders; to provide Participants with an incentive for excellence in individual performance; and to promote teamwork among Participants. The Plan is further intended to provide flexibility to CB&I in its ability to motivate, attract, and retain the services of Participants who make significant contributions to CB&I's success and to allow Participants to share in the success of CB&I. 1.3. DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as described in Section 1.1 hereof, and shall remain in effect, subject to the right of the Board of Directors to amend or terminate the Plan at any time pursuant to Article 14 hereof, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. ARTICLE 2. - DEFINITIONS Whenever and wherever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized: 2.1. "AFFILIATE" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations of the Exchange Act. 2.2. "AWARD" means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, Performance Shares or Performance Units. 2.3. "AWARD AGREEMENT" means an agreement entered into by CB&I and each Participant setting forth the terms and provisions applicable to Awards granted under this Plan. 2.4. "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. 2.5. "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of CB&I. 2.6. "CB&I" means Chicago Bridge & Iron Company, a Delaware corporation and the sponsor of the Plan. 2.7. "CHANGE IN CONTROL" unless otherwise defined in the Award Agreement or other written agreement between the Participant and the Company (or CB&I or the Committee) will be deemed to have occurred: (a) Any Person, other than the Company, any Subsidiary or any employee benefit plan (or related trust) of the Company or any such Subsidiary, becomes the Beneficial Owner of twenty-five percent (25%) or more of the total voting power of the Company's outstanding securities; (b) During any period of two years or less, individuals who at the beginning of such period constituted the Supervisory Board of the Company cease for any reason to constitute at least a majority thereof; provided that any new member of the Supervisory Board who is nominated for election to the Supervisory Board with the approval of at least 75% of the other members then still in office who were members at the beginning of the period shall be considered for purposes of this paragraph (b) as having been a member at the beginning of such period; or (c) Upon the consummation of (i) any merger or other business combination of the Company with or into another corporation pursuant to which the persons who were the shareholders of the Company immediately before such consummation do not own, immediately after such consummation, more than 70% of the voting power and the value of the stock of the surviving corporation in substantially the same proportions as their ownership of the common stock of the Company immediately prior to such consummation, or (ii) the sale, exchange or other disposition of all or substantially all the consolidated assets of the Company. 2.8. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. 2.9. "COMMITTEE" means the Committee appointed by the Board to administer the Plan as provided in Article 3 herein or, to the extent it functions as the Committee as provided in Article 3 herein, the Organization and Compensation Committee of the Supervisory Board. 2.10. "COMPANY" means Chicago Bridge & Iron Company N.V., a Netherlands corporation, including, as may be applicable to the context, any and all Subsidiaries and Affiliates, and any successor thereto. 2.11. "DIRECTOR" means any individual who is a member of the Board of Directors of CB&I or any Subsidiary of Affiliate. 2.12. "DISABILITY" shall mean a mental or physical condition of a Participant which the Committee, on the basis of information satisfactory to it, finds to be a permanent condition which renders such member unfit to perform the duties of an Employee, as such duties shall be determined by the Committee. Any determination of whether any condition of a Participant constitutes Disability shall be made under rules uniformly applied to all Participants. 2 2.13. "EFFECTIVE DATE" shall have the meaning ascribed to such term in Section 1.1 hereof. 2.14. "EMPLOYEE" means any employee of CB&I or the Company or their respective Subsidiaries and Affiliates. Directors who are not employed by any of the foregoing shall not be considered Employees under this Plan. 2.15. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto. 2.16. "FAIR MARKET VALUE" shall be determined on the basis of the closing sale price on the principal securities exchange on which the Shares are traded or, if there is no such sale on the relevant date, then on the last previous day on which a sale was reported. 2.17. "FISCAL YEAR" means the fiscal year of CB&I. 2.18. "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares granted under Article 6 herein and which is designated as an Incentive Stock Option and which is intended to meet the requirements of Code Section 422. 2.19. "INSIDER" shall mean an individual who is, on the relevant date, an officer, director or ten percent (10%) beneficial owner of any class of the Company's equity securities that is registered pursuant to Section 12 of the Exchange Act, all as defined under Section 16 of the Exchange Act. 2.20. "NAMED EXECUTIVE OFFICER" means a Participant who, as of the last date of the taxable year of CB&I, is one of the group of "covered employees," as defined in the regulations promulgated under Code Section 162(m), or any successor statute. 2.21. "NONEMPLOYEE DIRECTOR" means an individual who is a member of the Supervisory Board but who is not an Employee. 2.22. "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase Shares granted under Article 6 herein and which is not intended to meet the requirements of Code Section 422. 2.23. "OPTION" means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6 herein. 2.24. "OPTION PRICE" means the price at which a Share may be purchased by a Participant pursuant to an Option. 2.25. "OPTIONEE" means the Participant or, if the Participant has died, his or her Beneficiary or other person determined under Section 6.9, entitled to exercise any Option. 2.26. "PARTICIPANT" means an Employee, Nonemployee Director or nonemployee consultant to the Company who has outstanding an Award. 3 2.27. "PERFORMANCE-BASED EXCEPTION" means the performance-based exception from the tax deductibility limitations of Code Section 162(m). 2.28. "PERFORMANCE SHARE" means an Award granted to a Participant, as described in Article 8 herein. 2.29. "PERFORMANCE UNIT" means an Award granted to a Participant, as described in Article 8 herein. 2.30. "PERIOD OF RESTRICTION" means the period during which the transfer of Shares or Units of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events, as determined by the Committee, at its discretion), and the Shares are subject to a substantial risk of forfeiture, as provided in Article 7 herein. 2.31. "PERSON" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) thereof. 2.32. "RESTRICTED STOCK" means an Award of Restricted Stock Shares or Restricted Stock Units granted to a Participant pursuant to Article 7 herein. 2.33. "RESTRICTED STOCK SHARES" means an Award of Restricted Stock in the form of Shares which are issued and awarded to Participants subject to a substantial risk of forfeiture and restrictions on such Shares during the Period of Restriction as provided in Article 7 herein. 2.34. "RESTRICTED STOCK UNITS" means an Award of bookkeeping units each representing the right of a Participant to be issued and to receive a Share upon lapse of risks of forfeiture and restrictions on such Units during the Period of Restriction as provided in Article 7 herein, or at such later time as shall be determined by the Committee in its discretion upon grant of the Award or, with the consent of the Participant, after grant of the Award. 2.35. "RETIREMENT" means (i) a termination of employment after age 55 and at least a 10 year period of employment by CB&I or the Company or their respective present or former Subsidiaries or Affiliates, or a 30-year period of such employment, or age 65, or (ii) solely in the case of an individual who terminates service as a Nonemployee Director or service as a nonemployee consultant to the Company, such termination following the term of a Nonemployee Director or a resignation required by age limitation, or the expiration of the term of a consulting agreement; provided, however, that the Committee as part of an Award Agreement or otherwise may provide that for purposes of this Section a Participant may be credited with such additional years of age and employment as the Committee in its sole discretion shall determine is appropriate, and may provide such additional or different conditions for Retirement as the Committee in its sole discretion shall determine is appropriate. 2.36. "SHARES" means the publicly-traded shares of common stock of the Company. 2.37. "SUBSIDIARY" means any corporation in which CB&I or the Company owns directly, or indirectly through subsidiaries, at least fifty percent (50%) of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, 4 partnerships and joint ventures) in which CB&I or the Company owns at least fifty percent (50%) of the combined equity thereof. 2.38. "SUPERVISORY BOARD" means the Supervisory Board of Chicago Bridge & Iron Company N.V. 2.39. "VESTING DATE" means with respect to Restricted Stock the date (if any) on which the risks of forfeiture and restrictions on such Restricted Stock during the Period of Restriction have terminated (by their terms or by other action of the Committee consistent with this Plan) and all other conditions or restrictions applicable to such Restricted Stock have been satisfied. ARTICLE 3. - ADMINISTRATION 3.1. THE COMMITTEE. The Plan shall be administered by a Committee, the members of which shall be appointed from time to time by, and shall serve at the discretion of, the Board; provided, however, that (i) with respect to grants and Awards made or to be made to or held by any member of such Committee, the Plan shall be administered by the Organization and Compensation Committee of the Supervisory Board; and (ii) the Organization and Compensation Committee of the Supervisory Board may in its sole discretion exercise directly any power, right, duty or function of the Committee including but not limited to the making or amending of an Award to any Employee, Nonemployee Director or nonemployee consultant to the Company. 3.2. AUTHORITY OF THE COMMITTEE. Except as limited by law or by the Certificate of Incorporation or Bylaws of CB&I, and subject to the provisions herein, the Committee shall have full power to select Employees, Nonemployee Directors and nonemployee consultants to the Company who shall participate in the Plan; determine the sizes and types of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; construe and interpret the Plan and any agreement or instrument entered into under the Plan as they apply to Employees; establish, amend, or waive rules and regulations for the Plan administration as they apply to Employees; and (subject to the provisions of Article 14 herein) amend the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate its authority as specified herein. 3.3. DECISIONS BINDING. All determinations and decisions made by the Committee pursuant to the provisions of the a plan and all related orders and resolutions of the Board shall be final, conclusive and binding on all persons, including CB&I, the Company, their respective stockholders, Directors, members of the Supervisory Board, Employees, Participants, and their estates and beneficiaries. ARTICLE 4. - SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS 4.1. NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as provided in Section 4.2 herein, the number of Shares hereby reserved for issuance to Participants under the 5 Plan is 1,251,755(1). The maximum aggregate number of Shares with respect to which Awards may be granted in any fiscal year to any Participant in the form of Stock Options is 250,000(2). The maximum aggregate number of Shares with respect to which Awards may be granted in the form of Restricted Stock Shares, Restricted Stock Units, Performance Shares and Performance Units combined in any fiscal year to any Participant is 125,000(3). Shares awarded or to be awarded as Restricted Stock or other Awards may be held during the period of restriction or prior to transfer to the Participant in the trust of the kind commonly known as a rabbi trust. 4.2. ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in corporate capitalization, such as a stock split, or a corporate transaction, such as any merger, consolidation, separation, including a spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368) or any partial or complete liquidation of the Company, such adjustment shall be made in the number and class of Shares which may be delivered under Section 4.1, in the number and a class of and/or price of Shares subject to outstanding Awards granted under the Plan, and in the Award limits set forth in Section 4.1, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights; provided, however, that the number of Shares subject to any Award shall always be a whole number. 4.3. FRACTIONAL SHARES. No fractional Shares shall be issued to Participants under the Plan. If for any reason an Award or adjustment thereto would otherwise result in the issuance of a fractional Share, the Company shall pay the Participant in cash the Fair Market Value (determined as of the date immediately preceding the date of distribution) of such fractional Share. ARTICLE 5. - ELIGIBILITY AND PARTICIPATION 5.1. ELIGIBILITY. Persons eligible to participate in this Plan include all Employees, including Employees who are members of the Board, Nonemployee Directors, and nonemployee consultants performing services for the Company. 5.2. ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible individuals those to whom Awards shall be granted and shall determine the nature and amount of each Award. - --------------- (1) Equivalent to 2,503,510 shares following the stock split effective as of the close of business on February 3, 2003. (2) Equivalent to 500,000 shares following the stock split effective as of the close of business on February 3, 2003. (3) Equivalent to 250,000 shares following the stock split effective as of the close of business on February 3, 2003. 6 ARTICLE 6. - STOCK OPTIONS. 6.1. GRANT OF OPTIONS Subject to the terms and provisions of the Plan, the Committee may grant Options to Participants in such number, and upon such terms, and at any time and from time to time, as the Committee in its discretion may determine; provided, however, that no Option intended to an ISO may be granted to a Nonemployee Director or nonemployee consultant to the Company. The date the option is granted shall be the day on which the Committee acts to award a specific number of shares to a Participant, and shall be specified in each Award Agreement. 6.2. AWARD AGREEMENT. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine. The Award Agreement also shall specify whether the Option is intended to be an ISO within the meaning of Code Section 4.22, or an NQSO whose grant is intended not to fall under the provisions of code Section 422. 6.3. OPTION PRICE. The Option Price for each grant of an Option under this Plan shall be at least equal to one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted. Notwithstanding the foregoing, however, the Option Price of any Options granted coincident with and effective as of the Effective Date shall be equal to the offering price of a Share in the initial public offering of the Company, regardless of whether the Fair Market Value of a Share, as otherwise defined in this Plan, is greater or less than such price. 6.4. DURATION OF OPTIONS. Each Option granted shall expire at such time as the Committee shall determine at the time of grant; provided, however, that if the Award Agreement does not otherwise specify the expiration date, the Option shall expire on the tenth (10th) anniversary date of its grant. 6.5. EXERCISE OF OPTIONS. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant. 6.6. PAYMENT. If the Award Agreement does not otherwise specify the manner of exercise, Options granted under this Article 6 shall be exercised by the delivery of a written notice of exercise to CB&I, completed by the Optionee and delivered during regular business hours to the office of the Secretary of CB&I, or sent by certified mail to the Secretary of CB&I, accompanied by a negotiable check or other cash equivalent in full payment for the Shares. A copy of such notice of exercise shall also be delivered by the Optionee to the office of the Secretary of the Company. In the discretion of the Committee and as set forth in the Award Agreement, the Option Price upon exercise of any Option may also be payable to CB&I in full either: (a) in cash or its equivalent, or (b) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Option Price, or (c) by a combination of (a) and (b). 7 The Committee also may allow cashless exercise as permitted under Federal Reserve Board's Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law. Subject to any governing rules or regulations, as soon as practicable after receipt of a written notification of exercise and full payment, CB&I shall deliver, or have delivered, to the Participant, in the Participant's name, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s). 6.7. RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. 6.8. TERMINATION OF EMPLOYMENT. Each Participant's Option Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant's employment as an Employee or service as a Director or service as a nonemployee consultant to the Company. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination of employment. 6.9. NONTRANSFERABILITY OF OPTIONS. (a) INCENTIVE STOCK OPTIONS. No ISO granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant or by designation of a Beneficiary in accordance with Article 10. (b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a Participant's Award Agreement, no NQSO granted under this Article 6 may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. further, except as otherwise provided in a Participant's Award Agreement, all NQSOs granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant or by designation of a Beneficiary in accordance with Article 10. ARTICLE 7. - RESTRICTED STOCK. 7.1. GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Awards of Restricted Stock Shares or Restricted Stock Units to Participants in such amounts as the Committee shall determine. 7.2. RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be evidenced by a Restricted Stock Award Agreement that shall specify whether the grant is an Award of 8 Restricted Stock Shares or Restricted Stock Units, the Period(s) of Restriction, the number of Shares or Units of Restricted Stock granted, and such other provisions as the Committee shall determine. 7.3. TRANSFERABILITY. Except as otherwise provided in this Article 7, the Shares or Units of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Award Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Restricted Stock Award Agreement. Except as otherwise provided in this Article 7, Restricted Stock Shares shall become freely transferable by the Participant upon the Vesting Date, and Shares issued in respect of Restricted Stock Units shall be freely transferable by the Participant upon issuance to the Participant on or after the Vesting Date. 7.4. OTHER RESTRICTIONS. The Committee may impose such other conditions and/or restrictions on any Shares or Units of Restricted Stock granted pursuant to the Plan as it may deem advisable, including, without limitation, a requirement that Participants pay a stipulated purchase price at a stipulated time for each Share or Unit of Restricted Stock, restrictions and conditions of vesting or forfeiture based upon the achievement of specific performance goals (Company-wide, divisional, and/or individual), time-based restrictions on vesting following the attainment of the performance goals, and/or restrictions under applicable Federal or state securities laws. If the Restricted Stock Award is made in Restricted Stock Shares, CB&I shall retain the certificates representing Shares in CB&I's possession until the Vesting Date. If the Restricted Stock Award is made in Restricted Stock Units, no Shares shall be issued until the Vesting Date, but shares shall be issued in respect of such Units as of or after the Vesting Date. In either case, certificates for Shares shall be delivered to the Participant on or as soon as practicable after the Vesting Date, or at such later time or times as shall be determined by the Committee in its discretion upon grant of the Award or, with the consent of the Participant, after grant of the Award. 7.5. VOTING RIGHTS. Unless otherwise provided in the Award Agreement, Participants awarded Restricted Stock Shares hereunder which have not been forfeited may exercise full voting rights with respect to those Shares during the Period of Restriction. No voting rights may be exercised in respect of Restricted Stock Units (unless and until Shares are issued therefor on or after the Vesting Date). 7.6. DIVIDEND AND OTHER DISTRIBUTIONS. Unless otherwise provided in the Award Agreement, if during the Period of Restriction prior to a Vesting Date or forfeiture of Restricted Stock: (a) Cash dividends are paid on Shares, (i) the Company shall pay Participants holding Restricted Stock Shares the regular cash dividends paid with respect to the Shares; and (ii) the Company shall pay Participants holding Restricted Stock Units an amount equal to the cash dividends paid on an equivalent number of Shares; 9 (b) Dividends in Shares are paid in Shares, (i) Participants holding Restricted Stock Shares shall be credited with such dividends as additional Restricted Stock Shares subject to the same restrictions as the underlying Shares; and (ii) Participants holding Restricted Stock Units shall be credited with additional Restricted Stock Units equivalent to such dividends, subject to the same restrictions as the underlying Units. The Committee may in its discretion apply any restrictions to the dividends that the Committee deems appropriate. 7.7. TERMINATION OF EMPLOYMENT. Except as otherwise provided in the Award Agreement, if the Participant's employment as an Employee or service as a Director or nonemployee consultant to CB&I or the Company or their respective Subsidiaries and Affiliates terminates for any reason during the Period of Restriction, all Restricted Stock as to which the Period of Restriction has not yet expired or as to which a Vesting Date has not otherwise occurred shall be forfeited. The Committee in its discretion may set forth in the Award Agreement the extent to which the Participant shall nevertheless have the right to receive vested unrestricted Shares at or after termination of the Participant's employment as an Employee or service as a Director or nonemployee consultant. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares or Units of Restricted Stock issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of employment. 7.8. RIGHTS PERSONAL TO PARTICIPANT. All rights prior to the Vesting Date with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant, or in the event of the Participant's death prior to the Vesting Date, to the Beneficiary designated in accordance with Article 10. ARTICLE 8. - PERFORMANCE UNITS AND PERFORMANCE SHARES 8.1. GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan, Performance Units and/or Performance Shares may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee. 8.2. VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units/Shares that will be paid out to the Participant. For purposes of this Article 8, the time period during which the performance goals must be met shall be called a "Performance Period." 8.3. EARNING OF PERFORMANCE UNITS/SHARES. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Shares shall be entitled to receive payout on the number and value of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved. 10 8.4. FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES. Payment of earned Performance Units/Shares shall be made in a single lump sum, as soon as practicable after the Committee has certified the number of Performance Units/Shares earned for the Performance Period, or at such later time or times as shall be determined by the Committee in its discretion upon grant of the Award or, with the consent of the Participant, after grant of the Award. Subject to the terms of this Plan and except as otherwise provided in an Award Agreement, the Committee, in its sole discretion, may pay earned Performance Units/Shares in the form of cash or in Shares (or in a combination thereof) which have an aggregate Fair Market Value (as of the date immediately preceding the date of distribution) equal to the value as of such date of the number of earned Performance Units/Shares at the close of the applicable Performance Period. Such Shares may be granted subject to any restrictions deemed appropriate by the Committee. Unless otherwise provided in the Award Agreement, Participants shall be entitled to receive any dividends paid with respect to Shares which have been earned in connection with grants of Performance Units/Shares but not yet distributed to Participants, such dividends to be subject to the same terms and conditions as apply to dividends earned with respect to Restricted Stock, as set forth in Section 7.6 herein. 8.5. TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT. Unless determined otherwise by the Committee and set forth in the Participant's Award Agreement, in the event the employment or service as a Director or nonemployee consultant of a Participant is terminated by reason of death, Disability, or Retirement during a Performance Period, the Participant shall receive a payout of the Performance Units/Shares in a reduced amount prorated according to the ratio of the length of Participant's employment or service in the Performance Period to the length of the Performance Period, as specified by the Committee in its discretion. Payment of earned Performance Units/Shares shall be made at a time specified by the Committee in its sole discretion and set forth in the Participant's Award Agreement. Notwithstanding the foregoing, with respect to Named Executive Officers who retire during a Performance Period, payments shall be made at the same time as payments are made to Participants who did not terminate employment or service during the applicable Performance Period. 8.6. TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a Participant's employment or service terminates for any reason other than those reasons set forth in Section 8.5 herein, all Performance Units/Shares shall be forfeited by the Participant to CB&I unless determined otherwise by the Committee, as set forth in the Participant's Award Agreement. 8.7. NONTRANSFERABILITY. Except as otherwise provided in a Participant's Award Agreement, Performance Units/Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or by designation of a Beneficiary in accordance with Article 10. Further, except as otherwise provided in a Participant's Award Agreement, a Participant's rights under the Plan shall be exercisable during the Participant's lifetime only by the Participant or the Participant's legal representative. 11 ARTICLE 9. - PERFORMANCE MEASURES. Unless and until the Committee proposes for shareholder vote and shareholders of the Company approve a change in the general performance measures set forth in this Article 9, the attainment of which may determine the degree of payout and/or vesting with respect to Awards to Named Executive Officers which are designed to qualify for the Performance-Based Exception, the performance measure(s) to be used for purposes of such grants shall be chosen from among net income (either before or after taxes), share price, earnings per share, operating income, return on assets, return on equity, return on capital or investments, total shareholder return, or economic value added. The Committee shall have the discretion to adjust the determinations of the degree of attainment of the preestablished performance goals; provided, however, that Awards which are designed to qualify for the Performance-Based Exception, and which are held by Named Executive Officers, may not be adjusted upward (the Committee shall retain the discretion to adjust such Awards downward). In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing performance measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards which shall not qualify for the Performance-Based Exception, the Committee may make such grants without satisfying the requirements of Code Section 162(m). ARTICLE 10. - BENEFICIARY DESIGNATION Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid, and to exercise any Stock Option or succeed to the ownership of any Restricted Stock Performance Units/Shares or other Award as provided in this Plan, in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Committee during the Participant's lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate. ARTICLE 11. - DEFERRALS The Committee may permit or require a Participant to defer such Participant's receive of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option, the lapse or waiver of restrictions with respect to Restricted Stock, or the satisfaction of any requirements or goals with respect to Performance Units/Shares. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals. 12 ARTICLE 12. - RIGHTS OF EMPLOYEES 12.1. EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way the right of CB&I to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of CB&I. 12.2. PARTICIPATION. No Employee or Director shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award. ARTICLE 13. - CHANGE IN CONTROL 13.1. TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a Change in Control, unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges, or unless otherwise provided in an Award Agreement or other written agreement between the Participant and the Company (or CB&I or the Committee), then with respect to each Award outstanding on the date of the Change in Control: (a) Any and all Options granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term; (b) Any restriction periods and restrictions imposed on Restricted Shares shall lapse; (c) The target payout opportunities attainable under all outstanding Awards of Restricted Stock, Performance Units and performance Shares shall be deemed to have been fully earned for the entire Performance Period(s) as of the effective date of the Change in Control. The vesting of all Awards denominated in Shares shall be accelerated as of the effective date of the Change in Control, and there shall be paid out in cash to Participants within 30 days following the effective date of the Change in Control a pro rata amount based upon an assumed achievement of all relevant performance goals and upon the length of time within the Performance Period which has elapsed prior to the Change in Control. 13.2. TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL PROVISIONS. Notwithstanding any other provision of this Plan or any Award Agreement provision, the provisions of this Article 13 may not be terminated, amendment, or modified on or after the date of Change in Control to affect adversely any Award theretofore granted under the Plan without the prior written consent of the Participant with respect to said Participant's outstanding Awards; provided, however, the Board of Directors, upon recommendation of the Committee, may terminate, amend, or modify this Article 13 at any time and from time to time prior to the date of a Change of Control. ARTICLE 14. - AMENDMENT, MODIFICATION, AND TERMINATION 14.1. AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part; provided, however, that no amendment which requires shareholder approval in order for the Plan to 13 continue to comply with Rule 16b-3 under the Exchange Act, including any successor to such Rule, shall be effective unless such amendment shall be approved by the requisite vote of shareholders of the Company entitled to vote thereon. 14.2. ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR NONRECURRING EVENTS. The Committee may make adjustments in there terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.2 hereof) affecting CB&I or the Company, or the financial statements of CB&I or the Company, or of changes in applicable laws, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan; provided that no such adjustment shall be authorized to the extent that such authority would be inconsistent with the Plan's meeting the requirements of Section 162(m) of the Code, as from time to time amended. 14.3. AWARDS PREVIOUSLY GRANTED. The Committee may amend or modify any outstanding Award Agreement in any manner consistent with this Plan for an original Award Agreement, provided, however, that no amendment or modification of an Award Agreement shall adversely affect in any material way the Award previously granted under the Plan without the written consent of the Participant holding such Award. No termination, amendment or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan without the written consent of the Participant holding such Award. 14.4. COMPLIANCE WITH CODE SECTION 162(m). At all times when Code Section 162(m) is applicable, all Awards granted under this Plan shall comply with the requirements of Code Section 162(m); provided, however, that in the event the Committee determines that such compliance is not desired with respect to any Award or Awards available for grant under the Plan, then compliance with Code Section 162(m) will not be required. In addition, in the event that changes are made to Code Section 162(m) to permit greater flexibility with respect to any Award or Awards available under the Plan, the Committee may, subject to this Article 14, make any adjustments it deems appropriate. ARTICLE 15. - WITHHOLDING 15.1. TAX WITHHOLDING. CB&I shall have the power and the right to deduct or withhold, or require a Participant to remit to CB&I, an amount sufficient to satisfy Federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan. 15.2. SHARE WITHHOLDING. With respect to withholding required upon the exercise of Options, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of Awards granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having CB&I withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All such elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the committee, in its sole discretion, deems appropriate. 14 ARTICLE 16. - INDEMNIFICATION Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by CB&I against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim action, suit, or proceeding to which he or she may be party or in which he or she may be involved by reasons of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with CB&I's approval, or paid by him or her in satisfaction of any judgment of any such action, suit, or proceeding against him or her, provided he or she shall give CB&I an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Association, CB&I's Certificate of Incorporation or Bylaws, any agreement, as a matter of law, or otherwise, or any power that CB&I may have to indemnify them or hold them harmless. ARTICLE 17. - SUCCESSORS All obligations of CB&I under the Plan with respect to Awards granted hereunder shall be binding on any successor to CB&I, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of CB&I. ARTICLE 18. - LEGAL CONSTRUCTION 18.1. GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular shall include the plural. 18.2. SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 18.3. REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 18.4. SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. The extent any provision of the Plan or action by the Committee files to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 18.5. GOVERNING LAW. To the extent not preempted by federal law, the Plan and all agreements hereunder, shall be construed in accordance with and governed by the laws of the state of Illinois, without regard to its rules or provisions of law regarding conflict of laws. 15 CERTIFICATE ________________________ certifies that __he is the duly appointed and acting ____ Secretary of Chicago Bridge & Iron Company, a Delaware Corporation, and that the foregoing is a true and correct copy of the Chicago Bridge & Iron 1997 Long-Term Incentive Plan as amended and in effect on the date hereof. Dated: ____________________ __________________________________________ Secretary 16 EX-10.17 3 h23159exv10w17.txt 1999 LONG-TERM INCENTIVE PLAN Exhibit 10.17 CHICAGO BRIDGE & IRON 1999 LONG-TERM INCENTIVE PLAN CHICAGO BRIDGE & IRON COMPANY ADOPTED MAY 1, 1999, AS AMENDED THROUGH MAY 1, 2002 TABLE OF CONTENTS CHICAGO BRIDGE & IRON LONG-TERM INCENTIVE PLAN.................................................... 1 ARTICLE 1 - ESTABLISHMENT, OBJECTIVES AND DURATION................................................ 1 1.1. ESTABLISHMENT OF THE PLAN............................................................... 1 1.2 OBJECTIVES OF THE PLAN.................................................................. 1 1.3. DURATION OF THE PLAN.................................................................... 1 ARTICLE 2. - DEFINITIONS.......................................................................... 1 2.1. "AFFILIATE"............................................................................. 1 2.2. "AWARD"................................................................................. 1 2.3. "AWARD AGREEMENT"....................................................................... 1 2.4. "BENEFICIAL OWNER" OR "BENEFICIAL OWNERSHIP"............................................ 2 2.5. "BOARD" OR "BOARD OF DIRECTORS"......................................................... 2 2.6. "CB&I".................................................................................. 2 2.7. "CHANGE IN CONTROL"..................................................................... 2 2.8. "CODE................................................................................... 2 2.9. "COMMITTEE"............................................................................. 2 2.10. "COMPANY"............................................................................ 2 2.11. "DIRECTOR"........................................................................... 3 2.12. "DISABILITY"......................................................................... 3 2.13. "EFFECTIVE DATE"..................................................................... 3 2.14. "EMPLOYEE"........................................................................... 3 2.15. "EXCHANGE ACT"....................................................................... 3 2.16. "FAIR MARKET VALUE".................................................................. 3 2.17. "FISCAL YEAR"........................................................................ 3 2.18. "INCENTIVE STOCK OPTION" OR "ISO".................................................... 3 2.19. "NAMED EXECUTIVE OFFICER"............................................................ 3 2.20. "NONEMPLOYEE DIRECTOR"............................................................... 3 2.21. "NONQUALIFIED STOCK OPTION" OR "NQSO"................................................ 3 2.22. "OPTION"............................................................................. 3 2.23. "OPTION PRICE"....................................................................... 3 2.24. "OPTIONEE"........................................................................... 4 2.25. "PARTICIPANT"........................................................................ 4 2.26. "PERFORMANCE-BASED EXCEPTION"........................................................ 4 2.27. "PERFORMANCE SHARE".................................................................. 4 2.28. "PERFORMANCE UNIT"................................................................... 4 2.29. "PERIOD OF RESTRICTION".............................................................. 4 2.30. "PERSON"............................................................................. 4 2.31. "RESTRICTED STOCK"................................................................... 4 2.32. "RESTRICTED STOCK SHARES"............................................................ 4 2.33. "RESTRICTED STOCK UNIT".............................................................. 4 2.34. "RETIREMENT"......................................................................... 4 2.35. "SHARES"............................................................................. 5 2.36. "SUBSIDIARY"......................................................................... 5 2.37. "SUPERVISORY BOARD".................................................................. 5 2.38. "VESTING DATE"....................................................................... 5 ARTICLE 3. - ADMINISTRATION....................................................................... 5 3.1. THE COMMITTEE........................................................................... 5 3.2. AUTHORITY OF THE COMMITTEE.............................................................. 5 3.3. DECISIONS BINDING....................................................................... 6

i ARTICLE 4. - SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS........................................ 6 4.2. FORFEITED AND REACQUIRED SHARES......................................................... 6 4.3. ADJUSTMENTS IN AUTHORIZED SHARES........................................................ 6 4.4. FRACTIONAL SHARES....................................................................... 7 ARTICLE 5. - ELIGIBILITY AND PARTICIPATION........................................................ 7 5.1. ELIGIBILITY............................................................................. 7 5.2. ACTUAL PARTICIPATION.................................................................... 7 ARTICLE 6. - STOCK OPTIONS........................................................................ 7 6.1. GRANT OF OPTIONS........................................................................ 7 6.2. AWARD AGREEMENT......................................................................... 7 6.3. OPTION PRICE............................................................................ 7 6.4. DURATION OF OPTIONS..................................................................... 7 6.5. EXERCISE OF OPTIONS..................................................................... 7 6.6. PAYMENT................................................................................. 8 6.7. RESTRICTIONS ON SHARE TRANSFERABILITY................................................... 8 6.8. TERMINATION OF EMPLOYMENT............................................................... 8 6.9. NONTRANSFERABILITY OF OPTIONS........................................................... 8 (a) INCENTIVE STOCK OPTIONS.................................................................... 8 (b) NONQUALIFIED STOCK OPTIONS................................................................. 9 ARTICLE 7. - RESTRICTED STOCK..................................................................... 9 7.1. GRANT OF RESTRICTED STOCK............................................................... 9 7.2. RESTRICTED STOCK AGREEMENT.............................................................. 9 7.3. TRANSFERABILITY......................................................................... 9 7.4. OTHER RESTRICTIONS...................................................................... 9 7.5. VOTING RIGHTS........................................................................... 10 7.6. DIVIDEND AND OTHER DISTRIBUTIONS........................................................ 10 7.7. TERMINATION OF EMPLOYMENT............................................................... 10 7.8. RIGHTS PERSONAL TO PARTICIPANT.......................................................... 10 ARTICLE 8. - PERFORMANCE UNITS AND PERFORMANCE SHARES............................................. 11 8.1. GRANT OF PERFORMANCE UNITS/SHARES....................................................... 11 8.2. VALUE OF PERFORMANCE UNITS/SHARES....................................................... 11 8.3. EARNING OF PERFORMANCE UNITS/SHARES..................................................... 11 8.4. FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES.................................. 11 8.5. TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT....................... 11 8.6. TERMINATION OF EMPLOYMENT FOR OTHER REASONS............................................. 12 8.7. NONTRANSFERABILITY...................................................................... 12 ARTICLE 9. - PERFORMANCE MEASURES................................................................. 12 ARTICLE 10. - BENEFICIARY DESIGNATION............................................................. 13 ARTICLE 11. - DEFERRALS........................................................................... 13 ARTICLE 12. - RIGHTS OF EMPLOYEES................................................................. 13 12.1. EMPLOYMENT........................................................................... 13 12.2. PARTICIPATION........................................................................ 13 ARTICLE 13. - CHANGE IN CONTROL................................................................... 13 13.1. TREATMENT OF OUTSTANDING AWARDS...................................................... 13 13.2. TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL PROVISIONS............ 14

ii ARTICLE 14. - AMENDMENT, MODIFICATION, AND TERMINATION............................................ 14 14.1. AMENDMENT, MODIFICATION, AND TERMINATION............................................. 14 14.2. ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR NONRECURRING EVENTS... 14 14.3. AWARDS PREVIOUSLY GRANTED............................................................ 14 ARTICLE 15. - WITHHOLDING......................................................................... 14 15.1. TAX WITHHOLDING...................................................................... 14 15.2. SHARE WITHHOLDING.................................................................... 15 ARTICLE 16. - INDEMNIFICATION..................................................................... 15 ARTICLE 17. - SUCCESSORS.......................................................................... 15 ARTICLE 18. - LEGAL CONSTRUCTION.................................................................. 15 18.1. GENDER AND NUMBER.................................................................... 15 18.2. SEVERABILITY......................................................................... 15 18.3. REQUIREMENTS OF LAW.................................................................. 16 18.4. SECURITIES LAW COMPLIANCE............................................................ 16 18.5. GOVERNING LAW........................................................................ 16

iii CHICAGO BRIDGE & IRON 1999 LONG-TERM INCENTIVE PLAN ARTICLE 1 - ESTABLISHMENT, OBJECTIVES AND DURATION 1.1 ESTABLISHMENT OF THE PLAN. Chicago Bridge & Iron Company, a Delaware corporation ("CB&I"), a wholly owned subsidiary of Chicago Bridge & Iron Company N.V., a Netherlands corporation (the "Company"), hereby establishes an incentive compensation plan to be known as the "Chicago Bridge & Iron 1999 Long-Term Incentive Plan" (the "Plan"), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock Shares, Restricted Stock Units, Performance Shares and Performance Units. 1.2 OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize the profitability and growth of CB&I, the Company and their respective Subsidiaries, through incentives which are consistent with CB&I's goals and which link the personal interests of Participants to those of the Company's shareholders; to provide Participants with an incentive for excellence in individual performance; and to promote teamwork among Participants. The Plan is further intended to provide flexibility to CB&I in its ability to motivate, attract, and retain the services of Participants who make significant contributions to CB&I's success and to allow Participants to share in the success of CB&I. 1.3 DURATION OF THE PLAN. The Plan shall become effective as of May 1, 1999 (the "Effective Date"), subject to its approval by the shareholders of the Company, and shall remain in effect, subject to the right of the Board of Directors to amend or terminate the Plan at any time pursuant to Article 14 hereof, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. ARTICLE 2. - DEFINITIONS Whenever and wherever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized: 2.1 "AFFILIATE" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. 2.2 "AWARD" means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock Shares, Restricted Stock Units, Performance Shares or Performance Units. 2.3 "AWARD AGREEMENT" means an agreement setting forth the terms and provisions applicable to an Award granted to a Participant under this Plan. 1 2.4 "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. 2.5 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of CB&I. 2.6 "CB&I" means Chicago Bridge & Iron Company, a Delaware corporation and the sponsor of the Plan. 2.7 "CHANGE IN CONTROL," unless otherwise defined in the Award Agreement or other written agreement between the Participant and the Company (or CB&I or the Committee), will be deemed to have occurred: (a) Any Person, other than the Company, any Subsidiary or any employee benefit plan (or related trust) of the Company or any such Subsidiary, becomes the Beneficial Owner of 25% or more of the total voting power of the Company's outstanding securities; (b) During any period of two years or less, individuals who at the beginning of such period constituted the Supervisory Board of the Company cease for any reason to constitute at least a majority thereof; provided that any new member of the Supervisory Board who is nominated for election to the Supervisory Board with the approval of at least 75% of the other members then still in office who were members at the beginning of the period shall be considered for purposes of this paragraph (b) as having been a member at the beginning of such period; or (c) Upon the consummation of (i) any merger or other business combination of the Company with or into another corporation pursuant to which the persons who were the shareholders of the Company immediately before such consummation do not own, immediately after such consummation, more than 70% of the voting power and the value of the stock of the surviving corporation in substantially the same respective proportions as their ownership of the common stock of the Company immediately prior to such consummation, or (ii) the sale, exchange or other disposition of all or substantially all the consolidated assets of the Company. 2.8 "CODE" means the Internal Revenue Code of 1986, as amended from time to time. 2.9 "COMMITTEE" means the Committee appointed by the Board to administer the Plan as provided in Article 3 herein or, to the extent it functions as the Committee as provided in Article 3 herein, the Organization and Compensation Committee of the Supervisory Board. 2.10 "COMPANY" means Chicago Bridge & Iron Company N.V., a Netherlands corporation, including, as may be applicable to the context, any and all Subsidiaries and Affiliates, and any successor thereto. 2 2.11 "DIRECTOR" means any individual who is a member of the Board of Directors of CB&I or any Subsidiary or Affiliate. 2.12 "DISABILITY" shall mean a mental or physical condition of a Participant which the Committee, on the basis of information satisfactory to it, finds to be a permanent condition which renders such member unfit to perform the duties of an Employee, as such duties shall be determined by the Committee. Any determination of whether any condition of a Participant constitutes Disability shall be made under rules uniformly applied to all Participants. 2.13 "EFFECTIVE DATE" shall have the meaning ascribed to such term in Section 1.3 hereof. 2.14 "EMPLOYEE" means any employee of CB&I or the Company or their respective Subsidiaries and Affiliates. Directors who are not employed by any of the foregoing shall not be considered Employees under this Plan. 2.15 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto. 2.16 "FAIR MARKET VALUE" of Shares as of any date shall be determined on the basis of the closing sale price of Shares on the principal securities exchange on which the Shares are traded or if there is no such sale on the relevant date, then on the last previous day on which a sale was reported. 2.17 "FISCAL YEAR" means a fiscal year of CB&I. 2.18 "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares which is designated as an Incentive Stock Option and which is intended to meet the requirements of Code Section 422, granted to a Participant pursuant to Article 6 herein. 2.19 "NAMED EXECUTIVE OFFICER" means a Participant who, as of the last date of a taxable year of CB&I, is one of the group of "covered employees," as defined in the regulations promulgated under Code Section 162(m), or any successor statute. 2.20 "NONEMPLOYEE DIRECTOR" means an individual who is a member of the Supervisory Board but who is not an Employee. 2.21 "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase Shares which is not intended to meet the requirements of Code Section 422, granted to a Participant pursuant to Article 6 herein. 2.22 "OPTION" means an Incentive Stock Option or a Nonqualified Stock Option. 2.23 "OPTION PRICE" means the price at which a Share may be purchased by a Participant pursuant to an Option. 3 2.24 "OPTIONEE" means the Participant or, if the Participant has died, his or her Beneficiary, or other person determined under Section 6.9, entitled to exercise any Option. 2.25 "PARTICIPANT" means an Employee, Nonemployee Director or nonemployee consultant to the Company who has outstanding an Award. 2.26 "PERFORMANCE-BASED EXCEPTION" means the performance-based exception from the tax deductibility limitations of Code Section 162(m). 2.27 "PERFORMANCE SHARE" means an Award providing for the payment of a variable number of Shares depending on the achievement of performance goals, granted to a Participant pursuant to Article 8 herein. 2.28 "PERFORMANCE UNIT" means an Award providing for the payment of an amount based on either the Fair Market Value of Shares or the appreciation in Fair Market Value of Shares upon the achievement of performance goals, granted to a Participant, pursuant to Article 8 herein. 2.29 "PERIOD OF RESTRICTION" means the period during which the transfer of Restricted Stock Shares or Restricted Stock Units is limited in some way (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events, as determined by the Committee, at its discretion), and the Shares are subject to a substantial risk of forfeiture, as provided in Article 7 herein. 2.30 "PERSON" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and shall include a "group" as defined in Section 13(d) thereof. 2.31 "RESTRICTED STOCK" means Restricted Stock Shares or Restricted Stock Units. 2.32 "RESTRICTED STOCK SHARES" means Shares which are issued and awarded to Participants subject to a substantial risk of forfeiture and restrictions on such Shares during the Period of Restriction as provided in Article 7 herein. 2.33 "RESTRICTED STOCK UNIT" means a bookkeeping unit that represents the right of a Participant to be issued and to receive a Share upon lapse of risks of forfeiture and restrictions on such Units during the Period of Restriction, or at such later time as shall be determined by the Committee in its discretion upon grant of the Award or, with the consent of the Participant, after grant of the Award, as provided in Article 7 herein. 2.34 "RETIREMENT" means (i) a termination of employment after age 55 and at least a 10 year period of employment by CB&I or the Company or their respective present or former Subsidiaries or Affiliates, or a 30-year period of such employment, or age 65, or (ii) solely in the case of an individual who terminates service as a Nonemployee Director or service as a nonemployee consultant to the Company, such termination following the term of a Nonemployee Director or a resignation required by 4 age limitation, or the expiration of the term of a consulting agreement; provided, however, that the Committee as part of an Award Agreement or otherwise may provide that for purposes of this Section, a Participant may be credited with such additional years of age and employment as the Committee in its sole discretion shall determine is appropriate, and may provide such additional or different conditions for Retirement as the Committee in its sole discretion shall determine is appropriate. 2.35 "SHARES" means shares of common stock of the Company. 2.36 "SUBSIDIARY" means any corporation in which CB&I or the Company owns directly, or indirectly through subsidiaries, at least 50% of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which CB&I or the Company owns at least 50% of the combined equity thereof. 2.37 "SUPERVISORY BOARD means the Supervisory Board of the Company. 2.38 "VESTING DATE means with respect to Restricted Stock and Restricted Stock Units the date (if any) on which the risks of forfeiture and restrictions on such Restricted Stock Shares or Units during the Period of Restriction have terminated (by their terms or by other action of the Committee consistent with this Plan) and all other conditions or restrictions applicable to such Restricted Stock Shares or Units have been satisfied. ARTICLE 3. - ADMINISTRATION 3.1 THE COMMITTEE. The Plan shall be administered by a Committee, the members of which shall be appointed from time to time by, and shall serve at the discretion of, the Board; provided, however, that (i) with respect to grants and Awards made or to be made to or held by any member of such Committee or any Named Executive Officer , the Plan shall be administered by the Organization and Compensation Committee of the Supervisory Board; and (ii) the Organization and Compensation Committee of the Supervisory Board may in its sole discretion exercise directly any power, right, duty or function of the Committee, including but not limited to the grant or amendment of an Award to any Employee, Nonemployee Director or nonemployee consultant to the Company. 3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law or by the Certificate of Incorporation or Bylaws of CB&I, and subject to the provisions herein, the Committee shall have full power to select Employees, Nonemployee Directors and nonemployee consultants to the Company who shall participate in the Plan; determine the sizes and types of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; construe and interpret the Plan and any agreement or instrument entered into under the Plan as they apply to Employees; establish, amend, or waive rules and regulations for the Plan administration as they apply to Employees; and (subject to the provisions of Article 14 herein) amend the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan. Further, the Committee shall make all other determinations 5 which may be necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate its authority as specified herein. 3.3 DECISIONS BINDING. All determinations and decisions made by the Committee pursuant to the Plan and all related orders and resolutions of the Board shall be final, conclusive and binding on all persons, including CB&I, the Company, their respective shareholders, Directors, members of the Supervisory Board, Employees, Participants, and their estates and beneficiaries. ARTICLE 4. - SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS 4.1 NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as provided in Section 4.3 herein, the number of Shares reserved for issuance to Participants under the Plan is 2,930,000(1). The maximum aggregate number of Shares with respect to which Awards may be granted in any fiscal year to any Participant in the form of Stock Options is 250,000(2). The maximum aggregate number of Shares with respect to which Awards may be granted in the form of Restricted Stock Shares, Restricted Stock Units, Performance Shares and Performance Units combined in any fiscal year to any Participant is 125,000(3). Shares awarded or to be awarded as Restricted Stock or other Awards may be held during the Period of Restriction or prior to transfer to the Participant in a trust of the kind commonly known as a rabbi trust. 4.2 FORFEITED AND REACQUIRED SHARES. If any Shares subject to any Award are forfeited or such Award otherwise terminates without the issuance of such Shares or of other consideration in lieu of such Shares, the Shares subject to such Award, to the extent of any such forfeiture or termination, shall again be available for grant under the Plan. If Shares are applied to pay the Option price upon exercise of an Option or to satisfy federal, state or local tax withholding requirements pursuant Section 15.2, the Shares so applied shall be added to the Shares permitted under the limitations of Section 4.1 in determining the number of Shares remaining for issuance and for grants of Awards with respect to such Shares under the Plan. 4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in corporate capitalization, such as a stock split, or a corporate transaction, such as a merger, consolidation, separation, spin-off, or other distribution of stock or property of the Company, or any reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368) or any partial or complete liquidation of the Company, the Committee shall adjust the number and class of Shares which may be issued under Section 4.1 and in the limitation of Section 4.1 on grants of Awards with respect to Shares, in the number, class and/or price of Shares subject to outstanding - ----------------------- (1) Equivalent to 5,860,000 shares following the stock split effective as of the close of business on February 3, 2003. (2) Equivalent to 500,000 shares following the stock split effective as of the close of business on February 3, 2003. (3) Equivalent to 250,000 shares following the stock split effective as of the close of business on February 3, 2003. 6 Awards, as the Committee in its sole discretion determines to be appropriate and equitable to prevent dilution or enlargement of rights; provided, however, that the number of Shares subject to any Award shall always be a whole number. 4.4 FRACTIONAL SHARES. No fractional Shares shall be issued to Participants under the Plan. If for any reason an Award or adjustment thereto would otherwise result in the issuance of a fractional Share to a Participant, the Company shall pay the Participant in cash the Fair Market Value of such fractional Share. ARTICLE 5. - ELIGIBILITY AND PARTICIPATION 5.1 ELIGIBILITY. Persons eligible to participate in this Plan include all Employees, including Employees who are members of the Board, Nonemployee Directors, and nonemployee consultants performing services for the Company. 5.2 ACTUAL PARTICIPATION. Subject to the terms and provisions of the Plan, the Committee may, from time to time, select from all eligible individuals those to whom Awards shall be granted and shall determine the nature and amount of each Award. ARTICLE 6. - STOCK OPTIONS. 6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan, the Committee may grant Options to Participants in such number, and upon such terms, and at any time and from time to time, as the Committee in its discretion may determine; provided, however, that no Option intended to be an ISO may be granted to a Nonemployee Director or nonemployee consultant to the Company. The date an Option is granted shall be the day on which the Committee acts to award a specific number of Shares to a Participant at a specific Option Price, and shall be specified in each Award Agreement. 6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the expiration date of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine. The Award Agreement also shall specify whether or not the Option is intended to be an ISO. 6.3 OPTION PRICE. The Option Price for each grant of an Option under this Plan shall be at least equal to 100% of the Fair Market Value of a Share on the date the Option is granted. 6.4 DURATION OF OPTIONS. Each Option shall expire at such time (not later than the 10th anniversary of its date of grant) as the Committee shall determine at the time of grant. If an Award Agreement does not specify an expiration date, the Option shall expire on the 10th anniversary of its date of grant. 6.5 EXERCISE OF OPTIONS. Options shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant. 7 6.6 PAYMENT. If the Award Agreement does not otherwise specify the manner of exercise, Options shall be exercised by the delivery of a written notice of exercise to CB&I identifying the Option(s) being exercised, completed by the Optionee and delivered during regular business hours to the office of the Secretary of CB&I, or sent by certified mail to the Secretary of CB&I, accompanied by a negotiable check or other cash equivalent in full payment for the Shares. A copy of such notice of exercise shall also be delivered by the Optionee to the office of the Secretary of the Company. In the discretion of the Committee and as set forth in the Award Agreement, the Optionee may pay the Option Price to CB&I upon exercise of any Option by tendering previously acquired Shares which have been held by the Optionee for at least six months and which have an aggregate Fair Market Value at the time of exercise equal to the total Option Price, or by a combination of such Shares and a check or other cash equivalent. The Committee also may allow cashless exercise as permitted under Federal Reserve Board's Regulation T, subject to applicable securities law restrictions, or exercise by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law. Subject to any governing rules or regulations, as soon as practicable after receipt of a written notification of exercise and full payment, CB&I shall deliver, or have delivered, to the Optionee, in the Optionee's name, certificates for an appropriate number of Shares based upon the number of Shares purchased under the Option(s). 6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option under this Article 6 as it may deem advisable, including, without limitation, restrictions under applicable securities laws and under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded. 6.8 TERMINATION OF EMPLOYMENT. Each Participant's Option Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant's employment as an Employee or service as a Director or service as a nonemployee consultant to the Company. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination of employment. 6.9 NONTRANSFERABILITY OF OPTIONS. (a) INCENTIVE STOCK OPTIONS. No ISO may be sold, transferred, pledged, assigned, or otherwise alienated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant or by designation of a Beneficiary in accordance with Article 10. 8 (b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a Participant's Award Agreement, no NQSO may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant's Award Agreement, all NQSOs granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant or by designation of a Beneficiary in accordance with Article 10. ARTICLE 7. - RESTRICTED STOCK. 7.1. GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the Plan, the Committee may grant Awards of Restricted Stock Shares or Restricted Stock Units to Participants in such amounts and upon such terms, and at any time and from time to time, as the Committee shall in its discretion determine. 7.2. RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be evidenced by a Restricted Stock Award Agreement that shall specify whether the grant is an Award of Restricted Stock Shares or Restricted Stock Units, the Period(s) of Restriction, the number of Shares or Units of Restricted Stock granted, and such other provisions as the Committee shall determine. 7.3. TRANSFERABILITY. Except as otherwise provided in this Article 7, Restricted Stock Units may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated; and Restricted Stock Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Award Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Restricted Stock Award Agreement. Except as otherwise provided in this Article 7, Restricted Stock Shares shall become freely transferable by the Participant upon the Vesting Date, and Shares issued in respect of Restricted Stock Units shall be freely transferable by the Participant upon issuance to the Participant on or after the Vesting Date. 7.4. OTHER RESTRICTIONS. The Committee may impose such other conditions and/or restrictions on any Shares or Units of Restricted Stock granted pursuant to the Plan as it may deem advisable, including, without limitation, a requirement that Participants pay a stipulated purchase price at a stipulated time for each Share or Unit of Restricted Stock, restrictions and conditions of vesting or forfeiture based upon the achievement of specific performance goals (Company-wide, divisional, and/or individual), time-based restrictions on vesting following the attainment of the performance goals, and/or restrictions under applicable Federal or state securities laws. If the Restricted Stock Award is made in Restricted Stock Shares, CB&I shall retain the certificates representing Shares in CB&I's possession until the Vesting Date. If the Restricted Stock Award is made in Restricted Stock Units, no Shares shall be issued until the Vesting Date, but Shares shall be issued in respect of such Units as of or after the Vesting Date. In either case, certificates for Shares shall be delivered to the 9 Participant on or as soon as practicable after the Vesting Date, or at such later time or times as shall be determined by the Committee in its discretion upon grant of the Award or, with the consent of the Participant, after grant of the Award. 7.5. VOTING RIGHTS. Unless otherwise provided in the Award Agreement, Participants awarded Restricted Stock Shares hereunder which have not been forfeited may exercise full voting rights with respect to those Shares during the Period of Restriction. Restricted Stock Units shall not confer any voting rights (unless and until Shares are issued therefor on or after the Vesting Date). 7.6. DIVIDEND AND OTHER DISTRIBUTIONS. Unless otherwise provided in the Award Agreement, if during the Period of Restriction prior to a Vesting Date or forfeiture of Restricted Stock: (a) Cash dividends are paid on Shares, (i) the Company shall pay Participants holding Restricted Stock Shares the regular cash dividends paid with respect to the Shares; and (ii) the Company shall pay Participants holding Restricted Stock Units an amount equal to the cash dividends paid on an equivalent number of Shares; (b) Dividends in Shares are paid in Shares, (i) Participants holding Restricted Stock Shares shall be credited with such dividends as additional Restricted Stock Shares subject to the same restrictions as the underlying Shares; and (ii) Participants holding Restricted Stock Units shall be credited with additional Restricted Stock Units equivalent to such dividends, subject to the same restrictions as the underlying Units. The Committee may in its discretion apply any restrictions to the dividends that the Committee deems appropriate. 7.7 TERMINATION OF EMPLOYMENT. Except as otherwise provided in the Award Agreement, if the Participant's employment as an Employee or service as a Director or nonemployee consultant to CB&I or the Company or their respective Subsidiaries and Affiliates terminates for any reason during the Period of Restriction, all Restricted Stock as to which the Period of Restriction has not yet expired or as to which a Vesting Date has not otherwise occurred shall be forfeited. The Committee in its discretion may set forth in the Award Agreement the extent to which the Participant shall nevertheless have the right to receive vested unrestricted Shares at or after termination of the Participant's employment as an Employee or service as a Director or nonemployee consultant. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares or Units of Restricted Stock issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of employment. 7.8 RIGHTS PERSONAL TO PARTICIPANT. All rights prior to the Vesting Date with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant, or in the event of the Participant's 10 death prior to the Vesting Date, to the Beneficiary designated in accordance with Article 10. ARTICLE 8. - PERFORMANCE UNITS AND PERFORMANCE SHARES 8.1 GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms and provisions of the Plan, the Committee may grant Awards of Performance Units and/or Performance Shares to Participants in such amounts and upon such terms, and at any time and from time to time, as the Committee shall in its discretion determine. 8.2 VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units/Shares that will be paid out to the Participant. For purposes of this Article 8, the time period during which the performance goals must be met shall be called a "Performance Period." 8.3 EARNING OF PERFORMANCE UNITS/SHARES. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Shares shall be entitled to receive payout on the number and value of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved. 8.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES. Payment of earned Performance Units/Shares shall be made in a single lump sum, as soon as practicable after the Committee has certified the number of Performance Units/Shares earned for the Performance Period, or at such later time or times as shall be determined by the Committee in its discretion upon grant of the Award or, with the consent of the Participant, after grant of the Award. Subject to the terms of this Plan and except as otherwise provided in an Award Agreement, the Committee shall pay earned Performance Shares in Shares but may in its sole discretion pay earned Performance Units in the form of cash or in Shares (or in a combination thereof) which have an aggregate Fair Market Value equal to the value as of the date of distribution of the number of earned Performance Units at the close of the applicable Performance Period. Such Shares may be granted subject to any restrictions deemed appropriate by the Committee. Unless otherwise provided in the Award Agreement, Participants shall be entitled to receive any dividends paid with respect to Shares which have been earned in connection with grants of Performance Units/Shares but not yet distributed to Participants, such dividends to be subject to the same terms and conditions as apply to dividends earned with respect to Restricted Stock, as set forth in Section 7.6 herein. 8.5 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT. Unless determined otherwise by the Committee and set forth in the Participant's Award Agreement, in the event the employment or service as a Director or nonemployee consultant of a Participant is terminated by reason of death, Disability, or Retirement 11 during a Performance Period, the Participant shall receive a payout of the Performance Units/Shares in a reduced amount prorated according to the ratio of the length of Participant's employment or service in the Performance Period to the length of the Performance Period, as specified by the Committee in its discretion. Payment of earned Performance Units/Shares shall be made at a time specified by the Committee in its sole discretion and set forth in the Participant's Award Agreement. Notwithstanding the foregoing, with respect to Named Executive Officers who retire during a Performance Period, payments shall be made at the same time as payments are made to Participants who did not terminate employment or service during the applicable Performance Period. 8.6 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a Participant's employment or service terminates for any reason other than those reasons set forth in Section 8.5 herein, all Performance Units/Shares shall be forfeited by the Participant to CB&I unless determined otherwise by the Committee, as set forth in the Participant's Award Agreement. 8.7 NONTRANSFERABILITY. Except as otherwise provided in a Participant's Award Agreement, Performance Units/Shares may not be sold, transferred, pledged, assigned, or otherwise alienated, other than by will or by the laws of descent and distribution or by designation of a Beneficiary in accordance with Article 10. Further, except as otherwise provided in a Participant's Award Agreement, a Participant's rights under the Plan shall be exercisable during the Participant's lifetime only by the Participant or the Participant's legal representative. ARTICLE 9. - PERFORMANCE MEASURES. The performance measure(s) to be used for purposes of Awards to Named Executive Officers which are designed to qualify for the Performance-Based Exception shall be chosen from among net income (either before or after interests, taxes, depreciation and amortization), share price, earnings per share, operating income, return on net assets, return on equity, return on capital or investments, total shareholder return, savings in working capital, reduction in expense levels, operating cash flow, free cash flow, or economic value added, in each case where applicable determined either on a Company-wide basis or in respect of any one or more business units. The Committee shall have the discretion to adjust the determinations of the degree of attainment of the pre-established performance goals; provided, however, that Awards to Named Executive Officers, which are designed to qualify for the Performance-Based Exception, may not be adjusted upward (the Committee shall retain the discretion to adjust such Awards downward). In the event that the Committee determines that it is advisable to grant Awards which shall not qualify for the Performance-Based Exception, the Committee may make such grants without satisfying the requirements of Code Section 162(m). 12 ARTICLE 10. - BENEFICIARY DESIGNATION Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid, to exercise any Stock Option, or succeed to the ownership of any Restricted Stock Performance Units/Shares or other Award as provided in this Plan, in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Committee during the Participant's lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate. ARTICLE 11. - DEFERRALS The Committee may, subject to Section 14.3, in the Award Agreement or otherwise, permit or require a Participant to defer such Participant's receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option, the lapse or waiver of restrictions with respect to Restricted Stock, or the satisfaction of any requirements or goals with respect to Performance Units/Shares. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals. ARTICLE 12. - RIGHTS OF EMPLOYEES 12.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way the right of CB&I to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of CB&I. 12.2 PARTICIPATION. No Employee, Director or nonemployee consultant shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award. ARTICLE 13. - CHANGE IN CONTROL 13.1 TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a Change in Control, unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges, or unless otherwise provided in an Award Agreement or other written agreement between a Participant and the Company (or CBI or the Committee), then with respect to each Award outstanding on the date of the Change in Control: (a) Any and all Options granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term; (b) Any restriction periods and restrictions imposed on Restricted Shares shall lapse; 13 (c) The target payout opportunities attainable under all outstanding Awards of Restricted Stock, Performance Units and Performance Shares shall be deemed to have been fully earned for the entire Performance Period(s) as of the effective date of the Change in Control. The vesting of all Awards denominated in Shares shall be accelerated as of the effective date of the Change in Control, and there shall be paid out in cash to Participants within 30 days following the effective date of the Change in Control an amount based upon an assumed achievement of all relevant performance goals. 13.2. TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL PROVISIONS. Notwithstanding any other provision of this Plan or any provision of any Award Agreement, the provisions of this Article 13 may not be terminated, amended, or modified on or after the date of Change in Control to affect adversely any Award theretofore granted without the prior written consent of the Participant with respect to said Participant's outstanding Awards; provided, however, the Board, upon recommendation of the Committee, may terminate, amend, or modify this Article 13 at any time and from time to time prior to the date of a Change of Control. ARTICLE 14. AMENDMENT, MODIFICATION, AND TERMINATION 14.1. AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part. 14.2. ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR NONRECURRING EVENTS. The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.3 hereof) affecting CB&I or the Company, or the financial statements of CB&I or the Company, or of changes in applicable laws, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. 14.3. AWARDS PREVIOUSLY GRANTED. The Committee may amend or modify any outstanding Award Agreement in any manner consistent with this Plan for an original Award Agreement, provided, however, that no amendment or modification of an Award Agreement shall adversely affect in any material way the Award previously granted without the written consent of the Participant holding such Award. No termination, amendment or modification of the Plan shall adversely affect in any material way any Award previously granted without the written consent of the Participant holding such Award. ARTICLE 15 - WITHHOLDING 15.1. TAX WITHHOLDING. CB&I shall have the power and the right to deduct or withhold, or require a Participant to remit to CB&I, an amount sufficient to satisfy 14 Federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan. 15.2. SHARE WITHHOLDING. With respect to withholding required upon the exercise of Options, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of Awards granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having CB&I withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All such elections shall be irrevocable, made in writing, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate. ARTICLE 16. - INDEMNIFICATION Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by CB&I against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim action, suit, or proceeding to which he or she may be party or in which he or she may be involved by reasons of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with CB&I's approval, or paid by him or her in satisfaction of any judgment of any such action, suit, or proceeding against him or her, provided he or she shall give CB&I an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Association, CB&I's Certificate of Incorporation or Bylaws, any agreement, as a matter of law, or otherwise, or any power that CB&I may have to indemnify them or hold them harmless. ARTICLE 17. - SUCCESSORS All obligations of CB&I under the Plan with respect to Awards granted hereunder shall be binding on any successor to CB&I, whether such successor arises as a result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of CB&I. ARTICLE 18. - LEGAL CONSTRUCTION 18.1. GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. 18.2. SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 15 18.3. REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 18.4. SECURITIES LAW COMPLIANCE. Transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 under the Exchange Act (or any successor rule). To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 18.5. GOVERNING LAW. To the extent not preempted by federal law, the Plan and all agreements hereunder, shall be construed in accordance with and governed by the laws of the state of Illinois, without regard to its provisions regarding conflict of laws. CERTIFICATE ________________________ certifies that __he is the duly appointed and acting ____ Secretary of Chicago Bridge & Iron Company, a Delaware corporation, and that the foregoing is a true and correct copy of the Chicago Bridge & Iron 1999 Long-Term Incentive Plan as amended and as in effect on the date hereof. Dated: ____________________ __________________________________________ Secretary 16 EX-10.25 4 h23159exv10w25.txt SAVINGS PLAN Exhibit 10.25 CHICAGO BRIDGE & IRON SAVINGS PLAN As amended and restated as of January 1, 1997 and including the First, Second, Third, Fourth and Fifth Amendments TABLE OF CONTENTS ARTICLE I Adoption................................................... 1 1.01 Adoption, Amendment and Restatement....................... 1 ARTICLE II Definitions............................................... 1 2.01 "Account"................................................. 1 2.02 "Accrued Benefit"......................................... 1 2.03 "Active Account".......................................... 1 2.04 "Active Participant"...................................... 2 2.05 "Authorized Leave of Absence"............................. 2 2.06 "Beneficiary"............................................. 2 2.07 "Board"................................................... 2 2.08 "Code".................................................... 2 2.09 "Company"................................................. 3 2.10 "Company Contributions"................................... 3 2.11 "Company Stock"........................................... 3 2.12 "Company Stock Fund"...................................... 3 2.13 "Compensation"............................................ 3 2.14 "Compensation Limit"...................................... 4 2.15 "Disability" or "Disabled"................................ 5 2.16 "Dollar Limit"............................................ 5 2.17 "Effective Date".......................................... 5 2.18 "Elective Deferrals"...................................... 5 2.19 "Eligible Employee"....................................... 5 2.20 "Employee"................................................ 6 2.21 "Employer" or "Employers"................................. 6 2.22 "Employer Stock".......................................... 6 2.23 "ERISA"................................................... 6 2.24 "Field Employee".......................................... 6 2.25 "Forfeiture".............................................. 6 2.26 "Former Plan"............................................. 6 2.27 "Hardship"................................................ 6 2.28 "Highly Compensated Employee"............................. 7 2.29 "Hour of Service"......................................... 8 2.30 "Hourly Plan"............................................. 9 2.31 "Inactive Account"........................................ 9 2.32 "Investment Committee".................................... 9 2.33 "Investment Fund"......................................... 9 2.34 "Investment Manager"...................................... 9 2.35 "Matching Contributions".................................. 9 2.36 "Maternity or Paternity Leave"............................ 10 2.37 "Normal Retirement Date".................................. 10 2.38 "Participant"............................................. 10 2.39 "Period of Severance"..................................... 10 2.40 "Plan".................................................... 10

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PAGE ---- 2.41 "Plan Administrator"...................................... 10 2.42 "Plan Year"............................................... 10 2.43 "QMAC".................................................... 10 2.44 "Qualified Military Leave"................................ 10 2.45 "QNEC".................................................... 10 2.46 "Reduction-in-Force Termination".......................... 10 2.47 "Related Company"......................................... 11 2.48 "Related Plan"............................................ 11 2.49 "Required Distribution Date".............................. 11 2.50 "Restricted Account"...................................... 12 2.51 "Retirement".............................................. 11 2.52 "Rollover Contribution"................................... 11 2.53 "Salary Reduction Agreement".............................. 12 2.54 "Service"................................................. 12 2.55 "Termination of Employment"............................... 12 2.56 "Transferor Plan"......................................... 13 2.57 "Traveler"................................................ 13 2.58 "Traveler Contributions".................................. 13 2.59 "True-Up Contributions"................................... 13 2.60 "Trust"................................................... 13 2.61 "Trust Agreement"......................................... 13 2.62 "Trust Fund".............................................. 13 2.63 "Trustee"................................................. 14 2.64 "Valuation Date".......................................... 13 ARTICLE III Participation............................................ 13 3.01 Participation............................................. 13 3.02 Duration of Participation................................. 14 3.03 Participation Upon Re-Employment.......................... 14 3.04 Participation Forms....................................... 14 ARTICLE IV Contributions and Vesting................................. 14 4.01 Elective Deferrals........................................ 14 4.02 Matching Contributions.................................... 16 4.03 Company Contributions..................................... 17 4.04 Traveler Contributions.................................... 17 4.05 Rollover Contributions into the Plan...................... 18 4.05 Eligible Employee......................................... 18 4.06 Special Contributions; QNECs and QMACs.................... 18 4.07 Crediting of Contributions................................ 20 4.08 Determination and Amount of Employer Contributions........ 20 4.09 Condition on Company Contributions........................ 20
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PAGE ---- 4.10 Form of Company Contributions............................. 20 4.11 Vesting................................................... 21 4.12 Catch-Up Deferrals........................................ 22 ARTICLE V Limitations on Contributions............................... 23 5.01 Excess Deferrals.......................................... 23 5.02 Excess Contributions...................................... 24 5.03 Excess Aggregate Contributions............................ 27 5.04 Multiple Use of Sections 5.02 and 5.03.................... 29 5.05 Order of Application of Limitations....................... 32 5.06 Allocation of Income or Loss.............................. 32 5.07 Section 415 Limitation on Contributions................... 32 ARTICLE VI Trustee and Trust Fund.................................... 35 6.01 Trust Agreement........................................... 35 6.02 Selection of Trustee...................................... 35 6.03 Plan and Trust Expenses................................... 35 6.04 Trust Fund................................................ 35 6.05 Separate Accounts......................................... 35 6.06 Investment Committee...................................... 36 6.07 Investment Funds.......................................... 36 6.08 Investment of Participants' Accounts...................... 37 6.09 Shareholder Rights in Company Stock....................... 38 6.10 Trust Income.............................................. 39 6.11 Correction of Error....................................... 39 6.12 Right of the Employers to Trust Assets.................... 39 ARTICLE VII Loans and Withdrawals.................................... 40 7.01 Participant Withdrawals................................... 40 7.02 Participant Loans......................................... 41 7.03 Request for Distribution.................................. 44 ARTICLE VIII Benefits................................................ 44 8.01 Payment of Benefits in General............................ 44 8.02 Payment on Termination of Employment...................... 44 8.03 Time of Payment........................................... 45 8.04 Lump Sum Payment Without Election......................... 45 8.05 Payment Upon Death........................................ 46 8.06 Minimum Distribution Requirements......................... 48 8.07 Facility of Payment....................................... 49 8.08 Form of Payment........................................... 49 8.09 Direct Rollover to Another Plan........................... 49
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PAGE ---- 8.10 Deduction of Taxes from Amounts Payable................... 50 ARTICLE IX Administration............................................ 51 9.01 Sponsor Rights and Duties................................. 51 9.02 Plan Administrator Rights and Duties...................... 51 9.03 Plan Administrator Bonding and Expenses................... 52 9.04 Information To Be Supplied by Participants................ 52 9.05 Information To Be Supplied by Employers................... 52 9.06 Records................................................... 52 9.07 Electronic Media.......................................... 52 9.08 Plan Administrator Decisions Final........................ 53 ARTICLE X Claims Procedure........................................... 53 10.01 Initial Claim for Benefits................................ 53 10.02 Review of Claim Denial.................................... 53 ARTICLE XI Amendment, Merger and Termination of the Plan............. 54 11.01 Amendments................................................ 54 11.02 Plan Merger............................................... 55 11.03 Plan Termination.......................................... 55 11.04 Payment Upon Termination.................................. 55 11.05 Withdrawal from the Plan by an Employer................... 56 ARTICLE XII Top Heavy Provisions..................................... 56 12.01 Application............................................... 56 12.02 Special Top Heavy Definitions............................. 56 12.03 Special Top Heavy Provisions.............................. 62 ARTICLE XIII Miscellaneous Provisions................................ 65 13.01 Employer Joinder.......................................... 65 13.02 Non-Alienation of Benefits................................ 65 13.03 Qualified Domestic Relations Order........................ 65 13.04 Unclaimed Amounts......................................... 67 13.05 No Contract of Employment................................. 67 13.06 Recoupment of or Reduction for Overpayment................ 67 13.07 Employees' Trust.......................................... 67 13.08 Source of Benefits........................................ 67 13.09 Interest of Participants.................................. 68 13.10 Indemnification........................................... 68 13.11 Company Action............................................ 68 13.12 Company Merger............................................ 68 13.13 Multiple Capacity......................................... 68
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PAGE ---- 13.14 Gender and Number........................................... 68 13.15 Headings.................................................... 68 13.16 Uniform and Non-Discriminatory Application of Provisions.... 68 13.17 Invalidity of Certain Provisions............................ 68 13.18 Application to Merged Plans................................. 69 13.19 Law Governing............................................... 69
APPENDIX A SCHEDULE 1 -v- Exhibit 10.25 CHICAGO BRIDGE & IRON SAVINGS PLAN Article I Adoption 1.01 Adoption, Amendment and Restatement. The Chicago Bridge & Iron Savings Plan was originally established by the Company's corporate predecessor effective June 16, 1964. Chicago Bridge & Iron Company, a Delaware corporation, became the sponsor of the Plan effective March 18, 1997. The Company merges the CBI Hourly Employees' Saving Plan into this Plan and amends and restates the Plan effective January 1, 1997 (except as otherwise provided in this document) to read as set forth in this document. The Company merges the Howe-Baker Engineers, Inc. Employees' Profit-Sharing 401(k) Plan, the Matrix Engineering, Inc. Savings Plan, the A&B Builders, Inc. Savings Plan, and the Callidus Technologies 401(k) Savings Plan, into this Plan effective December 31, 2000. The Plan is intended to be a qualified profit sharing plan described in Section 401(a) of the Code with a qualified cash or deferred arrangement described in Section 401(k) of the Code. Article II Definitions The following terms, whenever used in the following capitalized form, shall have the meaning set forth below, unless the context clearly indicates otherwise: 2.01 "Account" means an Active Account or an Inactive Account, each comprising a record of a Participant's undivided share in the Trust plus income and gains thereon, and less expenses, losses and distributions therefrom: The Plan Administrator may maintain (or cause the Trustee to maintain) such subaccounts within any Account as the Plan Administrator deems necessary or desirable for purposes of this Plan. If assets and liabilities of a Transferor Plan or portion thereof are transferred to this Plan pursuant to Section 11.02, the Plan Administrator may establish additional Inactive Accounts for such assets and liabilities, or may allocate such assets and liabilities to an existing Active or Inactive Account, all as the Plan Administrator in its discretion determines is necessary or desirable for the purposes of this Plan. 2.02 "Accrued Benefit" means a Participant's total interest in the Trust composed of the aggregate balance of all such Participant's Accounts. The value of an Accrued Benefit at any time during any Plan Year shall be its value as adjusted on the coinciding or immediately preceding Valuation Date. 2.03 "Active Account" means any one or more of the following five (5) separate Accounts to which Elective Deferrals, Company Matching Contributions, Company Contributions, Travelers Contributions, and Rollover Contributions, if any, may currently be allocated: -1- Exhibit 10.25 (a) "Employee 401(k) Account" credited with Elective Deferrals made in accordance with Section 4.01. (b) "Company Matching Account" credited with Matching Contributions made in accordance with Section 4.02. (c) "Company Contribution Account" credited with Company Contributions, if any, made in accordance with Section 4.03. Effective January 1, 2001, Company Matching Accounts for pre-2001 Matching Contributions shall become Inactive Accounts, and new Company Matching Accounts shall be established as of January 1, 2001. (d) "Travelers Benefit Account" credited for Plan Years ending on or before December 30, 2000, with Traveler Contributions, if any, made in accordance with Section 4.04. Effective January 1, 2001, Travelers Benefit Accounts shall be maintained as Inactive Accounts. (e) "Prior Plan and Rollovers Account" credited with Rollover Contributions, if any, made in accordance with Section 4.05. 2.04 "Active Participant" for a Plan Year means a Participant who is employed by an Employer as an Eligible Employee for any portion of the Plan Year; provided, however that (i) for purposes of making Elective Deferrals under Section 4.01, a Participant will not be an Active Participant for a Plan Year unless he or she has Compensation in the Plan Year; (ii) for purposes of Company Contributions under Section 4.03, Traveler Contributions under Section 4.04(a)(ii), and any minimum contributions required under Article XII, a Participant will not be an Active Participant for the Plan Year unless he or she is an Employee on the last day of the Plan Year or had a Termination of Employment during the Plan Year by reason of Retirement, Disability, death, a Reduction-in-Force Termination or lay-off; and (iii) for purposes of Company Contributions under Section 4.03, a Participant will not be Active Participant for the Plan Year unless he or she has completed 1,000 or more Hours of Service during the Plan Year, or had a Termination of Employment during the Plan Year by reason of Retirement, Disability, death, or a Reduction-in-Force Termination. 2.05 "Authorized Leave of Absence" means an absence with or without pay, authorized by an Employer on a non-discriminatory basis, for Disability, accident, jury duty, military duty, or other reasons. 2.06 "Beneficiary" means any person affirmatively designated by a Participant pursuant to Section 8.05(c) to receive death benefits under the Plan (a "Designated Beneficiary") or if there is no Designated Beneficiary or the designation is ineffective under Section 8.05, the person or persons entitled to receive death benefits under the Plan by default under Section 8.05. 2.07 "Board" means the board of directors of the Company. 2.08 "Code" means the Internal Revenue Code of 1986, as amended, or any succeeding Internal Revenue Code. References to sections of the Code shall be include any such sections as amended, modified or renumbered. -2- 2.09 "Company" means (a) before March 18, 1997, Chi Bridge Holdings, Inc., a Delaware corporation, and (b) on and after March 18, 1997, Chicago Bridge & Iron Company, a Delaware corporation, a wholly-owned subsidiary of Chicago Bridge & Iron Company N.V., a Netherlands corporation; or any successor corporation, by merger, consolidation, purchase or otherwise, which elects to adopt the Plan and the Trust. 2.10 "Company Contributions" means the contributions made from time to time by an Employer to the Trustee in accordance with Section 4.03. 2.11 "Company Stock" means the publicly traded common shares of the Company's parent corporation, Chicago Bridge & Iron Company N.V., a Netherlands corporation. 2.12 "Company Stock Fund" means an Investment Fund designated for investment in Company Stock. Up to 100% of the assets of the Company Stock Fund may be invested in Company Stock. 2.13 "Compensation" means the amounts below: (a) Compensation. Except as provided in subsection (b), Compensation means the total cash salary and wages paid by an Employer through the U.S. payroll system of an Employer to a Participant while an Eligible Employee, (i) including short-term disability payments made directly from the assets of the Employer, overtime, and cash bonuses under any annual or other short term incentive pay or bonus plan, (ii) excluding long-term incentives, stock options, restricted stock, similar non-cash benefits, and contributions or benefits under any employee benefit plan, (iii) increased by the amount of any Elective Deferrals under this Plan and any other elective contributions or deferrals made by an Employer on behalf of an Employee that are excluded from the Participant's income by Section 125, Section 132(f), Section 402(e)(3), Section 402(h)(1)(B), Section 403(b), Section 408(p)(2)(A)(i) or Section 457 of the Code; and (iv) excluding all compensation in excess of the Compensation Limit. (b) Statutory Compensation. For purposes of applying the limitations of Article V (including the identification of Highly Compensated Employees), and applying the requirements of Article XII (including the identification of Key Employees), subject to the exceptions below, Statutory Compensation means compensation as defined for purposes of Section 415(c)(3) and Treasury Regulations Sections 1.415-2(d)(11)(i) thereunder, including wages within the meaning of Section 3401(a) of the Code and all other payments of compensation to an employee by his employer (in the course of the employer's trade or business) for which the employer is required to furnish the employee a written statement under sections 6041(d), 6051(a)(3), and 6052 of the Code, determined without regard to any rules under section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in section 3401(a)(2). Notwithstanding the foregoing: (1) For purposes of the identification of Highly Compensated Employees under Section 2.28 for Plan Years beginning before January 1, 1998, -3- Statutory Compensation means compensation as defined for purposes of Section 415(c)(3) of the Code and Treasury Regulations Sections 1.415-2(d)(2), (3) and (10) thereunder, (i) including wages, salaries, fees for professional services, and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Employer or any Related Company to the extent that the amounts are included in gross income (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits and reimbursements or other expense allowances under a nonaccountable plan), but (ii) excluding contributions of the Employer or a Related Company to (unless includible in the gross income of the Employee for the taxable year when contributed), or distributions from, a plan of deferred compensation (other than an unfunded nonqualified plan), amounts realized from the exercise of a non-qualified stock option or when restricted stock (or property) held by an Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture (as determined under Section 83 of the Code), amounts realized from the sale, exchange or other disposition of stock acquired under an incentive stock option, and other amounts which receive special tax benefits. (2) In applying Statutory Compensation for purposes of determining whether an Employee is a Highly Compensated Employee under Section 2.28 or a Key Employee under Section 12.02(d), for purposes of determining the Actual Deferral Percentage under Section 5.02 and the Actual Contribution Percentage under Section 5.03, and for purposes of determining for Plan Years beginning on or after January 1, 1998 the limitations under Section 5.07 and Minimum Employer Contributions under Section 12.03(a), Statutory Compensation under this subsection shall be increased by the amount of Elective Deferrals under this Plan and any other elective contributions or deferrals made by an Employer or Related Company on behalf of an Employee that excluded from the Participant's income by Section 125, Section 132(f), Section 402(e)(3), Section 402(h)(1)(B), Section 403(b), Section 408(p)(2)(A)(i) or Section 457 of the Code. (3) Except for purposes of determining Highly Compensated Employees under Section 2.28, Key Employees under Section 12.02(d), and the limitations under Section 5.07, Statutory Compensation will not exceed the Compensation Limit. 2.14 "Compensation Limit" means $200,000 (for 2002), as adjusted for increases in the cost-of-living in accordance with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any determination period beginning in such calendar year. If a determination period consists of fewer than 12 months, the annual Compensation Limit is an amount equal to the otherwise applicable annual Compensation Limit multiplied by a fraction, the numerator of which is the number of months in the short determination period, and the denominator of which is 12. -4- 2.15 "Disability" or "Disabled" means a Participant's inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous or indefinite period of at least twelve (12) months, and which is substantiated by proof of disability satisfactory to the Plan Administrator (which proof shall include a written statement of licensed physician or other appropriate medical care provider appointed or approved by the Employer). 2.16 "Dollar Limit" has the meaning defined for such term in Section 5.01. 2.17 "Effective Date" means January 1, 1997, the effective date of this amendment and restatement. The original effective date of the Plan was June 16, 1964. 2.18 "Elective Deferrals" means the contributions made by an Employer to the Trustee on behalf of an Active Participant attributable to reductions in the Participant's Compensation pursuant to a Salary Reduction Agreement in accordance with Section 4.01. 2.19 "Eligible Employee" means any Employee who is employed by an Employer and paid through the U.S. payroll system of the Employer, including an Employee transferred from the United States to work outside the United States but retained on the U.S. payroll system of the Employer, but excluding: (a) Union Employees. Any Employee who is a member of a collective bargaining unit of employees represented by a collective bargaining agent with which an Employer or a Related Company has a bargaining agreement, unless that agreement requires inclusion of the Employee in this Plan. (b) Nonresident Aliens. Any Employee who (i) is neither a citizen nor resident of the United States or is first employed by an Employer or Related Company outside the United States, and (ii) receives no earned income (within the meaning at Section 911(d)(2) of the Code) from the Employer or a Related Company from sources within the United States (within the meaning of Section 861(a)(3) of the Code). (c) Leased Employees. Any individual who is classified by the Employer at the relevant time as a Leased Employee (defined below), even if such person is subsequently determined to be, or to have been, a common-law employee of an Employer. For this purpose "Leased Employee" means a person who is not an employee of a recipient and who provides services to the recipient if: (1) such services are provided pursuant to an agreement between the recipient and any other person, (2) such person has performed such services for the recipient (or for the recipient and related persons) on a substantially full-time basis for a period of a least 1 year, and (3) such services are performed under the primary direction and control of the recipient. -5- (d) Independent Contractors. Any individual who is classified by the Employer at the relevant time as an independent contractor, even if such person is subsequently determined to be, or to have been, a common-law employee of an Employer. (e) Field Employees. For Plan Years ending on or before December 31, 2000, any Field Employee who at the relevant time has not yet qualified as a Traveler. (f) Part-Time and Temporary Workers. Any Employee who is not classified by the Employer at the relevant time as either a regular full-time or regular part-time employee. For this purpose an eligible "regular part-time employee" must have a normal scheduled work week of at least 20 Hours of Service or actually perform more than 1,000 Hours of Service in the 12-month period measured from the date he or she first performs an Hour of Service or in any Plan Year ending after that date. A temporary or summer employee shall not be an Eligible Employee. 2.20 "Employee" means any common law employee of an Employer or a Related Company, and any leased employee (within the meaning of Section 414(n)(2) of the Code) of an Employer or any Related Company. 2.21 "Employer" or "Employers" means the Company and any Related Company which has adopted the Plan pursuant to Section 13.01. 2.22 "Employer Stock" means Company Stock, and stock of a Participant's former employer accumulated in an account for the Participant under a Transferor Plan that is maintained as an Inactive Account under this Plan. 2.23 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 2.24 "Field Employee" means an employee of an Employer or a Related Company, who is paid on an hourly basis from the "field payroll", and whose duties consist of transient construction or related services performed on-site in the field and not at a permanent office, manufacturing or warehouse facility of the Employer or a Related Company. 2.25 "Forfeiture" means the portion of a Participant's Accrued Benefit that is forfeited as provided in Sections 4.10, 5.01, 5.02(c), or 13.04. 2.26 "Former Plan" means this Plan, then known as the CBI 401(k) Pay Deferral Plan, as in effect immediately before the Effective Date of this amendment and restatement, and including, to the extent relevant for administering this Plan, the Hourly Plan. 2.27 "Hardship" means an immediate and heavy financial need of the Participant on account of: (a) Medical Expenses. Expenses for medical care described in Section 213(d) of the Code previously incurred by the Participant, the Participant's spouse or any dependents of the Participant (as defined in Section 152 of the Code) or amounts -6- necessary for these persons to obtain medical care described in Section 213(d) of the Code. (b) Home Purchase. Costs directly related to the purchase of a principal residence for the Participant (excluding mortgage payments). (c) Educational Expenses. Payment of tuition, related educational fees and room and board expenses for the next 12 months of post-secondary education for the Participant, his or her spouse, children or dependents (as defined in Section 152 of the Code). (d) Prevention of Eviction or Foreclosure. Payments necessary to prevent the eviction of the Participant from his or her principal residence or foreclosure on the mortgage of the Participant's principal residence. (e) Other Deemed Hardship Events Designated by the Internal Revenue Service. Such other events, if any, that are designated by the Internal Revenue Service as constituting deemed immediate and heavy financial needs in regulations, revenue rulings, notices, or other documents of general applicability. 2.28 "Highly Compensated Employee" means, for any Plan Year, any individual who is an Employee described in subsection (a) or (b) below, or who is a former Employee described in subsection (c) below: (a) An Employee who at any time during the current Plan Year or the preceding Plan Year is a more than five percent (5%) owner (or is considered as owning more than five percent (5%) within the meaning of Section 318 of the Code) of the Employer or a Related Company ("5% Owner"). (b) An Employee who received Statutory Compensation during the preceding Plan Year in excess of $80,000 (as adjusted in accordance with regulations and rulings under Section 414(q) of the Code), and is in the group consisting of the top twenty percent (20%) of the total number of persons employed by the Employer and Related Companies when ranked on the basis of Statutory Compensation paid during the preceding Plan Year, provided, however, that, for purposes of determining the total number of persons employed by the Employer and Related Companies, the following Employees shall be excluded: (i) Employees who have not completed an aggregate of six (6) months of service during the preceding Plan Year, (ii) Employees who work less than seventeen and one-half (17-1/2) hours per week for 50% or more of the total weeks worked by such employees during the preceding Plan Year, (iii) Employees who normally work during not more than six (6) months during any year, -7- (iv) Employees who have not attained age twenty-one (21) by the end of the preceding Plan Year, (v) Employees who are nonresident aliens and who receive no earned income (within the meaning of Section 911(d)(2) of the Code) from the Employer or Related Companies which constitutes income during the preceding Plan Year from sources within the United States (within the meaning of Section 861(a)(3) of the Code), and (vi) Except to the extent provided in regulations prescribed by the Secretary of the Treasury, Employees who are members of a collective bargaining unit represented by a collective bargaining agent with which an Employer or Related Company has or has had a bargaining agreement. (c) A former Employee of an Employer or any Related Company if such former Employee was a Highly Compensated Employee at the time he or she had a Termination of Employment, or at any time after he or she attains age 55. For purposes of this subsection, (i) an Employee who performs no services for the Employer or a Related Company during a Plan Year (for example, an Employee who is on an Authorized Leave of Absence throughout the Plan Year) shall be treated as having had a Termination of Employment in the Plan Year in which he last performed services for the Employer or a Related Company and (ii) an Employee who performs services for the Employer or a Related Company during a Plan Year shall nevertheless be deemed to have had a Termination of Employment (solely for purposes of determining whether such Employee is a Highly Compensated Employee for any period after he or she has an actual Termination of Employment) if (1) in a Plan Year prior to his or her attainment of age 55, the Employee receives Statutory Compensation in an amount less than 50% of his or her average annual Statutory Compensation for the three consecutive calendar years preceding such Plan Year during which his or her Statutory Compensation was the greatest (or the total period of the Employee's service with the Employer and Related Companies, if less), and (2) after such Plan Year in which the Employee is deemed to have had a Termination of Employment and before the Plan Year in which the Employee has an actual Termination of Employment, the Employee's services for and Compensation from the Employer and Related Companies do not increase significantly. 2.29 "Hour of Service" means each hour for which an Employee is paid, or entitled to payment, by an Employer or a Related Company: (a) for the performance of duties; (b) on account of a period of time during which no duties were performed; provided, however, that (i) no more than 501 Hours of Service shall be credited for any single continuous period during which an Employee performs no duties, and (ii) no Hours of Service shall be credited for payments made or due under a plan maintained solely for the purpose of complying with applicable workers' compensation, unemployment compensation or disability insurance laws, or for reimbursement of medical expenses; and -8- (c) for which back pay, irrespective of mitigation of damages, is awarded or agreed to by the Employer or Related Company; provided, however, that (i) no more than 501 Hours of Service shall be credited for any single continuous period of time during which the Employee did not or would not have performed duties, and (ii) Hours of Service credited under (a) or (b) shall not also be credited under (c). The determination of Hours of Service for reasons other than the performance of duties shall be determined in accordance with the provisions of Labor Department Regulations Section 2530.200b-2(b), and Hours of Service shall be credited to computation periods in accordance with the provisions of Labor Department Regulations Section 2530.200b-2(c). 2.30 "Hourly Plan" means the CBI Hourly Employees' Savings Plan as in effect immediately prior to the Effective Date. 2.31 "Inactive Account" means an separate Account maintained under this Plan (including any account transferred from a Transferor Plan) to which no further Elective Deferrals, Matching Contributions, Company Contributions, Travelers Contributions or Rollover Contributions are currently allocated, but which the Plan Administrator in its discretion maintains as a separate Account to reflect any special vesting schedule applicable to the Account, any special distribution options required or permitted for such Account, and any other special benefits, rights or features pertaining to such Account. Schedule 1 sets forth the Accounts, including Inactive Accounts (and their vesting schedules, special distribution options, and other salient benefits, rights and features) maintained under this Plan from time to time. 2.32 "Investment Committee" means the committee appointed by the Company pursuant to Section 6.06 to act on behalf of the Company with respect to the investment of Plan assets. 2.33 "Investment Fund" means each pooled or commingled investment fund or investment arrangement designated or authorized by the Investment Committee pursuant to Section 6.07 from among (i) regulated investment companies registered under the Investment Company Act of 1940; (ii) common trust funds or collective investment funds qualified under Sections 401 and 501 of the Code; (iii) a discount brokerage account provided by a brokerage firm that is a member of NASD/SIPC designated or authorized by the Investment Committee to provide individually directed accounts for purposes of this Plan; (iv) any other funding vehicle (including, but not limited to, a limited partnership); (v) the Company Stock Fund; (vi) any other fund for the holding of other Employer Stock maintained in connection with an Inactive Account transferred from a Transferor Plan, and (vii) for former participants in the Hourly Plan, guaranteed investment contracts issued by Principal Mutual Life Insurance Company. Solely for the purpose of segregating notes representing loans to a Participant under Section 7.02, the Trustee and Plan Administrator shall hold such notes as a separate Investment Fund pursuant to Section 7.02(f). 2.34 "Investment Manager" means a person who has acknowledged in writing that he, she or it is a fiduciary with respect to this Plan and who (i) is registered as an investment adviser under the Investment Advisers Act of 1940 (the "Act"), or (ii) is not registered as an investment adviser under such Act by reason of paragraph (1) of Section 203(A) of such Act but is -9- registered as an investment adviser under the laws of the state in which such person maintains his, her or its principal office and place of business, and who, at the time such person last filed with such state the most recent the registration form required to maintain such person's registration under the laws of such state also filed a copy of such form with the Secretary of Labor, or (iii) is a bank as defined in the Act, or (iv) is an insurance company qualified to perform investment management or investment advisory services under the laws of more than one state. 2.35 "Matching Contributions" means the contributions made from time to time by an Employer to the Trustee in accordance with Section 4.02. 2.36 "Maternity or Paternity Leave" means an absence from work (i) by reason of pregnancy of the individual; (ii) by reason of a birth of a child of the individual; (iii) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual; or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Participant shall give the Plan Administrator such timely information as the Plan Administrator may reasonably require to establish that the absence from work is for one of the foregoing reasons and to establish the number of days for which there was such an absence. 2.37 "Normal Retirement Date" means the date on which the Participant attains age 65. 2.38 "Participant" means a current or former Eligible Employee participating in the Plan as provided in Article III. 2.39 "Period of Severance" means the period of time from the earliest of (i) an Employee's Termination of Employment, or (ii) the first anniversary of an Employee's first absence from work for any reason other than a Termination of Employment, until the date the Employee is credited with an Hour of Service upon reemployment by or return to service with an Employer or a Related Company. However if one of the reasons for an Employee's Termination of Employment or other absence was Maternity or Paternity Leave, the Period of Severance shall not include the first year that would otherwise be included in that Period of Severance. 2.40 "Plan" means this Chicago Bridge & Iron Savings Plan as set forth in this document and as from time to time amended; including, for periods prior to the Effective Date, the Former Plan. 2.41 "Plan Administrator" means the person appointed by the Company in accordance with Section 9.01 to serve as the plan administrator within the meaning of Section 414(g) of the Code and as the administrator within the meaning of Section 3(16)(A) of ERISA. 2.42 "Plan Year" means the calendar year. 2.43 "QMAC" means the qualified matching contribution made from time to time by an Employer to the Trustee in accordance with Section 4.06 2.44 "Qualified Military Leave" means an absence due to service in the uniformed services (as defined in chapter 43 of the United States Code) by any Employee provided the -10- Employee returns to employment with the Company or Related Employer with re-employment rights provided by law. 2.45 "QNEC" means the qualified non-elective contribution made from time to time by an Employer to the Trustee in accordance with Section 4.06. 2.46 "Reduction-in-Force Termination" means any permanent Termination of Employment of an Employee initiated by the Company or any Related Company, including any Termination of Employment caused by the sale by the Company or a Related Company of an ownership interest in a Related Company or the assets of a business or business segment, causing the sold Related Company, business or business segment to cease being (or being part of) a Related Company, but excluding: (a) any Termination of Employment by Retirement, or by early retirement under any retirement arrangement of an Employer applying to that Employee, elected by the Employee before being given notice of any impending Termination of Employment, or pursuant to an election under any special program of retirement incentive offered by the Company or Related Employer prior to any notice of impending Termination of Employment; (b) any Termination of Employment by reason of Disability or death; (c) any Authorized Leave of Absence; (d) any Termination of Employment for or after "Cause," as "Cause" is defined in the Chicago Bridge & Iron Salaried Employee Severance Pay Plan as from time to time in effect (the "Severance Plan"), whether or not the Severance Plan applies to the Employee; (e) any voluntary resignation by the Employee; or (f) any event that is not a Termination of Employment as defined in Section 2.55. 2.47 "Related Company" means a corporation, trade, or business however organized (including any limited liability company) during the time that it and an Employer are (i) members of a controlled group of corporations as defined in Section 414(b) of the Code; (ii) under common control as defined in Section 414(c) of the Code, (iii) members of an affiliated service group as defined in Section 414(m) of the Code, or (iv) members of a group the members of which are required to be aggregated pursuant to regulations under Section 414(o) of the Code; provided, however, that for purposes of determining applying Section 5.07, the standard of control under Sections 414(b) and 414(c) of the Code (and thus also Company and Related Plans) shall be determined as provided in Section 5.07(e). 2.48 "Related Plan" means any other defined contribution plan or any defined benefit plan (as defined in Sections 414(i), (j) and (k) of the Code) maintained by an Employer or a Related Company and intended to qualify under Section 401(a) of the Code, respectively called a "Related Defined Contribution Plan" and "Related Defined Benefit Plan." -11- 2.49 "Required Distribution Date" means April 1 of the calendar year following the later of (i) the calendar year in which the Participant attains age 70-1/2, or (ii) the calendar year in which the Participant has a Termination of Employment; provided, however, that this clause (ii) shall not apply (A) if the Participant is a five percent (5%) owner (as determined under Code Section 416(i)) of the Employer or a Related Company at any time during the Plan Year ending with or within the calendar year in which he or she attains age 70-1/2, or (B) to a Participant who attained age 70-1/2 before January 1, 1999. 2.50 "Restricted Account" means an Inactive Account that is subject to the survivor annuity requirements of Section 417 of the Code. 2.51 "Retirement" means a Termination of Employment on or after the date a Participant (i) has attained age 55 and has completed 10 years of Service, (ii) has completed 30 years of Service, or (iii) has attained his or her Normal Retirement Date. 2.52 "Rollover Contribution" means a contribution made from time to time by an Eligible Employee to the Trustee in accordance with Section 4.05 of the Plan (i) from a qualified trust as described in Section 402(c) of the Code, or (ii) from an individual retirement account or individual retirement annuity ("IRA") as described in Section 408(d)(3) of the Code if the sole source of contributions to such IRA was one or more rollover contributions from a qualified trust described in Section 402(c) of the Code. A Rollover Contribution shall include any direct transfer of an eligible rollover distribution described in Section 401(a)(31) of the Code from a qualified trust or from an IRA described in the preceding sentence. 2.53 "Salary Reduction Agreement" means the properly completed and executed form provided by the Plan Administrator which has been filed by the Participant with the Plan Administrator as provided in Section 4.01. 2.54 "Service" means the aggregate of all periods of employment of an Employee by an Employer or Related Company (including periods of Authorized Leave of Absence) measured from the date an Employee first performs an Hour of Service upon employment or reemployment to the date of the Employee's Termination of Employment, but excluding any Period of Severance other than an Authorized Leave of Absence; provided, however, that (i) an Employee shall not be credited with more than 12 months of Service with respect to any single period of Authorized Leave of Absence; and (ii) if an Employee who has a Termination of Employment is reemployed by an Employer or a Related Company and performs an Hour of Service before he or she incurs a one-year Period of Severance, such Termination of Employment shall be disregarded and his or her Service shall be treated as continuous through the date he or she resumes employment as an Employee. An Employee shall receive credit for 1/12 of a year of Service for each full or partial calendar month of Service. Service once credited under this Section shall not be disregarded by reason of any subsequent Period of Severance; except that if a Participant has five consecutive one-year Periods of Severance, Service after such five-year period shall not be taken into account for purposes of Section 4.10 in determining the nonforfeitable percentage of his or her Accrued Benefit derived from Employer contributions which accrued before such five-year period. For purposes of determining whether or to what extent a Participant's Accounts transferred from a Transferor Plan are vested and nonforfeitable under Section 4.11, Service of a Participant who was a participant in a Transferor Plan shall -12- include service with the predecessor employer credited for vesting purposes under the Transferor Plan. Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to Qualified Military Leave shall be provided in accordance with Section 414(u) of the Code, effective as of December 12, 1994. 2.55 "Termination of Employment" occurs when for any reason ( other than a layoff for lack of work with recall rights) an individual is no longer an Employee of an Employer or any Related Company, except that (a) If an individual incurs a layoff for lack of work with recall rights, a Termination of Employment shall occur on the first anniversary of the date of layoff, unless the individual has in the interim been recalled to employment with the Employer or a Related Company. (b) A Participant's Elective Deferrals, QNECs, QMACs, and earnings attributable to these contributions shall be distributed on account of the Participant's severance from employment satisfying the requirements of Section 401(k)(10) of the Code and Treasury Regulations and rulings thereunder, all as in effect at the time of such severance from employment, as determined in the sole discretion of the Plan Administrator. However, such a distribution shall be subject to the other provisions of the Plan regarding distributions, other than provisions that require a separation from service before such amounts may be distributed. 2.56 "Transferor Plan" means an employee benefit plan that is qualified under Section 401(a) of the Code and that transfers part or all of its assets and liabilities to, or merges or consolidates into, this Plan in a trust-to-trust transfer described in Section 414 (l) of the Code. 2.57 "Traveler" means a Field Employee who (i) has worked, within a twenty-six week period, for the Employer or Related Company, in at least two separate physical locations, one of which is no less than 50 miles from either the other or from such Field Employee's permanent residence; (ii) has worked during a minimum of twenty weeks within a twelve-month period at least two separate physical locations no less than 50 miles apart on projects consisting of significant manufacturing, refining or processing plan repairs or renovations (commonly known in the industry as "turnaround contracts") or (iii) has worked as a field superintendent, weld supervisor, safety supervisor, pusher or non-destructive examination supervisor continuously for at least thirty calendar days. 2.58 "Traveler Contributions" means the contributions for Plan Year's ending on or before December 31, 2000 made from time to time by an Employer to the Trustee in accordance with Section 4.04. 2.59 "True-Up" Contributions" has the meaning defined for such term in Section 4.02(d). 2.60 "Trust" means the trust established under the Trust Agreement by which contributions shall be received, held, invested and distributed to or for the benefit of Participants and Beneficiaries. -13- 2.61 "Trust Agreement" means the trust agreement dated December 31, 1996, by and between the Company and T. Rowe Price Trust Company, a Maryland limited trust company, as Trustee, and any amendments thereto or successor or supplemental agreements 2.62 "Trust Fund" means any property, real or personal, received by the Trustee, plus all income and gains and less losses, expenses and distributions chargeable thereto. 2.63 "Trustee" means the corporation, bank, trust company, individual or individuals who accept appointment as trustee to execute the duties of the Trustee set forth in the Trust Agreement. 2.64 "Valuation Date" means the last business day of each calendar year and such additional dates as the Plan Administrator shall deem appropriate. The Plan Administrator may designate different additional Valuation Dates for different Investment Funds and for different purposes under the Plan. Article III Participation 3.01 Participation. Each Eligible Employee who was a Participant in the Former Plan immediately before the Effective Date shall continue as a Participant in the Plan from and after the Effective Date. Each other Eligible Employee shall become a Participant on the first day on which he or she is an Eligible Employee. 3.02 Duration of Participation. An Eligible Employee who becomes a Participant shall continue to be a Participant until the later of (i) his or her Termination of Employment, or (ii) the distribution of his or her entire vested Accrued Benefit from the Plan. 3.03 Participation Upon Re-Employment. An Employee who has a Termination of Employment, and thereafter resumes employment with an Employer as an Eligible Employee shall again become a Participant immediately upon becoming an Eligible Employee. 3.04 Participation Forms. A Participant shall not be eligible to make Elective Deferrals (or to receive an allocation of Matching Contributions) until the effective date of his or her Salary Reduction Agreement as determined under Section 4.01(c). A Participant shall execute and deliver to the Plan Administrator a Beneficiary designation and an investment election, on such form or forms provided or permitted by the Plan Administrator, and in such manner, as the Plan Administrator may prescribe. Article IV Contributions and Vesting 4.01 Elective Deferrals. (a) General. Each Active Participant may elect to make Elective Deferrals from his or her Compensation by executing and filing an appropriately completed Salary -14- Reduction Agreement with the Plan Administrator on such form or forms provided or permitted by the Plan Administrator and in such manner as the Plan Administrator may prescribe. The Salary Reduction Agreement shall specify the percentage of Compensation to be contributed to the Plan as Elective Deferrals. That percentage shall not be more than the maximum percentage for Elective Deferrals prescribed by the Plan Administrator from time to time uniformly applicable to all Participants and effective from and after the date prescribed. The Employer shall reduce each Participant's Compensation by, and contribute to the Trust as Elective Deferrals on behalf of such Participant, the amount (if any) by which such Participant's Compensation has been reduced under such Participant's Salary Reduction Agreement. A Participant's Salary Reduction Agreement shall continue in effect, subject to subsection (e) below, notwithstanding any change in his or her Compensation, until he or she changes or revokes his or her Salary Reduction Agreement. (b) Changes of Salary Reduction Agreements. A Participant may change his or her rate of Elective Deferrals by executing and filing a new Salary Reduction Agreement with the Plan Administrator on such form provided or permitted by the Plan Administrator and in such manner as the Plan Administrator may prescribe. (c) Effective Date of Salary Reduction Agreement. A Salary Reduction Agreement or a change thereof shall apply solely to Compensation not yet paid or payable as of the date such new or changed Salary Reduction Agreement is filed with the Plan Administrator. Subject to the foregoing requirement, a Salary Reduction Agreement or change thereof shall take effect on the first day of the payroll period as of which the start or change of the Participant's Elective Deferrals is administratively practicable (determined under procedures established by the Plan Administrator) after the Participant has executed and filed an initial or changed Salary Reduction Agreement with the Plan Administrator as provided in subsection (a) or (b) of this Section 4.01. (d) Revocations of Salary Reduction Agreements. A Participant may revoke a Salary Reduction Agreement with respect to Compensation not paid or payable as of the date of such revocation by executing and filing a revocation of such Salary Reduction Agreement on such form provided or permitted by the Plan Administrator and in such manner as the Plan Administrator may prescribe. Revocation of a Salary Reduction Agreement shall take effect on the first day of the payroll period as of which implementing the revocation is administratively practicable (determined under procedures established by the Plan Administrator) after the Participant has executed and filed such revocation with the Plan Administrator. A Participant's Salary Reduction Agreement shall become ineffective upon his or her ceasing to be an Active Participant. But the Participant may make a new Salary Reduction Agreement in accordance with subsection (a) upon again becoming an Active Participant. (e) Other Reductions and Limitations. Elective Deferrals shall not exceed the lowest maximum amount permitted by Article V. Notwithstanding anything in a Salary Reduction Agreement, the Plan Administrator may reduce the Elective Deferrals and amend the Salary Reduction Agreement of any Participant to prevent a reasonably anticipated violation of the limitations of Section 5.07, and may reduce the Elective -15- Deferrals and Salary Reduction Agreement of any Participant who is a Highly Compensated Employee to prevent a reasonably anticipated violation of the limitations of Sections 5.01 or 5.02. If a Participant receives a Hardship distribution pursuant to Section 7.01, his or her Salary Reduction Agreement shall be suspended in accordance with Section 7.01(b)(4). The Plan Administrator may, in its discretion, impose such additional rules, regulations and limitations on the amount of Elective Deferrals that may be elected, including limitations on the amount of Elective Deferrals that an Active Participant may elect for each payroll period to a pro-rata portion of the Dollar Limit, and limitations on the amount of Elective Deferrals that a Highly Compensated Employee may elect, to ensure that the limitations of Article V are not exceeded. (f) Time for Contributing Elective Deferrals. For each payroll period during a Plan Year, each Employer shall pay the Elective Deferrals of Participants who are its Employees over to the Trustee as of, or as soon as reasonably possible after, the date such amount would otherwise have been paid to the Participant in cash, but not later than the 15th business day of the month following the month in which such amount would otherwise have been paid to the Participant in cash. (g) Allocation of Elective Deferrals. Elective Deferrals shall be allocated to the Employee 401(k) Account of each Participant on whose behalf such Elective Deferrals were made. 4.02 Matching Contributions. (a) General. Subject to Sections 11.01, 11.02 and 11.04, for each Plan Year, each Employer shall contribute on behalf of each Participant employed by the Employer on whose behalf Elective Deferrals are made, an amount equal to one hundred percent (100%) of so much of the Participant's Elective Deferrals for the Plan Year as do not exceed three percent (3%) of the Participant's Compensation for the Plan Year, or such larger or smaller percentages as each Employer may determine uniformly for the Participants who are its Employees. An Employer may change such percentages from time to time during the Plan Year, provided that the Employer may not retroactively decrease the percentages of its Matching Contributions or the percentage of Elective Deferrals subject to Matching Contributions. (b) Time for Contributing Matching Contributions. Matching contributions shall be determined and made, on the basis of Elective Deferrals, for each payroll period, subject to the subsection (d) below. However the Employer may pay its Matching Contributions over to the Trustee at any time not later than the due date for the filing of the federal income tax return (including any extensions) of the Employer for the tax year during which occurs the last day of the Plan Year containing the last day of such payroll period. (c) Allocation of Matching Contributions. Matching Contributions shall be allocated to the Company Matching Account of each Participant on whose behalf such Matching Contributions were made; provided, however, that effective January 1, 2001, a Participant's Company Matching Account as of December 31, 2000 shall become an -16- Inactive Account for pre-2001 Matching Contributions (including accumulated and future earnings thereon), as indicated in Schedule 1, and a new Company Matching Account shall be established for each such Participant as of January 1, 2001. (d) True-Up Contributions. As of the last day of each Plan Year, the applicable Matching Contributions formula under subsection (a) shall be applied to the total of the Participant's Elective Deferrals for the Plan Year then ending, and each Employer shall contribute (within the time specified by subsection (b)), on behalf of each Participant on whose behalf Elective Deferrals are made, the amount, if any (the "True-Up Contribution"), by which the total Matching Contributions so required exceed the actual Matching Contributions previously determined on the basis of payroll periods for such Active Participant during the course of the Plan Year. If an Employer has changed its determination of percentages for its matching contribution formula during the Plan Year, the amount of the True-Up Contribution shall be determined separately for each portion of a Plan Year during which a given matching contribution formula was in effect. 4.03 Company Contributions. (a) General. Subject to Sections 11.01, 11.02 and 11.04, for each Plan Year for which the Company elects in its sole discretion for Employers to make a Company Contribution, each Employer shall make a Company Contribution for each Active Participant employed by the Employer (other than, for Plan Years ending on or before December 31, 2000, a Traveler entitled to an allocation of Traveler Contributions pursuant to Section 4.04) who is an Employee on the last day of the Plan Year or had a Termination of Employment during the Plan Year by reason of Retirement, Disability, death or a Reduction-in-Force Termination. The Amount of the Company Contribution shall be (i) a percentage, determined by the Company in its discretion and uniformly applicable to all such Active Participants that is not less than five percent (5%), and not more than twelve percent (12%), or such larger or smaller percentage as each Employer may determine in its discretion and make uniformly applicable to all Active Participants employed by it, of (ii) the Compensation of each Active Participant for the portion of the Plan Year during which the Participant is an Active Participant (other than such a Traveler). If an Employer has changed its determination of the percentage of its Company Contribution during the Plan Year, the amount of the Company Contribution shall be determined separately for each portion of a Plan Year during which a given percentage was in effect. (b) Time for Company Contributions. For each Plan Year, each Employer shall pay its Company Contributions over to the Trustee not later than the due date for the filing of the federal income tax return (including any extensions) of the Employer for the tax year during which the last day of such Plan Year occurs. (c) Allocation of Company Contributions. Company Contributions shall be allocated to the Company Contribution Account of each Active Participant eligible for such allocation under subsection (a) in the same ratio that the eligible Compensation of such Active Participant bears to the total eligible Compensation of all Active Participants. -17- 4.04 Traveler Contributions. (a) Traveler Contributions. Subject to Sections 11.01, 11.02 and 11.04, for each Plan Year ending on or before December 31, 2000, for which the Company elects to make a Company Contribution, each Employer shall contribute for each Active Employee employed by the Employer who is a Traveler an amount equal to (i) one dollar ($1.00) for each Hour of Service performed by a Traveler (as a Traveler) described in clauses (i) or (ii) of Section 2.57, during the Plan Year, and (ii) five percent (5%) of the Compensation of a Traveler (as a Traveler) described in clause (iii) of Section 2.57 for the Plan Year. (b) Time for Traveler Contributions. Each Employee shall pay over to the Trustee the Traveler Contribution for each Plan Year not later than the due date for the filing of the federal income tax return (including extensions) of the Employer for the tax year during which the last day of such Plan Year occurs. (c) Allocation of Traveler Contributions. Traveler Contributions shall be allocated to the Travelers Benefit Account of each Traveler eligible for such allocation under subsection (a) in the amount specified for such Traveler in subsection (a). 4.05 Rollover Contributions into the Plan. At the request of any Eligible Employee the Plan Administrator shall direct the Trustee to accept a Rollover Contribution on behalf of the Eligible Employee. A Rollover Contribution shall be held in the Prior Plan and Rollovers Account for the Eligible Employee. Each Rollover Contribution shall be made in cash, in notes representing a loan to the Participant from a qualified trust under provisions of such qualified trust similar to Section 7.02, or in property (which may be stock or securities issued by the former employer) acceptable to the Trustee in its sole discretion for purposes of this Plan. Prior to accepting a Rollover Contribution, the Plan Administrator may require that the Eligible Employee who wants to make the Rollover Contribution shall provide evidence reasonably satisfactory to the Plan Administrator that such Contribution qualifies as a Rollover Contribution. Acceptance of a Rollover Contribution shall not in any manner guarantee the result of such contribution under any tax laws; and neither the Company, the Investment Committee, any Employer, the Plan Administrator, the Trustee nor any Investment Manager, shall be responsible for such tax results. If the Plan Administrator determines after any Rollover Contribution that such contribution did not in fact qualify as a Rollover Contribution, the amount of the Rollover Contribution, increased by income and gains and reduced (but not below zero) by losses and expenses, shall be returned to the Eligible Employee. 4.06 Special Contributions; QNECs and QMACs. (a) QNECs and QMACs. For each Plan Year, the Company may elect to have the Company and the other Employers make a special contribution in such amount (if any) as the Company may determine as QNECs and/or QMACs. In any Plan Year in which the Company elects to have such a QNEC or QMAC made, each Employer shall contribute a fractional portion of the QNEC or QMAC in such amount as the Company shall determine to be appropriate in the circumstances. -18- (b) Time for QNECs or QMACs. Each Employer shall pay its QNECs or QMACs for a Plan Year over to the Trustee not later than the last day of the following Plan Year; provided, however, that if the Employer intends to deduct such QNEC or QMAC in the tax year in which the last day of the Plan Year for which such QNEC or QMAC was made occurs, the Employer shall pay its QNEC or QMAC over to the Trustee on or before the due date for the filing of the federal income tax return (including any extensions) of the Employer for such tax year. (c) Allocation of QNECs or QMACs. As of the last day of each Plan Year, any QNECs or QMACs made to the Plan for the Plan Year shall be allocated to the Employee 401(k) Account of each Designated Participant (as defined below) who is an Active Participant, as determined by the Company in its discretion, in whichever one or more of the following methods as the Company shall determine: (i) Compensation-Based QNEC. (A) Compensation-based QNECs may be allocated to the Employee 401(k) Account of each Designated Participant who has Compensation not in excess of an amount specified by the Company in the ratio that such Participant's Compensation for the Plan Year bears to the total Compensation of all such Participants for the Plan Year. (B) Compensation-based QNECs may be allocated to the Employee 401(k) Account of each Designated Participant who has Compensation not in excess of an amount specified by the Company in the ratio that such Participant's Compensation for the Plan Year bears to the total Compensation of all such Participants for the Plan Year. (C) A Section 415-based QNEC may be allocated to the Employee 401(k) Account of each Designated Participant in an amount that maximizes each such Participant's annual additions under Code Section 415(c) of the code. (ii) Per Capita-Based QNEC. A per capita-based QNEC may be allocated to the Employee 401(k) Account of each Designated Participant in an amount equal to the total per capita-based QNEC divided by the total number of such Participants for the Plan Year. (iii) Section 401(k)-Based QMAC. A Section 401(k)-based QMAC may be allocated to the Employee 401(k) Account of each Designated Participant in the ratio that the amount of Elective Deferrals made to the Plan for such Plan Year on behalf of such Participant bears to the total amount of Elective Deferrals made to the Plan for such Plan Year on behalf of all such Participants, based on Elective Deferrals up to a specified percentage or dollar amount of Compensation, as determined by the Plan Administration. (d) Definition of Designated Participant. With respect to any QNEC or QMAC, a Designated Participant is a Participant who is not a Highly Compensated -19- Employee for the Plan Year and who is designated by the Plan Administrator on the basis of any one or more of the following: (i) such Participant's level of Compensation; (ii) such Participant's employment on the last day of the Plan Year; (iii) such Participant's completion of a Year of Vesting Service; (iv) such Participant's making of a Salary Reduction Agreement Election; or (v) such Participant's job classification that satisfies the nondiscriminatory classification test. 4.07 Crediting of Contributions. Contributions to be allocated to a Participant's Account shall be credited to such Account (and available for Participant direction of investment pursuant to Section 6.08(a) and loans, withdrawals and benefits pursuant to Articles VII and VIII) on or as soon as reasonably practicable (under procedures established or approved by the Plan Administrator) after the contributions (and a reconciliation of the contributions to Participants' Accounts) are actually received by the Trustee from time to time during or after the Plan Year. However, for purposes of determining the Accrued Benefit to which a Participant is entitled, contributions made or to be made for a particular Plan Year but credited under this Section after the last day of such Plan Year shall nevertheless be deemed made and allocated on such last day of such Plan Year. 4.08 Determination and Amount of Employer Contributions. Subject to the Company's determination of the rate (if any) of Company Contributions pursuant to Section 4.03, the Plan Administrator shall determine the amount of any contribution to be made by the Company and each Employer hereunder. In making such determination, the Plan Administrator shall be entitled to rely upon the estimates of Compensation made by the accounting officers of each respective Employer with respect to the Employees of that Employer. Such determination shall be binding on all Participants, all Employers, and the Trustee. Under no circumstances shall any Participant or Beneficiary have any right to examine the books and records of any Employer. 4.09 Condition on Company Contributions. All contributions of Elective Deferrals, Matching Contributions, Company Contributions, Traveler Contributions, QNECs or QMACs by the Company or any other Employer under this Plan are hereby expressly conditioned upon their being deductible for federal income tax purposes under Section 404 of the Code; and notwithstanding anything else in the Plan shall not exceed the amount so deductible. 4.10 Form of Company Contributions. Contributions of the Company or any other Employer under this Plan shall be in the form of cash if they are (i) Elective Deferrals, (ii) Company Contributions to the extent not in excess of 5% of the Compensation of Participants entitled to an allocation of such Company Contributions, or (iii) Traveler Contributions. All other contributions of the Company or any other Employer under this Plan (including that portion of any Company Contributions in excess of 5% of the Compensation of -20- Participants entitled to an allocation of such Company Contributions) may in the discretion of the Company be made in cash, in Company Stock that is a qualifying employer security (as defined in Section 407(d)(5) of ERISA), or in other property acceptable to the Trustee in its sole discretion. 4.11 Vesting. (a) Vesting Upon Normal Retirement Date, Death or Disability. A Participant's Accrued Benefit shall be fully vested and nonforfeitable if and when the Participant attains his or her Normal Retirement Date, dies or becomes Disabled on or before the date he or she has a Termination of Employment, or incurs a Termination of Employment by reason of a Reduction-In-Force Termination. (b) Fully Vested Accounts. A Participant's Accrued Benefit shall be fully vested and nonforfeitable at all times to the extent represented by the balance of his or her Employee 401(k) Account, Travelers Benefit Account, and Rollover Account. (c) Other Termination. Except as provided in subsection (a): (1) The vested and nonforfeitable portion of a Participant's Accrued Benefit attributable to his or her Company Contribution Account shall be the percentage of such Account determined in accordance with the vesting schedule specified below:
Years of Vested Service Percentage - -------------------- ---------- ~~Less than five years 0% Five years or more 100%~~
(2) The vested and nonforfeitable portion of a Participant's Accrued Benefit attributable to his or her Company Matching Account (excluding his or her Inactive Account for pre-2001 Matching Contributions) shall be the percentage of such Account determined in accordance with the vesting schedule specified below:
Years of Vested Service Percentage - --------------------- ---------- ~~Less than three years 0% Three years or more 100%,~~
(d) Inactive Accounts. A Participant's Accrued Benefit shall be fully vested and nonforfeitable at all times to the extent represented by an Inactive Account (including the Participant's Inactive Account for pre-2001 Matching Contributions, if any), other than an Inactive Account that comprises contributions (including matching contributions) made -21- by an employer under a Transferor Plan. The nonforfeitable percentage of an Inactive Account that comprises contributions (including matching contributions) made by an employer under a Transferor Plan shall be determined under the vesting schedule specified in the applicable Transferor Plan for accounts containing such contributions, as shown on Schedule 1, taking into account (without duplication) all of the Participant's Years of Service including service with the predecessor employer credited for vesting purposes under the Transferor Plan. (e) Forfeitures. If a Participant has a Termination of Employment, then that portion of the Participant's Accrued Benefit which is not vested as of his or her Termination of Employment shall become a Forfeiture as soon as administratively practicable after the earliest of (i) the date on which the balance of the Participant's Accounts is distributed, (ii) the last day of the Plan Year in which the Participant incurs a one year Period of Severance, or (iii) the date of Termination of Employment; provided, however, if the Participant has no vested interest in any Accounts, such portion shall become a Forfeiture on the date of Termination of Employment. (f) Return to Employment. If a Participant or a former Participant resumes service with an Employer as an Employee before incurring a Period of Severance lasting five or more years, the amount forfeited under subsection (e) (without adjustment for interest, gains or losses) shall be reinstated to the Participant's or former Participant's Account(s) from which the Forfeiture arose, as soon as administratively practicable after the Participant resumes service with an Employer as an Employee, first out of Forfeitures for the Plan Year in which reemployment occurs, and to the extent that Forfeitures for such Plan Year are not sufficient, out of the Trust Fund as an administrative expense of the Trust. If a former Participant does not resume employment with an Employer before the end of a Period of Severance lasting at least five years, the amounts forfeited under subsection (e) shall not be reinstated. (g) Application of Forfeitures. Forfeitures arising pursuant to Sections 4.10(e), 5.01, 5.02(c), or 13.04 during a Plan Year shall be applied first to restore any Forfeitures that are reinstated during the Plan Year pursuant to Sections 4.10(f) or 13.04; second, to correct in such Plan Year any errors in the adjustment of Participants' Accounts pursuant to Section 6.11, third, to the payment of expenses of administering the Plan and the Trust pursuant to Section 6.03, and fourth, toward the payment of Company Contributions. Forfeitures that are applied toward payment of Company Contributions shall be considered to be Company Contributions, shall reduce the amount of Company Contributions otherwise required to be made to the Trust, and shall be allocated in accordance with Section 4.03(c). 4.12 Catch-Up Deferrals. Effective for Plan Years beginning on or after January 1, 2002, each Participant who is an "Eligible Active Participant" (as defined in subsection (a)) may elect to make Catch-Up Deferrals from his or her Compensation by written election on a Salary Reduction Form filed with the Plan Administrator in such manner as the Plan Administrator may prescribe. The Employer shall reduce each Eligible Active Participant's Compensation by, and contribute to the Trust as Catch-Up Deferrals on behalf of such Participant, the amount (if any) of the Participant's Catch-Up Deferrals. For purposes of this Section 4.12: (a) An "Eligible Active Participant" is a Participant who: -22- (1) will have attained age 50 on or before the last day of the Plan Year; and (2) has made Elective Deferrals for the Plan Year that are the maximum Elective Deferrals allowed under the Plan, taking into account the provisions of Article V. (b) For each Plan Year, the amount of the Catch-Up Deferrals made on behalf of a Participant who is an Eligible Active Participant shall be equal to the dollar amount or percentage (in increments of 1%) of the Participant's Compensation specified by the Participant for Catch-Up Deferrals on his or her Salary Reduction Form, provided that such Catch-Up Deferrals may not exceed the lesser of the following for a Plan Year: (1) $1,000 for 2002, $2,000 for 2003, $3,000 for 2004, $4,000 for 2005, $5,000 for 2006, and $5,000 for Plan Years after 2006 as adjusted for cost-of-living increases by the Secretary of the Treasury or his delegate pursuant to the provisions of Section 414(v)(2)(C) of the Code; or (2) The excess of (i) the Participant's Statutory Compensation for the Plan Year as determined under Section 2.13(b) (as applied for purposes of Sections 5.02 and 5.03), over (ii) the Participant's Elective Deferrals for the Plan Year. (c) A Participant's initial Catch-Up Deferral election shall be effective for Compensation payable on or after the date on which such election is made and shall remain in effect until changed or revoked. Thereafter, changes in the percentage (solely in increments or decrements of 1%) or dollar amount of Compensation to be deferred or revocation of any such election, may be made by written election on a Salary Reduction Form filed with the Plan Administrator in such manner as the Plan Administrator may prescribe. (d) The Catch-Up Deferrals for the Plan Year shall be credited to the Participants' Employee 401(k) Accounts in the amounts of their respective Catch-Up Deferral elections for such Plan Year and shall be fully vested and nonforfeitable. (e) Catch-Up Deferrals shall not be subject to any of the limitations under Article V. (f) The Plan Administrator may specify rules from time to time governing Catch-Up Deferrals, including, but not limited to, rules regarding the timing, method, and implementation dates of Catch-Up Deferral elections and the return or recharacterization of Catch-Up Deferrals as Elective Deferrals. Such rules shall be in compliance with any applicable guidance issued by the Secretary of the Treasury, and, to the extent deemed advisable by the Plan Administrator in order to comply with such guidance, such rules may override any of the preceding provisions of this Section 4.12. (g) Catch-Up Deferrals will be treated as Elective Deferrals for all purposes of this Plan; other than Section 4.02 (relating to Matching Contributions) and Article V -23- (relating to Limitations on Contributions); provided, however, that Catch-Up Deferrals recharacterized under subsection (f) as Elective Deferrals will be eligible for Matching Contributions to the extent provided for Elective Deferrals in Section 4.02 ARTICLE V Limitations on Contributions 5.01 Excess Deferrals. Notwithstanding Section 4.01 or anything in a Participant's Salary Reduction Agreement, the sum for any calendar year of (i) Elective Deferrals of any Participant under this Plan, (ii) any elective deferrals excluded from the Participant's gross income made under a Related Plan, and (iii) the amount of elective deferrals under any other plan if the Participant notifies the Plan Administrator in writing by March 1 of the following calendar year that such other plan exists under which elective deferrals were excluded from the Participant's gross income and the amount of such elective deferrals (excluding in every case Catch-Up Deferrals made under Section 4.12 of this Plan or corresponding provisions authorized by Section 414(v) of the Code of any Related Plan or other plan), shall not exceed the applicable Dollar Limit. The "Dollar Limit" is $11,000 for 2002, $12,000 for 2003, $13,000 for 2004, $14,000 for 2005, $15,000 for 2006, and for years after 2006 is $15,000 as adjusted for cost-of-living increases by the Secretary of the Treasury or his or her delegate pursuant to Sections 402(g)(4) and 415(d) of the Code; increased in each year to the extent applicable in accordance with applicable regulations and rulings under Section 402(g)(7) of the Code. If the sum of such amounts exceeds the Dollar Limit for a calendar year, the Plan Administrator shall, not later than the April 15 following the close of such calendar year, distribute to the Participant all or such portion of the Participant's Elective Deferrals in excess of the Dollar Limit (by first distributing unmatched Elective Deferrals and then matched Elective Deferrals) for such calendar year in an amount equal to the greater of (i) the amount the Plan Administrator determines is necessary to eliminate the excess of the sum of the amount described in clauses (i) and (ii) above over the, including net income and minus any loss allocable to such amount determined in accordance with Section 5.06, or (ii) the amount requested in writing by the Participant on or before the March 1 following the close of such calendar year. Any Matching Contributions (including any net income and minus any loss allocable thereto determined in accordance with Section 5.06) made with respect to such distributed Elective Deferrals matched Plan Administrator shall be forfeited and allocated in accordance with Section 4.10(f). 5.02 Excess Contributions: The ADP Test. Notwithstanding Section 4.01 or anything in a Participant's Salary Reduction Agreement, a Participant's Elective Deferrals shall not exceed the amounts permitted under the non-discrimination rules of Section 401(k) of the Code as set forth in this Section. (a) Imposition of Limit. Elective Deferrals made with respect to a Highly Compensated Employee for a Plan Year shall not exceed such amount as the Plan Administrator determines is necessary to cause the Average ADP (as defined in subsection (d) below) of Active Participants who are Highly Compensated Employees to not exceed the greater of the following limits (the "Required ADP Test"): -24- (1) General Limit. The Average ADP of the Highly Compensated Employees for such Plan Year shall not be more than the Average ADP of all other Active Participants for such Plan Year multiplied by 1.25; or (2) Alternative Limit. The excess of the Average ADP of Highly Compensated Employees for such Plan Year over the Average ADP of all other Active Participants for such Plan Year shall not be more than two percentage points, and the Average ADP of the Highly Compensated Employees for such Plan Year shall be not more than the Average ADP of all other Active Participants for such Plan Year multiplied by two. If the Plan Administrator so elects by amendment to this Plan, it may apply the limits set forth in paragraphs (1) and (2) of this subsection (a) by using the Average ADP of Active Participants (other than Highly Compensated Employees) for the Plan Year preceding the Plan Year for which the determination is made rather than for the current Plan Year; provided that such election may not be changed except as provided by the Secretary of the Treasury. (b) Manner of Reduction to Satisfy Limit. To the extent the Plan Administrator determines is necessary to pass the Required ADP Test, Elective Deferrals (and Matching Contributions allocated with respect to Elective Deferrals that are reduced) shall be reduced for Highly Compensated Employees in the following steps: STEP 1: The Plan Administrator shall first determine the dollar amount of the reductions which would have to be made to the Elective Deferrals of each Highly Compensated Employee who is an Active Participant for the Plan Year in order for the Average ADP of the Highly Compensated Employees for the Plan Year to satisfy the Required ADP Test. Such amount shall be calculated by first determining the dollar amount by which the Elective Deferrals of Highly Compensated Employees who have the highest Actual Deferral Percentage (as defined in subsection (d)) would have to be reduced until the first to occur of: (i) such Employees' Actual Deferral Percentage would equal the Actual Deferral Percentage of the Highly Compensated Employee or group of Highly Compensated Employees with the next highest Actual Deferral Percentage; or (ii) the Average ADP of all of the Highly Compensated Employees, as recalculated after the reductions made under this Step 1, satisfies the Required ADP Test. Then, unless the recalculated Average ADP of the Highly Compensated Employees satisfies the Required ADP Test, the reduction process shall be repeated by determining the dollar amount of reductions which would have to be made to the Elective Deferrals of the Highly Compensated Employees who, after the prior reductions made in this step 1, would have the highest Actual Deferral Percentage until the first to occur of: (iii) such Employees' Actual Deferral Percentage, after the current and all prior reductions under this Step 1, would equal the Actual Deferral Percentage of the Highly Compensated Employee or group of Highly Compensated Employees with the next highest Actual Deferral Percentage; or (iv) the Average ADP of all of the Highly Compensated Employees, as recalculated after the current and all prior reductions made under this Step 1, satisfies the Required ADP Test. This process is repeated until the Average ADP of all of the Highly Compensated Employees, after all reductions, satisfies the Required ADP Test. -25- STEP 2. Next, the Plan Administrator shall determine the total dollar amount of reductions to the Elective Deferrals calculated under Step 1 ("Total Excess Contributions"). STEP 3. Finally, the Plan Administrator shall reduce the Elective Deferrals of the Highly Compensated Employees with the highest dollar amount of Elective Deferrals by the lesser of the dollar amount which: (i) causes each such Highly Compensated Employee's Elective Deferrals to equal the dollar amount of the Elective Deferrals of the Highly Compensated Employee or group of Highly Compensated Employees with the next highest dollar amount of Elective Deferrals; or (ii) reduces the Highly Compensated Employees' Elective Deferrals by the Total Excess Contributions. Then, unless the total amount of reductions made to Highly Compensated Employees' Elective Deferrals under this Step 3 equals the amount of the Total Excess Contributions, the reduction process shall be repeated by reducing the Elective Deferrals of the group of Highly Compensated Employees with the highest dollar amount of Elective Deferrals, after the prior reductions made in this Step 3, by the lesser of the dollar amount which: (iii) causes each such Highly Compensated Employees' Elective Deferrals, after the current and all prior reductions under this Step 3 to equal the dollar amount of the Elective Deferrals of the Highly Compensated Employees with the next highest dollar amount of Elective Deferrals; or (iv) causes total reductions to equal the Total Excess Contributions. This process is repeated with each successive group of Highly Compensated Employees with the highest dollar amount, after all reductions, of the Elective Deferrals until the total reductions made under this Step 3 is equal to the Total Excess Contributions. (c) Distribution of Excess Deferrals. The Plan Administrator shall, not later than the last day of the Plan Year next following the Plan Year in which such amounts are contributed, distribute the Total Excess Contributions (including any income earned and minus any loss allocable to such amounts determined in accordance with Section 5.6) to the Highly Compensated Employees on whose behalf such Elective Deferrals were made. Any Matching Contributions (including any income earned and minus any loss allocable thereto determined in accordance with Section 5.6) made with respect to such distributed Elective Deferrals shall be forfeited and allocated in accordance with Section 4.10(f). (d) Average ADP; Actual Deferral Percentage. The "Average ADP" for a specified group of Active Participants for a Plan Year shall be the average of the Actual Deferral Percentages (as defined below) of the members of such group. The "Actual Deferral Percentage" of an Active Participant is the ratio of the amount of Elective Deferrals actually paid over to the Plan on behalf of such Active Participant for such Plan Year divided by the Active Participant's Statutory Compensation for the Plan Year, or, at the discretion of the Plan Administrator to the extent not prohibited by regulations prescribed by the Secretary of the Treasury or his or her delegate, the sum of (i) Elective Deferrals (to the extent not included in the Actual Contribution Percentage under Section 5.03(d)), and (ii) any portion on all of the QNECS and QMACS actually paid over to the Plan on behalf of such Active Participant for the Plan Year, divided by the Active Participant's Compensation for the Plan Year. -26- (e) Aggregation Rules. The Actual Deferral Percentage for any Active Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Elective Deferrals allocated under this Plan and is also eligible to have elective deferrals (within the meaning of Section 401(m)(4)(B) of the Code), qualified matching contributions (within the meaning of Treasury Regulation Section 1.401(k)-1(g)(13)(i)) or qualified nonelective contributions (within the meaning of Treasury Regulation Section 1.401(k)-1(g)(13)(ii)), allocated pursuant to a cash or deferred arrangement under one or more Related Plans shall be determined as if such elective deferrals, qualified matching contributions and qualified nonelective contributions were made under a single arrangement. If a Highly Compensated Employee participates in two or more cash or deferred arrangements that have different plan years, all cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement. In the event this Plan satisfies the requirements of Section 401(k), 401(a)(4) or 410(b) of the Code only if aggregated with one or more Related Plans, or if one or more Related Plans satisfy the requirements of such sections of the Code only if aggregated with this Plan, then this Section shall be applied by determining the Actual Deferral Percentages of Participants as if this Plan and all such Related Plans were a single plan; provided, however, that the Plan and one or more Related Plans may be aggregated in order to satisfy the non-discrimination rules of Section 401(k) of the Code only if such plans have the same plan year. 5.03 Excess Aggregate Contributions: The ACP Test. Notwithstanding Section 4.2, Matching Contributions shall not exceed the amounts permitted under the non-discrimination rules of Section 401(m) of the Code as set forth in this Section. (a) Imposition of Limit. Matching Contributions made on behalf of Highly Compensated Employees for a Plan Year shall not exceed such amount as the Plan Administrator determines is necessary to cause the Average ACP (as defined in subsection (d) below) of Active Participants who are Highly Compensated Employees not to exceed the greater of the following limits (the "Required ACP Test"): (1) General Limit. The Average ACP of the Highly Compensated Employees for such Plan Year shall not be more than the Average ACP of all other Active Participants for such Plan Year Multiplied by 1.25; or (2) Alternative Limit. The excess of the Average ACP for Highly Compensated Employees for such Plan Year over the Average ACP of all other Active Participants for such Plan Year shall not be more than two percentage points, and the Average ACP of the Highly Compensated Employees for such Plan Year shall not be more than the Average ACP of all other Active Participants for such Plan Year multiplied by two. If the Plan Administrator so elects, it may apply the limits set forth in paragraphs (1) and (2) of this subsection (a) by using the Average ACP of all other Active Participants (other than Highly Compensated Employees) for the Plan Year preceding the Plan Year for -27- which the determination is made rather than for the current Plan Year; provided that such election may not be changed except as provided by the Secretary of the Treasury. (b) Manner of Reduction to Satisfy Limit. To the extent that the Plan Administrator, after giving effect to any reduction in the amount of Matching Contributions pursuant to Section 5.02(c), determines is necessary to pass the Required ACP Test, Matching Employer Contributions shall be reduced for Highly Compensated Employees in the following steps: STEP 1: The Plan Administrator shall first determine the dollar amount of the reductions which would have to be made to the Matching Contributions of each Highly Compensated Employee who is an Active Participant for the Plan Year in order for the Average ACP of the Highly Compensated Employees to satisfy the Required ACP Test. Such amount shall be calculated by first determining the dollar amount by which the Matching Contributions of the Highly Compensated Employees who have the highest Actual Contribution Percentage (as defined in subsection (d)) would have to be reduced until the first to occur of: (i) such Employees' Actual Contribution Percentage would equal the Actual Contribution Percentage of the Highly Compensated Employee or group of Highly Compensated Employees with the next highest Actual Contribution Percentage; or (ii) the Average ACP of all of the Highly Compensated Employees, as recalculated after the reductions made under this Step 1, satisfies the Required ACP Test. Then, unless the recalculated Average ACP of the Highly Compensated Employees satisfies the Required ACP Test, the reduction process shall be repeated by determining the dollar amount of reductions which would have to be made to the Matching Contributions of the Highly Compensated Employees who, after the prior reductions made in this Step 1 would have the highest Actual Contribution Percentage until the first to occur of: (iii) such Employees Actual Contribution Percentage, after all the current and prior reductions under this Step 1 would equal the Actual Contribution Percentage of the Highly Compensated Employee or group of Highly Compensated Employees with the next highest Actual Contribution Percentage; or (iv) the Average ACP of all of the Highly Compensated Employees, as recalculated after the current and all prior reductions under this Step 1, satisfies the Required ACP Test. This process is repeated until the Average ACP of all of the Highly Compensated Employees, as recalculated after all reductions made under this Step 1, satisfies the Required ACP Test. STEP 2. Next, the Plan Administrator shall determine the total dollar amount of reductions to the Matching Employer Contributions calculated under Step 1 ("Total Excess Aggregate Contributions"). STEP 3. Finally, the Plan Administrator shall reduce the Matching Employer Contributions of the Highly Compensated Employees with the highest dollar amount of Matching Employer Contributions by the lesser of the dollar amount which: (i) causes each such Highly Compensated Employee's Matching Contributions to equal the dollar amount of the Matching Employer Contributions of the Highly Compensated Employee or group of Highly Compensated Employees with the next highest dollar amount of Matching Contributions; or (ii) reduces the Highly Compensated Employees' Matching Contributions by the Total Excess Aggregate Contributions. Then, unless the total -28- amount of reductions made to Highly Compensated Employees' Matching Employer Contributions under this Step 3 equals the amount of Total Excess Aggregate Contributions, the reduction process shall be repeated by reducing the Matching Contributions of the group of Highly Compensated Employees with the highest dollar amount of Matching Employer Contributions, after the prior reductions made in this Step 3, by the lesser of the dollar amount which: (iii) causes each such Highly Compensated Employee's Matching Contributions, after the current and cell prior reductions under this Step 3, to equal the dollar amount of the Matching Contributions of Highly Compensated Employees with the next highest dollar amount of Matching Contributions; or (iv) causes total reductions to equal the Total Excess Aggregate Contributions. This process is repeated with each successive group of Highly Compensated Employees with the highest dollar amount, after all reductions, of the Matching Contributions until the total reductions made under this Step 3 is equal to the Total Excess Aggregate Contributions. (c) Distribution of Excess Contributions. The Plan Administrator shall, not later than the last day of the Plan Year next following the Plan Year in which such amounts are contributed, distribute the Total Excess Aggregate Contributions (including any income earned and minus any loss allocable to such amounts determined in accordance with Section 5.06), to the Highly Compensated Employees on whose behalf such Matching Contributions were made. (d) Average ACP; Actual Contribution Percentage. The "Average ACP" for a specified group of Active Participants for a Plan Year shall be the average of the Actual Contribution Percentages (as defined below) of the members of such group. The "Actual Contribution Percentage" of an Active Participant is the ratio of the amount of Matching Employer Contributions actually paid over to the Plan on behalf of such Active Participant for such Plan Year divided by the Active Participant's Statutory Compensation for the Plan Year, or at the discretion of the Plan Administrator to the extent not prohibited by regulations prescribed by the Secretary of Treasury or his or her delegate, the sum of (i) Matching Contributions (and QMACs to the extent not included in the Actual Deferral Percentage under Section 5.02(d)), and (ii) any portion or all of the Elective Deferrals or QNECs (to the extent not included in the Actual Deferral Percentage under Section 5.02(d)) actually paid over to the Plan on behalf of such Active Participant for the Plan Year, divided by the Active Participant's Statutory Compensation during the Plan Year. (e) Aggregation Rules. The Actual Contribution Percentage for any Active Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Matching Contributions allocated under this Plan and is also eligible to make employee nondeductible contributions or to have matching contributions (within the meaning of Section 401(m)(4)(A) of the Code) allocated under one or more Related Plans shall be determined as if the total of such Matching Employer Contributions, employee nondeductible contributions, and matching contributions were made under a single arrangement. In the event that this Plan satisfies the requirements of Section 401(m), 401(a)(4) or 410(b) of the Code only if aggregated with one or more Related Plans, or if one or -29- more Related Plans satisfy the requirements of such sections of the Code only if aggregated with this Plan, then this Section shall be applied by determining the Actual Contribution Percentages of Participants as if this Plan and all such Related Plans were a single plan; provided, however, that the Plan and one or more Related Plans may be aggregated in order to satisfy the non-discrimination requirements of Section 401(m) of the Code only if such plans have the same plan year. 5.04 [RESERVED] 5.05 Order of Application of Limitations. Section 5.01 shall be first applied to contributions under the Plan; second, Section 5.02 shall be applied to contributions under the Plan; third, Section 5.03 shall be applied to contributions under the Plan; and last, Section 5.04 shall be applied to contributions under the Plan. Section 5.07 shall be applied to contributions under the Plan without regard to Sections 5.01, 5.02 or 5.03. 5.06 Allocation of Income or Loss. Any income or loss attributable to contributions distributed pursuant to Sections 5.01, 5.02 or 5.03 shall be distributed or forfeited, as applicable. Such distributable income or loss shall be determined as follows: (a) Income or Loss for Plan Year. The Plan Administrator shall compute income or loss attributable to distributed contributions for a completed Plan Year using any reasonable method permitted under Treasury Regulations Sections 1.401(k)-1(f)(4)(ii), 1.401(m)-1(e)(3)(ii) and 1.402(g)-1(e)(5), as applicable; provided that the method does not violate Section 401(a)(4) of the Code, is used consistently for all Participants and for all corrective distributions under the Plan for the Plan Year, and is used by the Plan for allocating income to Participants' Accounts. (b) Income or Loss for Period Between End of Plan Year and Distribution. The Plan Administrator shall compute income or loss attributable to distributed contributions for the period between the end of the Plan Year and the date of distribution (the "Gap Period") using any reasonable method permitted under Treasury Regulations Sections 1.401(k)-1(f)(4)(ii), 1.401(m)-1(e)(3)(ii) and 1.402(g)-1(e)(5), as applicable; provided that the method does not violate Section 401(a)(4) of the Code, is used consistently for all Participants and for all corrective distributions under the Plan for the Gap Period, and is used by the Plan for allocating income to Participants' Accounts. 5.07 Section 415 Limitation on Contributions. (a) Limitations on Contributions. Notwithstanding any provisions of this Plan to the contrary, a Participant's Annual Additions (as defined in subsection (b)(1) below) for any Plan Year shall not exceed his or her Maximum Annual Additions (as defined in subsection (b)(2) below) for the Plan Year. If a Participant's Annual Additions exceed his or her Maximum Annual Additions, the Participant's Annual Additions for the Plan Year shall be reduced according to subsection (c) below by the amount necessary to eliminate such excess (the "Annual Excess"). -30- (b) Definitions. (1) "Annual Additions" of a Participant for a Plan Year means the sum of the following: (A) Elective Deferrals, Matching Contributions, Company Contributions, Travelers Benefits, QNECs, QMACs, and Minimum Top Heavy Employer Contributions (if any, as determined under Article XII) and any Forfeitures thereof, allocated for the Plan Year. (B) All employer contributions, non-deductible employee contributions and forfeitures for such Plan Year allocated to such Participant's accounts for such Plan Year under any Related Defined Contribution Plan, (C) contributions allocated to any individual medical account (as defined in Code Section 401(h)) established for the Participant which is part of a Related Defined Benefit Plan as provided in Code Section 415(l) and any amount attributable to post-retirement medical benefits allocated to an account established under Code Section 419A(d)(1) for the Participant; provided, however, that the limitation in Section (b)(2)(A) below shall not apply to any amounts treated as an Annual Addition under this subsection (b)(1)(C). A Participant's Annual Additions shall include amounts described in this subsection (b)(1) that are determined to be excess contributions as defined in Section 401(k)(8)(B) of the Code, excess aggregate contributions as defined in Section 401(m)(6)(B) of the Code, and excess deferrals as described in Section 402(g) of the Code, regardless of whether such amounts are distributed or forfeited. Rollover Contributions and trust-to-trust transfers shall not be included as part of a Participant's Annual Additions. The Annual Additions for any Plan Year beginning before January 1, 1987 shall not be recomputed to treat all non-deductible employee contributions as Annual Additions. (2) "Maximum Annual Additions" of a Participant for a Plan Year means the lesser of (A) or (B) below: (A) Percentage Limitation. 100% of the Participant's Statutory Compensation during the Plan Year; or (B) Dollar Limitation. $40,000 (in 2002, as adjusted for cost-of-living increases in accordance with regulations prescribed by the Secretary of the Treasury or his or her delegate pursuant to the provisions of Section 415(d) of the Code). (c) Elimination of Annual Excess. If a Participant has an Annual Excess for a Plan Year, such excess shall not be allocated to the Participant's Accounts but shall be eliminated as follows: -31- (1) Unmatched Elective Deferrals Participant Contributions. The Participant's unmatched Elective Deferrals for the Plan Year shall be reduced to the extent necessary to eliminate the Annual Excess. (2) Matched Elective Deferrals and Related Matching Contributions. If any Annual Excess remains, the Participant's matched Elective Deferrals and the related Matching Contributions for the Plan Year shall be reduced in proportionate amounts to the extent necessary to eliminate the Annual Excess. (3) Company Contributions. If any Annual Excess remains, the Company Contributions for the Plan Year shall be reduced to the extent necessary to eliminate the Annual Excess. (4) QNECs or QMACs. If any Annual Excess remains, the Participant's QNECs or QMACs for the Plan Year shall be reduced to the extent necessary to eliminate the Annual Excess. Any Elective Deferrals reduced or eliminated under this Section shall be distributed to the Participant. Any allocations of Matching Contributions, Company Contributions, QNECs or QMACs reduced or eliminated under this Section shall be held, subject to the limits of this Section, in a suspense account and applied to reduce the Matching Contributions, Company Contributions, QNECs and QMACs for the next succeeding Plan Year of the Employer of the Participant with respect to which such reductions have occurred. On Plan termination any amounts held in a suspense account which may not be allocated to Participants in the Plan Year of the termination under this Section shall be returned to the Employers in such proportions as shall be determined by the Plan Administrator. (d) Combined Limitations. Effective for Plan Years beginning before January 1, 2000, if a Participant participates or has participated in any Related Defined Benefit Plan, the sum of the Defined Benefit Plan Fraction (as defined in Section 415(e)(2) of the Code) and the Defined Contribution Plan Fraction (as defined in Section 415(e)(3) of the Code) for such Participant shall not exceed 1.0 (called the "Combined Fraction"). If the Combined Fraction of such Participant exceeds 1.0 for any Plan Year commencing prior to January 1, 2000, the Participant's Defined Benefit Plan Fraction shall be reduced (a) first, by limiting the Participant's annual benefits payable from the Related Defined Benefit Plan in which he participates to the extent provided therein and (b) second, by reducing the Participant's Annual Additions to the extent necessary to reduce the Combined Fraction of such Participant to 1.0. (e) Standard of Control. For purposes of this Section 5.07, the standard of control for determining a Related Company under Sections 414(b) and 414(c) of the Code (and thus also Related Plans) shall be deemed to be "more than 50%" rather than "at least 80%." -32- ARTICLE VI Trustee and Trust Fund 6.01 Trust Agreement. The Company and the Trustee have entered into a Trust Agreement which provides for the investment of the assets of the Plan and administration of the Trust Fund. The Trust Agreement, as from time to time amended, shall continue in force and shall be deemed to form a part of the Plan and any and all rights or benefits which may accrue to any person under the Plan are subject to all the terms and provisions of the Trust Agreement. 6.02 Selection of Trustee. The Company shall select and may remove the Trustee and the Trustee may resign in accordance with the Trust Agreement. The resignation or removal of a Trustee and the appointment of a successor Trustee and the approval of his, her or its accounts shall be accomplished in the manner provided in the Trust Agreement. 6.03 Plan and Trust Expenses. All expenses incurred by the Trustee or the Plan Administrator in the administration of the Plan and the Trust (including compensation of the Trustee, accountants, attorneys and other persons who render advice or services to the Plan or Trust, if any) shall be paid by the Trust except to the extent paid by the Company. Expenses uniquely attributable to the Accounts of a particular Participant (and not paid by the Company), including but not limited to expenses of a discount brokerage account, shall, to the extent permitted by law, be charged to such Account and shall not be treated as a general Trust expense chargeable to the Accounts of all Participants. Expenses uniquely attributable to a particular Investment Fund (and not paid by the Company) shall be charged to such Investment Fund and shall not be treated as a general expense chargeable to the Accounts of all Participants. 6.04 Trust Fund. The Trust under this Plan shall be a separate entity aside and apart from Employers or their assets. All Elective Deferrals, Matching Contributions, Company Contributions, Traveler Contributions and Rollover Contributions to the Plan shall be paid into the Trust, and all benefits payable under the Plan shall be paid from the Trust. An Employer shall have no rights or claims of any nature in or to the assets of the Trust Fund except (1) the right of the Company to require the Trustee to hold, use, apply and pay such assets held by the Trustee, in accordance with the directions of the Plan Administrator, for the exclusive benefit of the Participants and their Beneficiaries, and (2) the Employers' rights of reversion as provided in Sections 5.07 and 6.11. The Trust, and the corpus and income thereof, shall in no event and in no manner whatsoever be subject to the rights or claims of any creditor of any Employer. 6.05 Separate Accounts. The Plan Administrator shall maintain separate Accounts for each Participant as described in Section 2.01 hereof. Contributions shall be credited to Participant's Accounts in accordance with Section 4.06. Withdrawals and distributions shall be charged to a Participant's Accounts on the Valuation Date coinciding with or next preceding the date such withdrawal or distribution is made from the Participant's Accounts. Earnings, gains and losses shall be credited or charged to a Participant's Accounts on the Valuation Date coinciding with or next following the date such amounts are actually credited or charged by the Investment Fund in which such Participant's Accounts are invested. Expenses shall be charged to a Participant's Accounts on the Valuation Date coinciding with or next preceding the date -33- such expenses are actually paid by the Investment Fund in which such Participant's Accounts are invested. 6.06 Investment Committee. The Company shall appoint an Investment Committee composed of one (1) or more persons who are officers, directors or employees of the Company or a Related Company to select Investment Funds, to appoint and remove any Investment Manager, to engage consultants, to formulate an investment policy, to monitor the performance of Investment Funds and Investment Managers, and to perform such other functions with respect to the investment of the assets of the Plan as the Company may direct. Each member of the Committee shall serve until death, resignation, removal, or until he or she ceases to be an officer, director or employee of any of the Company and any Related Company. Any member of the Committee may resign upon fifteen (15) days written notice to the Company. The Company may remove any member of the Committee upon fifteen (15) days written notice to such member and all other members of the Committee. If a vacancy occurs in the membership of the Committee the Company may (and if there would otherwise be no members of the Committee, shall) appoint a successor member of the Committee who shall have the same powers and duties as those conferred upon his or her predecessor(s). The Company shall advise the Trustee, any Investment Manager and the Plan Administrator of the membership of the Committee and of any change therein; and the Trustee, any Investment Manager and the Plan Administrator shall be protected in reliance on any such notice. The Committee shall act at a meeting, or in writing without a meeting, by the vote or concurrence of a majority of its members; provided, however, that no member of the Committee who is a Participant shall take part in any action having particular reference to his or her own benefits hereunder. All written directions by the Committee may be made over the signatures of a majority or its members and all persons shall be protected in relying on such written directions. 6.07 Investment Funds. The assets of the Trust Fund shall be invested in the Investment Funds authorized by the Investment Committee for the investment of Participants' Accounts. The Investment Committee may, from time to time, authorize additional Investment Funds with such investment characteristics, as it deems appropriate. The Investment Committee may also terminate the use of any Investment Fund by this Plan as it deems appropriate. The Trustee, Investment Manager, or the manager of any Investment Fund, may modify the investment characteristics of any Investment Fund as it deems appropriate. The designation, modification or termination of any Investment Fund shall be reflected in the records of the Plan and shall be communicated promptly to the Plan Administrator. Subject to the provisions of Section 6.08, up to 100% of a Participant's Accounts may be invested in the Company Stock Fund. In order to maintain appropriate or adequate liquidity and pending or pursuant to investment directions, the Trustee, Investment Manager or the manager of any Investment Fund is authorized to hold such portions of each of the Investment Funds as it deems necessary in cash or liquid short-term cash equivalent investments or securities (including, but not limited to, United States government treasury bills, commercial paper, and savings accounts and certificates of deposit, and common or commingled trust funds invested in such securities). -34- 6.08 Investment of Participants' Accounts. (a) In General. Except as provided in subsections (b) or (c) below, a Participant may direct the investment of his or her Accounts among the Investment Funds in accordance with such rules and procedures as the Plan Administrator may establish or adopt. A Participant's investment election made pursuant to this Section shall continue in effect, notwithstanding any change in the amount of contributions to the Plan, until such Participant shall change his or her investment election in accordance with such rules and procedures. If for any reason contributions are allocated to an Account of a Participant who has not given such direction, such Account shall be invested in the T. Rowe Price Prime Reserve Fund (or if that is not an available Investment Fund, then in such available Investment Fund as has the most similar investment characteristics). Notwithstanding any provision in this Section to this contrary, the Plan Administrator, the Trustee or the manager of any Investment Fund may issue rules and regulations imposing such restrictions and limitations on the investment of contributions in, and transfers of Account balances among, the Investment Funds as it deems appropriate from time to time, consistent with the investment objectives of the respective Investment Funds. (b) Company Stock. Notwithstanding the foregoing, if the Company in its sole discretion makes Company Contributions or Matching Contributions in part or in whole in the form of Company Stock, such Company Stock shall be held in the Company Stock Fund and shall not be subject to a Participant's or Beneficiary's direction of investment. A Participant may, in accordance with such rules and procedures as the Plan Administrator may establish or adopt, direct the investment of Elective Deferrals, Matching Contributions, Company Contributions and Rollover Contributions into the Company Stock Fund. A Participant may not elect to transfer into the Company Stock Fund any portion of his or her Accounts that are invested in another investment Fund. Moreover, a Participant may elect to transfer all or a portion of his or her Accounts that are invested in the Company Stock Fund (other than the portion that is restricted under this subsection) into another Investment Fund in accordance with such rules and procedures as the Plan Administrator may establish or adopt. The Plan Administrator shall maintain appropriate accounts or subaccounts to reflect the portion of any Participants' or Beneficiary's Accounts' investment in the Company Stock Fund which is restricted under this subsection and the portion which is unrestricted. Cash dividends and other cash distributions received with respect to the portion of a Participant's or Beneficiary's Accounts invested in the Company Stock Fund shall be retained in the Company Stock Fund and reinvested in Company Stock. (c) Other Employer Stock. If a Participant has an Inactive Account invested in Employer Stock other than Company Stock, he or she may, in accordance with such procedures as the Plan Administrator may establish or adopt, elect to transfer all or a portion of such Account into another Investment Fund. A Participant may not elect to transfer into Employer Stock any portion of his or her Accounts that are invested in another Investment Fund, nor to direct the investment of Elective Deferrals, Matching Contributions, Company Contributions or Rollover Contributions into Employer Stock, other than Company Stock as provided by subsection (c). -35- (d) GICs. Accounts of former participants in the Hourly Plan invested in guaranteed investment contracts ("GICs") issued by the Principal Mutual Life Insurance Company as of the Effective Date shall remain invested in such GICs until the GIC matures or the Participant (or Beneficiary) elects to transfer part or all of his or her Account balance from such GIC to another Investment Fund. No funds may be transferred into a GIC. Unless otherwise elected by the Participant (or Beneficiary) in accordance with such rules and procedures as the Plan Administrator may establish or adopt, amounts becoming available from maturing GICs will be invested in the T. Rowe Price Prime Reserve Fund (or if that is not an available Investment Fund, then in such available Investment Fund as has the most similar investment characteristics). (e) Fiduciary Responsibility. Except as expressly limited by subsections (b) and (c) above, the Participant has sole authority and discretion, fully and completely, to select the Investment Fund(s) for the investment of his or her Accounts. The Participant accepts full and sole responsibility for the success or failure of any selection he or she makes. To the maximum extent permitted by Section 404(c) of ERISA, neither the Trustee, the Company, the Investment Committee, any Investment Manager, the Plan Administrator, any Employer, nor any other person shall be responsible for losses that are the direct and necessary result of investment instructions given by any Participant. 6.09 Shareholder Rights in Company Stock. (a) Participant Directions. Each Participant as a named fiduciary, shall have the right to direct the Trustee as to the manner of voting and the exercise of all other rights which a shareholder of record has (including, but not limited to, the right to sell or retain shares in a public or private tender offer) with respect to shares (and fractional shares) of Company Stock which have been allocated to the Participant's Accounts in the Company Stock Fund and not yet become a Forfeiture under Section 4.10(d). Subject to subsection (c) below, the Trustee shall vote or exercise shareholder rights with respect to all shares (and fractional shares) of Company Stock in the Company Stock Fund for which the Trustee received timely directions from Participants in accordance with such Participants' directions. The Trustee shall vote all shares (and fractional shares) of Company Stock in the Company Stock Fund for which the Trustee has not received timely voting instructions in the Trustee's sole discretion. In the event of a tender offer for Company Stock, the Trustee shall determine in its sole discretion whether to tender any shares (or fractional shares) of Company Stock in the Company Stock Fund for which the Trustee does not receive a timely direction from the Participant or Beneficiary as to whether to tender such shares (and fractional shares). (b) Confidentiality. The Trustee shall solicit the directions of Participants in accordance with Section 6.09(a) and shall follow such directions by delivering aggregate votes to the Company or otherwise implementing such directions in any convenient manner that preserves the confidentiality of the votes or other directions of individual Participants, except to the extent necessary to comply with applicable federal laws or state laws that are not preempted by ERISA. Any designee of the Trustee who assists in the solicitation or tabulation of the directions of Participants shall certify in writing that he, she or it will maintain the confidentiality of all directions given. -36- (c) Fiduciary Override. Notwithstanding the foregoing, in the event that the Trustee determines that the manner of voting and the exercise of other shareholder rights with respect to shares of Company Stock held in the Company Stock Fund is not proper or is contrary to the provisions of ERISA (including, without limitation, the fiduciary responsibility requirements of Section 404 of ERISA), the Trustee shall disregard such direction and assume responsibility for the voting or exercise of other shareholder rights with respect to such shares of Company Stock held in the Company Stock Fund. 6.10 Trust Income. As of each Valuation Date, the fair market value of the Trust and of each Investment Fund shall be determined (other than the value of GICs, which shall be as determined by Principal Mutual Life Insurance Company) and recorded by the Trustee. The Trustee's (or Principal Mutual Life Insurance Company's) determination of fair market value shall be final and conclusive on all persons. As of each Valuation Date, the Trustee shall determine the net income, gains or losses of the Trust Fund and of each separate Investment Fund since the preceding Valuation Date. The net income, gains or losses thus derived from the Trust shall be accumulated and shall from time to time be invested as a part of the Trust Fund. The Trustee shall proportionately allocate the net income, gains or losses of each Investment Fund among (a) the Participants' Accounts and (b) the suspense account maintained under Section 5.07(c) for unallocated Employer contributions, all as valued as of the preceding Valuation Date (reduced by any distributions therefrom since the preceding Valuation Date) by crediting (or charging) each such Account by an amount equal to the net income, gains or losses of each Investment Fund multiplied by a fraction, the numerator of which is the balance of such Account invested in such Investment Fund as of the preceding Valuation Date (reduced by any distributions therefrom since the preceding Valuation Date) and the denominator of which is the total value of all Accounts invested in such Investment Fund as of the preceding Valuation Date (reduced by any distributions therefrom since the preceding Valuation Date). Not later than 90 days after the last day of the Plan Year (or after such additional date or dates as the Plan Administrator in its discretion may request), the Trustee shall provide the Plan Administrator and the Investment Committee with a written report detailing the fair market value of the Trust and of each Investment Fund as of the last day of the Plan Year (or as of such other date or dates as the Plan Administrator in its discretion may request). 6.11 Correction of Error. In the event of an error in the administration or the Plan or otherwise in maintaining a Participant's Accounts that is not otherwise corrected in accordance with Sections 5.01, 5.02(c), 5.03(c) or 5.07(c), the Company may in its sole discretion elect for one or more Employers to contribute such amount as it shall determine is necessary and appropriate to correct the error. Unless the Company so elects, the Plan Administrator, in its sole discretion, may correct such error by either (i) in the case of an error resulting in reducing a Participant's Account balance, allocating Forfeitures for the Plan Year to such Participant's Accounts in such amount as he shall determine to be needed to correct the error, or (ii) crediting or charging the adjustment required to make such correction to or against income or as an expense of the Trust for the Plan Year in which the correction is made. Except as provided in this Section, the Accounts of other Participants shall not be readjusted on account of such error. 6.12 Right of the Employers to Trust Assets. Except as provided in Section 5.07(c) and subject to (a) and (b) below, the Employers shall have no right or claims to the Trust Fund except the right to require the Trustee to hold, use, apply, and pay such assets in its possession in -37- accordance with the Plan for the exclusive benefit of the Participants or their Beneficiaries and for defraying the reasonable expenses of administering the Plan and Trust. (a) Return of Contributions Where Deduction is Disallowed. If, and to the extent that, a deduction for Elective Deferrals, Matching Contributions, Company Contributions, Traveler Contributions, QNECs or QMACs is disallowed under Section 404 of the Code, Elective Deferrals conditioned on deductibility will be distributed to the appropriate Participant and Matching Contributions, Company Contributions, Traveler Contributions, QNECs and QMACs conditioned upon deductibility will be returned to the appropriate Employer (as determined by the Plan Administrator) within one year after the disallowance of the deduction. (b) Return of Contributions Made Through Mistake of Fact. If, and to the extent that, a contribution of Elective Deferrals, Matching Contributions, Company Contributions Traveler Contributions, QNECs or QMACs is made through mistake of fact, Elective Deferrals will be distributed to the appropriate Participant and Matching Contributions, Company Contributions, Travelers Contributions, QNECs and QMACs will be returned to the appropriate Employer (as determined by the Plan Administrator) within one year of the payment of the contribution. ARTICLE VII Loans and Withdrawals 7.01 Participant Withdrawals. A Participant may, in accordance with this Section, withdraw all or a portion of his or her Accounts pursuant to Subsection (a), (b) or (c); provided, however, that the amount withdrawn pursuant to this Section 7.01 shall not be greater than the amount of the Participant's vested Accrued Benefit available for withdrawal under this Section. Withdrawals shall be made pro rata from each Investment Fund in which the Account or Accounts from which the withdrawal is paid are invested. (a) In-Service Withdrawals from Rollover Account and Certain Prior Plan Accounts. A Participant may withdraw, in accordance with Section 7.03, for any reason, all or any portion of his or her Rollover Account and, subject to the restrictions imposed by Appendix A and Schedule 1, any other Inactive Account comprising Rollover Contributions or after-tax employee contributions made under this Plan or a Transferor Plan. (b) Age 59-1/2 Withdrawals. A Participant who has attained age 59-1/2 may withdraw, in accordance with Section 7.03, for any reason, all or any part of all of his or her Vested Accrued Benefits in any or all of his or her Accounts, other than an Account arising under a Transferor Plan that was subject to Section 412 of the Code. (c) Hardship Withdrawal. A Participant may withdraw, in accordance with Section 7.03, for reasons of Hardship, that portion of his or her Employee 401(k) Account excluding any income or gain credited to his or her Employee 401(k) Account for any period after December 31, 1988; subject to the following requirements: -38- (1) Maximum Amount. The maximum amount available for a Hardship withdrawal is 50% of the sum of (i) the balance of the Participant's Employee 401(k) Account as of December 31, 1988, plus (ii) the dollar amount of Elective Deferrals made after December 31, 1988, minus (iii) previous Hardship withdrawals of Elective Deferrals or of income or gain thereon. (2) Necessary to Satisfy Immediate and Heavy Financial Need. The amount of the withdrawal on account of Hardship shall not exceed the amount necessary to satisfy the Participant's immediate and heavy financial need arising by reason of a Hardship, including the amount needed to pay any federal, state and local income taxes and penalties reasonably expected to be incurred by reason of the withdrawal; (3) Exhaustion of Other Sources of Funds. The Participant must have obtained all distributions and withdrawals other than Hardship distributions or withdrawals, and all non-taxable loans currently available under the Plan and all Related Plans and the Participant must have exercised all options to acquire Company Stock granted under an equity incentive or any similar plan maintained by an Employer or any Related Company if such options are currently exercisable and if the fair market value of Company Stock exceeds the exercise price of the option; (4) Twelve Month Suspension of Elective Deferrals. The Participant's Elective Deferrals under the Plan, and voluntary participant contribution and elective deferrals under all other qualified and nonqualified plans of deferred compensation (including equity incentive or any similar plans, and cash or deferred arrangements which are part of a cafeteria plan within the meaning of Section 125 of the Code but excluding health or welfare benefits and flexible spending arrangements that are part of a cafeteria plan) maintained by an Employer or a Related Company, shall be suspended for a period of six (6) months following the receipt of the Hardship withdrawal; and (5) Limitation on Elective Deferrals in the Year Following the Hardship Withdrawal. The Elective Deferrals under the Plan and elective deferrals (as defined in Section 402(g) of the Code) under any Related Plan for the Participant's taxable years immediately following the taxable year of the Hardship withdrawal shall not exceed the maximum amount described in Section 5.01 for such next taxable year less the amount of such Participant's Elective Deferrals under the Plan and elective deferrals under any Related Plan for the taxable year of the Hardship withdrawal. 7.02 Participant Loans. Upon proper application of a Participant for any reason, the Plan Administrator shall grant a loan to such Participant on such terms and conditions, consistent with this Section, as the Plan Administrator shall determine. -39- (a) Loan Amount. The maximum loan amount, when added to all outstanding amounts loaned to the Participant from the Plan and all Related Plans shall not exceed the least of: (1) $50,000, reduced by the excess (if any) of: (A) the Participant's highest outstanding balance of loans from the Plan and all Related Plans during the one-year period ending on the day before the date on which such loan is made, over (B) the Participant's outstanding balance of loans from the Plan and all Related Plans on the date on which such loan is made; (2) 50% of the Participant's vested Accrued Benefit valued as of the most recent Valuation Date for which a valuation has been completed preceding the date of disbursement of the loan. The minimum loan amount shall be one thousand dollars ($1,000). No loan shall be available to a Participant unless the maximum loan available under this subsection (a) exceeds one thousand dollars ($1,000). A Participant may not have more than one loan from the Plan outstanding at any time. (b) Loan Terms. Any loan made under this Section 7.02 shall, by its terms, be required to be repaid within five (5) years, unless the loan is used to acquire a dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as a principal residence of the Participant, in which case the loan shall, by its terms, be required to be repaid within fifteen (15) years. (c) Level Amortization. All loans, except as provided in the regulations prescribed by the Secretary of the Treasury, shall be amortized over the term of the loan in substantially level payments not less frequently than quarterly. A Participant's loan shall be repaid by means of payroll deduction. (1) Authorized Leave of Absence. Notwithstanding the foregoing provisions of this Section, a Participant's loan payments shall be suspended for a period of up to one year while the Participant is on an unpaid Authorized Leave of Absence (other than a military leave described in clause (2) below); provided that the loan must be repaid within the term specified in subsection (b) and the installments due after the earlier of the Participant's resumption of active service or the first anniversary of the commencement of the Authorized Leave of Absence may not be less than the installments payable immediately prior to the commencement of the Authorized Leave of Absence. (2) Military Leave. Notwithstanding the provisions of subsection (b) and (a), a Participant's loan repayments shall be suspended as permitted under Section 414(u)(4) of the Code during periods of absence from employment due to Qualified Military Leave effective as of December 12, 1994. -40- (d) Loans Granted on a Reasonably Equivalent Basis. The Plan Administrator may grant such loans and may direct the Trustee to lend Trust Fund assets to such Participant, provided that such loans are available to all Participants on a reasonably equivalent basis, are not made available to Highly Compensated Employees in amounts greater than the amounts made available to other Employees, bear a reasonable rate of interest, and are adequately secured. (e) Pledge of Accounts. Any loan made pursuant to this Section 7.02 shall be made pro rata from the Participant's Accounts. If a Participant's Account is invested in more than one Investment Fund at the time of the loan, the loan shall be made pro rata from each Investment Fund (other than the Company Stock Fund) in which the Accounts from which the loan is disbursed are invested, except to the extent an Inactive Account is not available for loans as set forth in Schedule 1. Such loan and any accrued but unpaid interest with respect thereto, shall constitute a first lien upon the interest of such Participant in the Accounts from and to the extent to which the loan is made and, to the extent that the loan may be unpaid at the time the Participant's Accounts become payable, shall be deducted from the amount payable to such Participant or his Beneficiary at the time of distribution of any portion of his or her Accounts. In the event that a Participant fails to repay a loan according to its terms and foreclosure occurs, the Plan may foreclose on the portion of the Participant's Accounts which secure the loan and which would be distributable to the Participant as of the earliest date on which the Participant could elect a distribution or withdrawal pursuant to this Article or Article VII. Such foreclosed amount shall be deemed to be a distribution. (f) Loan Earmarked as a Separate Investment for Participant's Accounts. The note representing the loan shall be segregated as a separate Investment Fund held by the Trustee as a separate earmarked investment solely for the account of the Participant. Interest and principal payments on a Participant's loan shall be credited to each of the Participant's Accounts in the ratio that the amount of the loan borrowed from the Account bears to the total amount of the loan borrowed from all of the Participant's Accounts. Interest and principal payments shall be invested in accordance with the Participant's investment election under Section 6.08 in effect at the time such interest and principal payment is made. (g) Spousal Consent. If any part of the loan will be disbursed from a Restricted Account, the Participant must obtain the consent of his or her spouse, if any, to use of his or her Accounts as security for the loan. Spousal consent shall be obtained no earlier than the beginning of the 90-day period that ends on the date on which the loan is to be so secured. The consent must be in writing, must acknowledged the effect of the loan and must be witnessed by a notary public. Such consent shall thereafter be binding with respect to the consenting spouse or any subsequent spouse with respect to that loan. A new consent shall be required if the Accounts are used as security for the renegotiation, extension, renewal or other revision of the loan. (h) Loans Subject to Terms and Conditions Imposed by Plan Administration. Any loan made pursuant to this Section, subject to the foregoing requirements, shall be subject to such origination fee and other terms and conditions as the Plan Administrator -41- may in its discretion impose. The Plan Administrator may adopt such non-discriminatory rules and regulations relating to loans to Participants as it may deem appropriate. 7.03 Request for Distribution. A withdrawal or loan shall be paid only if the Participant or Beneficiary files a written request for a withdrawal with the Plan Administrator on such form as the Plan Administrator shall provide or permit and in accordance with such rules and regulations as the Plan Administrator may prescribe. A withdrawal or loan disbursed to a married participant from a Restricted Account shall require the consent of the participant's spouse in accordance with Appendix A. A withdrawal or loan shall be paid as soon as administratively feasible after the first Valuation Date that after the Plan Administrator receives a valid written request for a withdrawal or loan. ARTICLE VIII Benefits 8.01 Payment of Benefits in General. Subject to the special rules applicable to a Restricted Accounts set forth in Appendix A, a Participant's benefits under this Plan shall be payable in accordance with the provisions of this Article. Except as otherwise specifically provided, the provisions of this Article shall apply to all distributions occurring on or after the Effective Date including distributions to Participants (or to the Beneficiaries of deceased Participants) who had a Termination of Employment prior to the Effective Date. 8.02 Payment on Termination of Employment. If a Participant has a Termination of Employment, the Participant (or if the Participant has died, his or her Beneficiary) shall be entitled to a distribution of the vested portion of the Participant's Accrued Benefit in such one of the following methods as the Participant (or if the Participant has died and has not elected a form of distribution which precludes his or her Beneficiary from making a subsequent election, the Participant's Beneficiary), may elect by written notice to the Plan Administrator in a form acceptable to the Plan Administrator: (a) a single lump sum; (b) installments at monthly, quarterly or annual intervals over a period certain not exceeding the life expectancy (as defined in Section 8.06(e)) of the Participant, or if the Participant's Beneficiary is an individual the joint and last survivor life expectancy (as defined in Section 8.06(e)) of the Participant and his or her Beneficiary or the life expectancy of the Beneficiary (if the Beneficiary is receiving the installments) and in compliance with the requirements of Section 8.06. Notwithstanding the foregoing, if for any reason no election of a form of benefit is on file with the Plan Administrator when payment of the Participant's Accrued Benefit is required under Section 8.03, or if the Participant's vested Accrued Benefit does not exceed $5,000 ($3,500 for the Plan Year 1997), at the time of the Participant's Termination of Employment the Trustee will pay the Participant's vested Accrued Benefit in a single lump sum. -42- 8.03 Time of Payment. (a) General. Distribution of a Participant's benefits upon Termination of Employment will normally be available as soon as reasonably practicable after the Valuation Date coinciding or with or next following the Participant's Termination of Employment, but not more than 60 days following the end of the Plan Year in which his or her Termination of Employment occurred. However, except as otherwise provided in this Section, a distribution shall be paid only if and after the Participant or Beneficiary files a written request for a distribution with the Plan Administrator on such form as the Plan Administrator shall provide or permit and in accordance with such rules and regulations as the Plan Administrator may prescribe. The time of any distribution is subject to subsection (b), (c) and (d). (b) Consent Requirement. If the Participant's distributable Account balance is more than $5,000 ($3,500 for the Plan Year 1997), and if the Participant is living but has not attained age 65, distribution will not be made before the Participant attains age 65 or dies without the Participant's prior written consent. The Plan Administrator will notify each such terminated Participant of his or her right to give or withhold such consent at least 30 days, but no more than 90 days, before the date distribution is made (if in a lump sum) or begins (if in installments). Such distribution may be made less than 30 days after such notice is given if the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision whether to elect a distribution, and the Participant, after receiving the notice, affirmatively elects a distribution. (c) Limitation on Mandatory Deferral. The making (if in a lump sum) or commencement (if in installments) of any distribution shall not be delayed without the consent of the Participant (or Beneficiary) beyond sixty (60) days after the close of the Plan Year in which occurs the latest of (i) the Participant's Termination of Employment, or (ii) the Participant's Normal Retirement Date. The failure of a Participant or Beneficiary to otherwise elect payment in accordance with the provisions of the Plan shall be deemed to be an election to defer the making or commencement of payment of benefits until such Participant files a request in accordance with subsection (a) and (if applicable) a consent in accordance with subsection (b), or until the Required Distribution Date as provided in subsection (d) below. (d) Required Distribution Date. Notwithstanding any other provision of this Plan or any Participant election, payment of benefits shall be made (if in a lump sum) or shall commence (if in installments) not later than the Participant's Required Distribution Date, or such later date as the Secretary of the Treasury or his or her delegate shall by applicable regulation, ruling or notice permit. If the payment is made in installments, the installment schedule shall comply with Section 8.06. If the payment is made by reason of the death of the Participant, the schedule shall comply with Section 8.05(d). 8.04 Lump Sum Payment Without Election. Notwithstanding any other provision of this Article VIII, if a Participant (or the Beneficiary of a deceased Participant) is entitled to a distribution (including distributions with respect to Participants who had a Termination of -43- Employment prior to January 1, 1997) and if the value of a Participant's vested Accrued Benefit does not exceed $5,000 ($3,500 for the Plan Year 1997), the Plan Administrator shall direct the immediate distribution of such benefit in a single lump sum regardless of any election or consent of the Participant, his or her spouse or other Beneficiary; provided, however, that no cash-out payment under this subsection shall be made after distribution of benefits has begun without the consent of the Participant or (if the Participant has died and his or her surviving spouse is his or her Beneficiary) his or her surviving spouse. 8.05 Payment Upon Death. (a) Designated Beneficiary. Each Participant shall designate a Beneficiary to receive payment of that portion, which may be all, of his or her Accrued Benefit that is payable after the Participant's death, on such form as the Plan Administrator shall provide or permit and in accordance with such rules and regulations as the Plan Administrator may prescribe. The Participant may change his or her Beneficiary from time to time by filing a Beneficiary designation in writing with the Plan Administrator. No designation of Beneficiary or change of Beneficiary shall be effective unless and until it is received by the Plan Administrator during the Participant's lifetime and, if applicable, unless and until the consent of the Participant's spouse (in accordance with subsection) is received by the Plan Administrator. (b) Default Beneficiary. If a Participant shall fail to file a valid Beneficiary designation, or if all persons designated as the Beneficiary shall have died, (or, in the case of a Beneficiary other than an individual, ceased to exist), or if, after a reasonable search, the Plan Administrator is unable to locate the Participant's Beneficiary within a period of two years following the Participant's death, the Participant's Beneficiary shall be the first of the following in order of precedence: (1) the Participant's surviving spouse; (2) the Participants then-living descendants, if any, per stirpes; (3) the Participant's then-living parent or parents, equally; (4) the estate of the last to die of the Participant and any designated Beneficiary. (c) Spousal Consent. If the Participant is married, his or her designation of a Beneficiary other than his or her surviving spouse will not be valid unless the spouse has consented to such designation of Beneficiary. Such consent shall be: (1) in a writing acknowledging the effect of the consent; (2) signed by the Participant's spouse and witnessed by a notary public or (if the Plan Administrator is an individual employed by the Company or a Related Employer) the Plan Administrator or an employee of the Company or a Related Employer working under the organizational supervision of the Plan Administrator; -44- (3) effective only for the spouse who gives the consent; (4) effective only with respect to the specific beneficiary named in the consent unless the spouse voluntarily in such consent expressly permits subsequent elections of Beneficiaries without further spousal consent and acknowledges the spouse's right to limit the consent to a specific Beneficiary; and (5) irrevocable unless and until the Participant revokes his or her designation of Beneficiary. However, the consent of a Participant's spouse shall not be required if (i) it is established to the satisfaction of a Plan representative that such consent may not be obtained because there is no spouse, or because the spouse cannot be located, (ii) the Participant is legally separated or the Participant has been abandoned (within the meaning of local law) and the Participant has a court order to such effect, or (iii) because of such other circumstances as the Secretary of the Treasury may by regulations prescribe. If the spouse is legally incompetent to give consent, the spouse's legal guardian, even if the guardian is the Participant, may give consent. To the extent provided in any Qualified Domestic Relations Order (as defined in Section 13.03), the former spouse of a Participant shall be treated as the surviving spouse of such Participant for purposes of providing consent in accordance with this Section 8.05. (d) Period of Distribution. Notwithstanding the foregoing Sections of this Article VIII, if a Participant dies and if at the time of his or her death such Participant has not attained his or her Required Distribution Date and installment payments to the Participant have not yet begun under Section 8.02(b) and 8.06, such Participant's vested Accrued Benefit shall be distributed no later than December 31 of the calendar year which contains the fifth anniversary of the Participant's death; except that if the Beneficiary is the Participant's surviving spouse, the Participant's vested Accrued Benefit shall be distributed no later than December 31 of the calendar year in which the Participant would have attained age 70-1/2. If the surviving spouse of a Participant who is the Participant's Beneficiary dies before distributions have begun to the surviving spouse under this Section 8.05(d), distributions shall be made in accordance with this Section 8.05(d) as if the surviving spouse were the Participant. Notwithstanding the foregoing Sections of this Article VIII, if for any reason any portion of a Participant's vested Accrued Benefit is to be paid after his or her death to a trust or to an estate, the Plan Administrator shall direct the immediate distribution of such benefit in a single lump sum. (e) Rights of Beneficiary. The Beneficiary of a Participant who has died shall have the same rights and obligations as the Participant with respect to the portion of the interest of the Participant as to which he or she is the Beneficiary, to direct the investment of Accounts pursuant to Section 6.08 and to direct the Trustee with respect to exercise of rights in Company Stock pursuant to Section 6.09. -45- 8.06 Minimum Distribution Requirements. (a) If a Participant's vested Accrued Benefit is to be distributed in installments, the amount required to be distributed for each calendar year, beginning with distributions for the first distribution calendar year (as defined in subsection (e)), shall at least equal the quotient obtained by dividing the Participant's benefit by the applicable life expectancy (as defined in subsection (e)). (b) The amount to be distributed each year, beginning with distributions for the first distribution calendar year, shall not be less than the quotient obtained by dividing the Participant's vested Accrued Benefit by the lesser of (i) the applicable life expectancy (as defined in subsection (e) below) as of the distribution calendar year or (ii) if the Participant's spouse is not the Beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of Prop. Treas. Reg. Section 1.401(a)(9)-2. Distributions after the death of the Participant shall be distributed using the applicable life expectancy as the relevant divisor without regard to Prop. Treas. Reg. Section 1.401(a)(9)-2. (c) The minimum distribution required for the Participant's first distribution calendar year shall be made on or before the Participant's Required Distribution Date. The minimum distribution for other calendar years, including the minimum distribution for the distribution calendar year in which the Participant's Required Distribution Date occurs, shall be made on or before the December 31 of that distribution calendar year. (d) For purposes of this Section, the Participant's vested Accrued Benefit shall be the Participant's vested Account balances as of the last Valuation Date in the calendar year immediately preceding the distribution calendar year (the "valuation calendar year") increased by the amount of any vested contributions or Forfeitures allocated to the Participant's Accounts in the valuation calendar year after the relevant Valuation Date and decreased by distributions made in the valuation calendar year after the relevant Valuation Date; provided, however, that, if any portion of the minimum distribution for the first distribution calendar year is made in the second distribution calendar year on or before the Required Distribution Date, the amount of the minimum distribution made in the second distribution calendar year shall be treated as if it had been made in the immediately preceding distribution calendar year. (e) For purposes of this Section: (1) "Life expectancy" and "joint and last survivor life expectancy" means the life expectancy computed using the expected return multiples in Tables V and VI of Treas. Reg. Section 1.72-9. For the purposes of this Article, the life expectancy of a Participant and of his or her spouse and the joint and last survivor life expectancy of the Participant and his or her spouse shall, if so elected by the Participant or his spouse, be redetermined in accordance with such uniform and non-discriminatory rules as the Plan Administration shall establish, but may not be redetermined more frequently than annually. Such election shall be irrevocable as to the Participant or spouse and shall apply to all subsequent years. In the absence of such an election, such life expectancies shall not be -46- redetermined. For purposes of this Article, the life expectancy of a nonspouse Beneficiary shall not be redetermined. (2) "Distribution calendar year" means any calendar year for which a minimum distribution is required. For distributions beginning before the Participant's death, the first distribution calendar year shall be the calendar year immediately preceding the calendar year which contains the Participant's Required Distribution Date. For distributions beginning after the Participant's death, the first distribution calendar year shall be the calendar year in which distributions are required to begin as described in Section 8.05(d). (3) "Applicable life expectancy" means the life expectancy (or joint and last survivor life expectancy) calculated using the attained age of the Participant (or Beneficiary) as of the Participant's (or Beneficiary's) birthday in the applicable calendar year reduced by one for each calendar year which has elapsed since the date life expectancy (or joint and last survivor life expectancy) was first calculated. If life expectancy (or joint and last survivor life expectancy) is being redetermined, the applicable life expectancy shall be the life expectancy as so redetermined. The applicable calendar year shall be the first distribution calendar year, and, if life expectancy (or joint and last survivor life expectancy) is being redetermined, such succeeding calendar year. (f) With respect to distributions under the Plan made for calendar years beginning on or after January 1, 2001 the Plan will apply the minimum distribution requirements of section 401(a)(9) of the Internal Revenue Code in accordance with the regulations under section 401(a)(9) that were proposed on January 17, 2001, notwithstanding any provision of the Plan to the contrary. The amendment contained in this subsection shall continue in effect until the end of the last calendar year beginning before the effective date of final regulations under section 401(a)(9) or such other date as may be specified in guidance published by the Internal Revenue Service. 8.07 Facility of Payment. If a Participant or Beneficiary is (i) declared an incompetent or is a minor, (ii) a conservator, guardian, or other person legally charged with his or her care has been appointed, and (iii) written notice of such incompetency and appointment is filed with the Plan Administrator before distribution of benefits, then any benefits to which such Participant or Beneficiary is entitled shall be payable to such conservator, guardian, or other person legally charged with his or her care. Neither the Company, any Related Employer, the Trustee, the Investment Committee, any Investment Manager, nor the Plan Administrator, shall be under any duty to see to the proper application of such payments made to a Participant, conservator, guardian, or relatives of a Participant. 8.08 Form of Payment. Each distribution shall be paid in cash (including negotiable check or other cash equivalent), except that a Participant or Beneficiary may elect in accordance with such procedures as the Plan Administrator may establish or adopt to receive that portion of his or her distributable Accounts invested in the Company Stock Fund or in other Employer Stock in the form of whole shares (with cash in lieu of fractional shares) of such Company Stock or other Employer Stock. -47- 8.09 Direct Rollover to Another Plan. Notwithstanding any provision of this Plan to the contrary, a Participant or other Distributee (as defined below), may elect, at such time and in such manner as prescribed by the Plan Administrator, to have all or any portion of the benefits payable to such Distributee which constitutes an Eligible Rollover Distribution (as defined below) as paid by the Trustee directly to the Eligible Retirement Plan specified by such Distributee. Such election shall be subject to such reasonable administrative requirements as the Plan Administrator may from time to time establish which may include, but shall not be limited to, requirements consistent with Treasury Regulations and other guidance issued by the Internal Revenue Service permitting de minimis requirements for amounts eligible to be rolled over or paid partly to the Participant and partly rolled over. An election may be made pursuant to this Section only after the Distributee has met otherwise applicable requirements for receipt of a distribution under the Plan, including any applicable requirements of Appendix A. As used in this Section, the following terms shall have the following meanings: (1) "Eligible Rollover Distribution" means any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 8.06(b); any distribution by reason of Hardship pursuant to Section 7.01(b); and except as provided in the following sentence the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). A portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax employee contributions which are not includable in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in Section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includable in gross income and the portion of such distribution which is not so includable. (2) "Eligible Retirement Plan" means an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the Distributee's Eligible Rollover Distributions. However, in the case of an Eligible Rollover Distribution to a Participant's surviving spouse or surviving former spouse who is a Distributee pursuant to a Qualified Domestic Relations Order (as defined in Section 13.03), an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. For purposes of this Section an Eligible Retirement Plan shall also mean an annuity contract described in section 403(b) of the Code and an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any -48- agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this plan. The definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in section 414(p) of the Code. (3) "Distributee" means a Participant. In addition, a Participant's surviving spouse and a former spouse who is the alternate payee under a Qualified Domestic Relations Order are Distributees with regard to the interest of such spouse or former spouse. (4) "Direct Rollover" means a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 8.10 Deduction of Taxes from Amounts Payable. The Trustee may deduct from any amounts to be distributed under this Plan such amounts as the Trustee, in his, her or its sole discretion, deems proper to protect the Trustee and the Trust against liability for the payment of death, succession, inheritance, income, or other federal, state or local taxes, and out of the money so deducted, the Trustee may discharge any such liability and pay the amount remaining to the Participant or his or her Beneficiary, as the case may be. ARTICLE IX Administration 9.01 Sponsor Rights and Duties. The Company shall have overall responsibility for the administration and operation of the Plan, which the Company shall discharge by the appointment and removal (with or without cause) of the Trustee, the Investment Committee and the Plan Administrator. 9.02 Plan Administrator Rights and Duties. The Plan Administrator shall administer and enforce the Plan and the Trust in accordance with the terms of the Plan and the Trust Agreement and shall have all powers necessary to accomplish that purpose, including but not by way of limitation, the following, all to be exercised in the sole and absolute discretion of the Plan Administrator: (a) To issue rules, regulations and procedures and prescribe forms necessary for the proper conduct and administration of the Plan and to change, alter, or amend such rules, regulations and procedures and forms; (b) To construe the Plan and Trust Agreement; (c) To determine all questions arising in the administration of the Plan, including those relating to the eligibility of persons to become Participants; the rights of Participants, former Participants and their Beneficiaries; and Employer contributions, -49- (d) To determine and advise the Trustee of the amount and kind of benefits payable to Participants or their Beneficiaries; (e) To authorize the Trustee to disburse funds from the Trust Fund in accordance with the provisions of the Plan; (f) To employ and compensate such accountants and attorneys (who may but need not be the accountants or attorneys of the Company) and other persons to render advice, and such clerical employees as the Plan Administrator may deem necessary to the performance of his, her or its duties; (g) To invest all or a portion of the Trust Fund in loans to Participants and to segregate the notes representing such loan in a separate fund in accordance with Section 7.2; (h) To have prepared and furnished to Participants and Beneficiaries all information required under federal law or provisions of this Plan to be furnished to them; (i) To have prepared and filed or published with the Department of Labor and the Department of Treasury or other governmental agency all reports and other information required under federal law; (i) To make available to Participants upon request, for examination during business hours, such records as pertain exclusively to the examining Participant; and (j) To hear, review and determine claims for benefits. (k) To delegate his, her or its responsibilities under the Plan to such person or persons as he, she or it may deem advisable; (l) To do all other acts and things necessary he, she or it deems in his, her or its sole discretion to be necessary or appropriate for the administration of the Plan. 9.03 Plan Administrator Bonding and Expenses. The Plan Administrator shall serve without bond (except as otherwise required by federal law) and without compensation for his, her or its service as such; but all expenses incurred in the administration of the Plan and the Trust shall be paid by the Trust pursuant to Section 6.03 except to the extent paid by the Company. 9.04 Information To Be Supplied by Participants. Participants and Beneficiaries shall provide the Plan Administrator and the Trustee or their delegates with such information, as they shall from time to time determine to be necessary in the discharge of their duties for the administration of the Plan and the Trust. The Plan Administrator and the Trustee may rely conclusively on the information certified to them by a Participant or Beneficiary. 9.05 Information To Be Supplied by Employers. Employers shall provide the Plan Administrator and the Trustee or their delegates with such information, as they shall from time to time determine to be necessary in the discharge of their duties for the administration of the Plan -50- and the Trust. The Plan Administrator and the Trustee may rely conclusively on the information certified to them by an Employer. 9.06 Records. The regularly kept records of the Plan Administrator, the Company and the other Employers shall be conclusive evidence of the Service of a Participant, his or her Compensation, his or her age, marital status, status as an Eligible Employee, and all other matters contained in such records applicable to this Plan. 9.07 Electronic Media. Under procedures authorized or approved by the Plan Administrator, any form for any notice, election, designation, or similar communication required or permitted to be given to or received from a Participant or Beneficiary under this Plan may be made available to such Participant or Beneficiary in an electronic medium (including computer network, e-mail or voice response system) and any such communication to or from a Participant or Beneficiary through such electronic media shall be fully effective under this Plan for such purposes as such procedures shall prescribe; provided, however, that the consent of a spouse under Section 7.02(g), 8.05(c), or Appendix A, shall be effective only if made in a written document. Any record of such communication retrieved from such electronic medium under its normal storage and retrieval parameters shall be effective as a fully authentic executed writing for all purposes of this Plan absent manifest error in the storage or retrieval process. 9.08 Plan Administrator Decisions Final. The Plan Administrator shall have discretion to determine all matters within his, her or its jurisdictions. The decisions of the Plan Administrator shall be final, binding and conclusive upon the Employers, and the Trustee and upon each Employee, Participant, former Participant, Beneficiary and every other person or party interested or concerned. ARTICLE X Claims Procedure 10.01 Initial Claim for Benefits. Except as provided in Section 8.03 for requests for and consents to distribution in certain circumstances, and in Appendix A, no claim shall be required for benefits routinely due to be made or begin under this Plan. Any Participant or Beneficiary (a "Claimant") may submit to the Plan Administrator (or to such other person or persons as may be designated by the Plan Administrator) a claim for benefits not received or received in an improper amount. A claim shall be in writing in such form as is provided or approved by the Plan Administrator. A Claimant shall have no right to seek review of a denial of benefits, or to bring any action in any court to enforce a claim for benefits, prior to his or her filing a claim for benefits under this Section 10.01 and exhausting his or her rights to review under Section 10.02. When a claim for benefits has been filed properly, the Plan Administrator shall evaluate such claim for benefits and notify the Claimant of its approval or the denial within ninety (90) days after the receipt of such claim unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, the Plan administrator shall furnish written notice of the extension to the Claimant prior to the termination of the initial ninety (90) day period. The notice shall specify the special circumstances requiring an extension and the date by which a final decision will be reached (which date shall not be later -51- than one hundred and eighty (180) days after the date on which the claim was filed). The Plan Administrator shall give the Claimant written notice whether the claim is granted or denied, in whole or in part. If a claim is denied, in whole or in part, the Plan Administrator shall give the Claimant written notice which shall contain (1) the specific reasons for the denial, (2) references to pertinent plan provisions upon which the denial is based, (3) a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary, and (4) the Claimant's rights to seek review of the denial. 10.02 Review of Claim Denial. If a claim is denied, in whole or in part (or if within the time periods presented in Section 10.01 the Claimant has not received an approval or a denial and the claim is therefore deemed denied), the Claimant shall have the right to request that the Plan Administrator (or such other person or persons as may be designated by the Plan Administrator) review the denial. The Plan Administrator may in the sole and absolute discretion of the Plan Administrator appoint a third person other than the Plan Administrator, with such person's consent but without the consent of any Claimant, to make any decision on review of a claim under this Section 10.02, provided such person acknowledges in writing that he, she or it is a fiduciary with respect to this Plan for such purpose. A request for review shall be in writing and must be filed with the Plan Administrator within sixty (60) days after the date on which the Claimant received written notification of the denial. A Claimant (or his or her duly authorized representative) may request and receive copies of pertinent documents and submit issues and comments in writing to the Plan Administrator (or other designated person). Within sixty (60) days after such request for review is received, the Plan Administrator (or other designated person) shall reconsider the decision and advise the Claimant in writing of the decision on review, unless special circumstances require an extension of time for processing the review, in which case the Plan Administrator (or other designated person) shall give the Claimant a written notification within such initial sixty (60) day period specifying the reasons for the extension and advising the Claimant when such review shall be completed. Such review shall be completed within one hundred and twenty (120) days after the date on which the request for review was filed. The Plan Administrator (or other designated person) shall forward the decision on review to the Claimant in writing and shall include specific reasons for the decision and references to plan provisions upon which the decision is based. A decision on review shall be final and binding on all persons for all purposes. No action may be brought in any court respecting benefits, which were the subject of a denial of a claim for benefits (other than an action by the Plan Administrator to enforce such denial) more than one (1) year after the denial of such claim. If a Claimant shall fail to file a request for review in accordance with the procedures described in Sections 10.01 and 10.02, such Claimant shall have no right to review and shall have no right to bring action in any court and the denial of the claim shall become final and binding on all persons for all purposes. ARTICLE XI Amendment, Merger and Termination of the Plan 11.01 Amendments. The Company may amend, modify, change, revise, discontinue or terminate the Plan at any time prospectively or retroactively. Such amendment, modification, change, revision, discontinuance or termination shall be done by written resolution of the Board of Directors of the Company, except that (i) an amendment or modification required (in the -52- reasonable judgment of the Plan Administrator or the Company) to comply with changes in applicable law or to permit the issuance of or conform to the conditions of a favorable determination letter from the Internal Revenue Service on the qualification of the Plan under Section 401(a) of the Code may be done by written instrument signed on behalf of the Company by the Plan Administrator or officer of the Company; and (ii) the Plan Administrator may revise Schedule 1 from time to time to reflect the Accounts maintained from time to time under the Plan as long as such revision does not have an effect prohibited by this Section or Section 11.02. However, except as authorized or permitted by provisions of the Code, or any other statute relating to employees' trusts, or regulations or ruling issued pursuant thereto, no amendment shall: (i) increase the duties or liabilities of the Trustee or the Plan Administrator without the consent of the person affected; (ii) have the effect of vesting in any Employer any interest in any funds, securities or other property subject to the terms of this Plan and the Trust Agreement; or authorizing or permitting at any time any part of the corpus or income of the Trust Fund to be used or diverted to purposes other than for the exclusive benefit of Participants and their Beneficiaries, except as provided in Sections 5.07 and 6.11 or applicable law as in effect from time to time, or (iii) divest any Participant of his or her vested Account Balance, decrease the Accrued Benefit of any Participant, or eliminate or reduce any early retirement benefit or retirement-type subsidy or eliminate an optional form of benefit except as permitted by Section 411(d)(6) of the Code and Treasury Regulations and rulings thereunder or other applicable law as in effect from time to time. 11.02 Plan Merger. The Company may direct the merger or consolidation of this Plan with, or transfer of assets from this Plan to, another employee benefit plan qualified under Section 401(a) of the Code ("Other Plan"), or may direct the Trustee to accept the merger or consolidation of a Transferor Plan into, or a transfer of assets and liabilities, or portion thereof, from a Transferor Plan to this Plan, on such terms and conditions as the Company in its sole discretion deems desirable, in the same manner (and subject to the same conditions) as an amendment to this Plan under Section 11.01. However, the Plan shall not merge or consolidate with, or transfer to or receive from any Transferor Plan or Other Plan any assets or liabilities, (i) unless each Participant would receive a benefit immediately after the merger, consolidation or transfer (if the Plan were then terminated) which is equal to or greater than the benefit to which he would have been entitled immediately before the merger, consolidation, or transfer (if the Plan were then terminated), and (ii) the merger, consolidation or transfer of assets does not have an effect prohibited by clause (iii) of Section 11.01 above. The portion of any assets and liabilities received from a Transferor Plan that was attributable to elective contributions, qualified non-elective contributions or qualified non-elective contributions, or matching contributions (within the meaning of Treas. Reg. Section 1.401(k)-1(g)(13) shall remain subject to the distribution restrictions of Treas. Reg. Section 1.401(k)-1(d). The portion of any assets and liabilities received from a Transferor Plan that was subject to Section 412 of the Code shall not be distributable before the earlier of the Participant's Normal Retirement Date or Termination of Employment except as otherwise required by Section 401(a)(9) of the Code. No merger, consolidation, or transfer of assets shall impose on the Company or any Related Company any liabilities or obligations of the sponsor of a Transferor Plan respecting the Transferor Plan or accounts transferred from the Transferor Plan (including but not limited to the obligation to make contributions to such accounts) unless the Company or Related Company expressly assumes such liabilities or obligations. -53- 11.03 Plan Termination. The Company, by resolution of the Board of Directors, may reduce, suspend or discontinue Employer contributions hereunder, and terminate the Plan at any time in whole or in part, provided, however, that the termination of the Plan or the reduction, suspension or discontinuance of contributions hereunder shall not have any retroactive effect as to deprive any Participant or Beneficiary of any benefit already accrued. 11.04 Payment Upon Termination. Upon termination of the Plan or complete discontinuance of Employer contributions, the unvested portion of each Participant's Accrued Benefit that has not been forfeited pursuant to Section 4.10 prior to the termination of the Plan or complete discontinuance of Employer contributions shall become fully vested and nonforfeitable. Upon a partial termination of the Plan, the Accrued Benefit of each former Active Participant who lost status as an Active Participant because of such partial termination shall become fully vested and nonforfeitable. In the event of termination of the Plan and after payment of all expenses, the Plan Administrator may direct that either (1) each Participant and each Beneficiary of a deceased Participant receive his or her entire Accrued Benefit as soon as reasonably possible or (2) the Trust be continued and Participants' Accrued Benefits be distributed at such times and in such manner as provided in Article VIII, in which case continued allocations of net income, gains, losses and expenses of the Trust Fund as provided in Article VI shall be made. 11.05 Withdrawal from the Plan by an Employer. Any Employer other than the Company may withdraw from the Plan and Trust Agreement, under such terms and conditions as the Board of Directors may prescribe, by delivery to the Trustee and the Company of a resolution of its board of directors electing to so withdraw. An Employer that ceases to be a Related Employer shall automatically withdraw from the Plan effective as of the date such Employer ceases to be a Related Employer unless then or thereafter such Employer affirmatively elects, and the Board of Directors affirmatively consents, to such Employer continuing to be an Employer under this Plan. ARTICLE XII Top Heavy Provisions 12.01 Application. The definitions in Section 12.02 shall apply under this Article XII and the special rules in Section 12.03 shall apply, notwithstanding any other provisions of the Plan, for any Plan Year in which the Plan is a Top Heavy Plan and for such other Plan Years as may be specified herein. multiple employer plan as described in Code Section 413(c), the provisions of this Article XII shall be applied separately to each Employer and Related Company taking account of benefits under the Plan provided to employees of the Employer or Related Company because of service with that Employer or Related Company. 12.02 Special Top Heavy Definitions. The following special definitions shall apply under this Article XI. (a) "Aggregate Employer Contributions" means the sum of all Employer contributions under this Plan allocated for a Participant to the Plan and employer contributions and forfeitures allocated for the Participant to all Related Defined -54- Contribution Plans in the Aggregation Group. With respect to Non-Key Employees, Elective Deferrals under the Plan and employer contributions attributable to salary reduction or similar arrangement under any Related Defined Contribution Plans shall not be included in Aggregate Employer Contributions. Matching Contributions under the Plan and employer matching contributions (within the meaning of Section 401(m)(4)(A) of the Code) under any Related Defined Contribution Plans shall be included in Aggregate Employer Contributions. Matching Contributions that are used to satisfy the minimum contribution requirements of Section 12.03(a) shall be treated as Matching Contributions for purposes of the actual contribution percentage test of Section 5.03 of the Plan and other applicable requirements of Section 401(m) of the Code. (b) "Aggregation Group" means the group of plans in a Mandatory Aggregation Group, if any, that includes the Plan, unless the inclusion of Related Plans in the Permissive Aggregation Group would prevent the Plan from being a Top Heavy Plan, in which case "Aggregation Group" means the group of plans consisting of the Plan and each other Related Plan in a Permissive Aggregation Group with the Plan. (1) "Mandatory Aggregation Group" means each plan (considering the Plan and Related Plans) that, during the Plan Year that contains the Determination Date or any of the four preceding Plan Years, (A) had a participant who was a Key Employee, or (B) was necessary to be considered with a plan in which a Key Employee participated in order to enable the plan in which the Key Employee participated to meet the requirements of Section 401(a)(4) or 410 of the Code. If the Plan is not described in (A) or (B) above, it shall not be part of a Mandatory Aggregation Group. (2) "Permissive Aggregation Group" means the group of plans consisting of (A) the plans, if any, in a Mandatory Aggregation Group with the Plan, and (B) any other Related Plan, that, when considered as a part of the Aggregation Group, does not cause the Aggregation Group to fail to satisfy the requirements of Section 401(a)(4) and Section 410 of the Code. A Related Plan in (B) of the preceding sentence may include a simplified employee pension plan, as defined in Code Section 408(k), and a collectively bargained plan, if when considered as a part of the Aggregation Group such plan does not cause the Aggregation Group to fail to satisfy the requirements of Section 401(a)(4) and Section 410 of the Code considering, if the plan is a multiemployer plan as described in Code Section 414(f) or a multiple employer plan as described in Code Section 413(c), benefits under the plan only to the extent provided to employees of the employer because service with the employer and, if the plan is a simplified employee pension plan, only the employer's contribution to the plan. -55- (c) "Determination Date" means, with respect to a plan year, the last day of the preceding plan year or, in the case of the first plan year, the last day of such plan year. If the Plan is aggregated with other plans in the Aggregation Group, the Determination Date for each other plan shall be, with respect to any plan year, the Determination Date for each such other plan which falls in the same calendar year as the Determination Date for the Plan. (d) "Key Employee" means, for the Plan Year containing the Determination Date, any Employee or former Employee (including any deceased employee) who at any time during such Plan Year was: (1) an officer (including administrative executives as described in Treasury Regulations Section 1.416-1(T-13)) of the Employer or a Related Company having annual Compensation for the Plan Year greater than $130,000 (as adjusted under Section 416(i) of the Code for Plan Years beginning after December 31, 2002); (2) a more than five percent (5%) owner (or is considered as owning more than five percent (5%) within the meaning of Code Section 318) of the Employer or a Related Company; or (3) a more than one percent (1%) owner (or is considered as owning more than one percent (1%) within the meaning of Code Section 318) of the Employer or a Related Company and has an annual Compensation for such Plan Year from the Employer and Related Companies of more than $150,000. No more than a total of fifty (50) persons (or, if lesser, the greater of three (3) persons or ten percent (10%) of all persons or beneficiaries of persons who are employees or former employees) shall be treated as Key Employees under paragraph (1) above for any Plan Year. If the number of persons who meet the requirements to be treated as Key Employees under paragraph (1) exceeds such limitation those persons with the highest annual Compensation in a Plan Year for which the requirements are met and who are within the limitation on the number of Key Employees will be treated as Key Employees. For purposes of determining the number of officers taken into account hereunder, employees described in Section 2.26(b)(1) through (6) shall be excluded. The determination of who is a Key Employee will be made in accordance with Section 416(i) of the Code and the applicable regulations (e) "Non-Key Employee" means a person with an accrued benefit or account balance in the Plan or any Related Plan in the Aggregation Group at any time during the Measurement Period who is not a Key Employee, and any beneficiary of such a person. (f) "Present Value of Accrued Benefits" means, for any Plan Year, an amount equal to the sum of (1), (2) and (3), subject to (4), for each person who, in the Plan Year containing the Determination Date, was a Key Employee or a Non-Key Employee. -56- (1) The value of a person's Accrued Benefit under the Plan and each Related Defined Contribution Plan in the Aggregation Group, determined as of the valuation date coincident with or immediately preceding the Determination Date, adjusted for contributions due as of the Determination Date, as follows: (A) in the case of a plan not subject to the minimum funding requirements of Section 412 of the Code, by including the amount of any contributions actually made after the valuation date but on or before the Determination Date, and, in the first plan year of a plan, by including contributions made after the Determination Date that are allocated as of a date in that first plan year; and (B) in the case of a plan that is subject to the minimum funding requirements, by including the amount of any contributions that would be allocated as of a date not later than the Determination Date, plus adjustments to those amounts as required under applicable rulings, even though those amounts are not yet required to be contributed or allocated (e.g., because they have been waived) and by including the amount of any contributions actually made (or due to be made) after the valuation date but before the expiration of the extended payment period in Section 412(c)(10) of the Code. (2) The sum of the actuarial present values of a person's accrued benefits under each Related Defined Benefit Plan in the Aggregation Group, expressed as a benefit commencing at Normal Retirement Date (or the person's attained age, if later) determined based on the following actuarial assumptions: (A) Interest rate: 5%; and (B) Post Retirement Mortality: 1984 Unisex Pension Table; and determined in accordance with Code Section 416(g), provided, however, that the accrued benefit of any Non-Key Employee shall be determined under the method which is used for accrual purposes for all Related Defined Benefit Plans or, if no single accrual method is used in all such plans, such accrued benefit shall be determined as if such benefit accrued not more rapidly than the slowest accrual rate permitted under Code Section 411(b)(1)(C). The present value of an accrued benefit for any person who is employed by an employer maintaining a plan on the Determination Date is determined as of the most recent valuation date which is within a 12-month period ending on the Determination Date, provided however that: (C) for the first plan year of the plan, the present value for an employee is determined as if the employee had a Termination of Employment (i) on the Determination Date or (ii) on such valuation date but taking into account the estimated accrued benefit as of the Determination Date; and -57- (D) for the second and subsequent plan years of the plan, the accrued benefit taken into account for an employee is not less than the accrued benefit taken into account for the first plan year unless the difference is attributable to using an estimate of the accrued benefit as of the Determination Date for the first plan year and using the actual accrued benefit as of the Determination Date for the second plan year. For purposes of this paragraph (2), the valuation date is the valuation date used by the plan for computing plan costs for minimum funding, regardless of whether a valuation is performed that year. If the plan provides for a nonproportional subsidy as described in Treasury Regulations Section 1.416-1(T-27), the present value of accrued benefits shall be determined taking into account the value of nonproportional subsidized early retirement benefits and nonproportional subsidized benefit options. (3) Distributions made with respect to the Employee under the Plan and any Related Plan within the Aggregation Group during the one-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been a Related Plan within the Aggregation Group. In the case of a distribution for a reason other than separation from service, death or disability, this provision shall be applied by substituting "five-year period" for "one-year period." (4) The following rules shall apply in determining the Present Value of Accrued Benefits: (A) Amounts attributable to qualified voluntary employee contributions, as defined in Section 219(e) of the Code, shall be excluded. (B) In computing the Present Value of Accrued Benefits with respect to rollovers or plan-to-plan transfers, the following rules shall be applied to determine whether amounts which have been distributed during the five (5) year period ending on the Determination Date from or accepted into this Plan or any plan in the Aggregation Group shall be included in determining the Present Value of Accrued Benefits: (i) Unrelated Transfers accepted into the Plan or any plan in the Aggregation Group after December 31, 1983 shall not be included. (ii) Unrelated Transfers accepted on or before December 31, 1983 and all Related Transfers accepted at any time into the Plan or any plan in the Aggregation Group shall be included. -58- (iii) Unrelated Transfers made from the Plan or any plan in the Aggregation Group shall be included. (iv) Related Transfers made from the Plan or any plan in the Aggregation Group shall not be included by the transferor plan (but shall be counted by the accepting plan). (C) The Accrued Benefit of any individual who has not performed services for the Employer maintaining the Plan at any time during the one (1) year period ending on the Determination Date shall be excluded. (g) "Related Transfer" means a rollover or a plan-to-plan transfer which is either not initiated by the Employee or is made between plans each of which is maintained by a Related Company. (h) A "Top Heavy Aggregation Group" exists in any Plan Year for which, as of the Determination Date, the sum of the Present Value of Accrued Benefits for Key Employees under all plans in the Aggregation Group exceeds sixty percent (60%) of the sum of the Present Value of Accrued Benefits for all employees under all plans in the Aggregation Group; provided that, for purposes of determining the sum of the Present Value of Accrued Benefits for all employees, there shall be excluded the Present Value of Accrued Benefits of any Non-Key Employee who was a Key Employee for any Plan Year preceding the Plan Year that contains the Determination Date. For purposes of applying the special rules herein with respect to a Super Top Heavy Plan, a Top Heavy Aggregation Group will also constitute a "Super Top Heavy Aggregation Group" if in any Plan Year as of the Determination Date, the sum of the Present Value of Accrued Benefits for Key Employees under all plans in the Aggregation Group exceeds ninety percent (90%) of the sum of the Present Value of Accrued Benefits for all employees under all plans in the Aggregation Group. (i) "Top Heavy Plan" means the Plan in any Plan Year in which the Plan is a member of a Top Heavy Aggregation Group, including a Top Heavy Aggregation Group consisting solely of the Plan. For purposes of applying the rules herein with respect to a Super Top Heavy Plan, a Top Heavy Plan will also constitute a "Super Top Heavy Plan" if the Plan in any Plan Year is a member of a Super Top Heavy Aggregation Group, including a Super Top Heavy Aggregation Group consisting solely of the Plan. (j) "Unrelated Transfer" means a rollover or a plan-to-plan transfer which is both initiated by the Employee and (a) made from a plan maintained by a Related Company to a plan maintained by an employer which is not a Related Company or (b) made to a plan maintained by a Related Company from a plan maintained by an employer which is not a Related Company. 12.03 Special Top Heavy Provisions. For each Plan Year in which the Plan is a Top Heavy Plan, the following rules shall apply, except that the special provisions of this Section 12.03 shall not apply with respect to any employee included in a unit of employees -59- covered by an agreement which the Secretary of Labor finds to be a collective-bargaining agreement between employee representatives and one or more Employers if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representative and the Employer or Employers: (a) Minimum Employer Contributions. In any Plan Year in which the Plan is a Top Heavy Plan, the Employers shall make additional Employer Contributions to the Plan as necessary for each Participant who is employed on the last day of the Plan Year and who is a Non-Key Employee to bring the amount of his or her Aggregate Employer Contributions for the Plan Year up to at least three percent (3%) of his or her Compensation, or if the Plan is not required to be included in an Aggregation Group in order to permit a Related Defined Benefit Plan in the Aggregation Group to satisfy the requirements of Section 401(a)(4) or Section 410 of the Code, such lesser amount as is equal to the largest percentage of a Key Employee's Compensation allocated to the Key Employee as Aggregate Employer Contributions, unless such Participant is a Participant in a Related Defined Benefit Plan and receives a minimum benefit thereunder in accordance with Section 416(c) of the Code in which case such Participant shall not receive a minimum contribution under this Section 11.3(a). For purposes of determining whether a Non-Key Employee is a Participant entitled to have minimum Employer Contributions made on his or her behalf, a Non-Key Employee will be treated as a Participant even if he is not otherwise a Participant (or accrues no benefit) under the Plan because: (1) he has failed to complete the requisite number of hours of service (if any) after becoming a Participant in the Plan, (2) he is excluded from participation in the Plan (or accrues no benefit) merely because his or her compensation is less than a stated amount, or (3) he is excluded from participation in the Plan (or accrues no benefit) merely because of a failure to make mandatory employee contributions or, if the Plan is a 401(k) plan, because of a failure to make elective 401(k) contributions. Contributions required by this subsection shall be allocated to the Company Contribution Account (if the Non-Key Employee is not a Traveler) or the Traveler Benefit Account (if the Non-Key Employee is a Traveler) of the affected Non-Key Employee. (b) Vesting. For each Plan Year in which the Plan is a Top Heavy Plan and any Plan Year thereafter, the Employer Contribution Account of a Participant who has at least one Hour of Service after the Plan becomes a Top Heavy Plan and who has completed three (3) or more years of Vesting Service shall become fully vested and nonforfeitable. (c) Limitations. For Plan Years commencing prior to January 1, 2000, in computing the limitations under Section 5.07 hereof for years in which the Plan is a Top -60- Heavy Plan, the special rules of Section 416(h) of the Code shall be applied in accordance with applicable regulations and rulings so that, in determining the denominator of the Defined Contribution Plan Fraction and the Defined Benefit Plan Fraction, at each place at which "1.25" would have been used, "1.00" shall be substituted, and by substituting $41,500 for $51,875 in the numerator of the transition fraction described in Section 415(e)(6)(B) of the Code, unless the Plan is not a Super Top Heavy Plan and the special requirements of Section 416(h)(2) of the Code have been satisfied. This Section 12.3(c) shall not apply to any Plan Year commencing after December 31, 1999. (d) Transition Rule for a Top Heavy Plan. Notwithstanding the provisions of Section 12.03(c), for each Plan Year commencing prior to January 1, 2000 in which the Plan is a Top Heavy Plan and in which the Plan does not meet the special requirements of Section 416(h)(2) of the Code in order to use 1.25 in the denominator of the Defined Contribution Plan Fraction and the Defined Benefit Plan Fraction, if an Employee was a participant in one or more defined benefit plans and in one or more defined contribution plans maintained by the employer before the plans became Top Heavy Plans and if such Participant's Combined Fraction exceeds 1.00 because of accruals and additions that were made before the plans became Top Heavy Plans, a factor equal to the lesser of 1.25 or such lesser amount (but not less than 1.00) as shall be needed to make the Employee's Combined Fraction equal to 1.00 shall be used in the denominator of the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction if there are no further accruals or annual additions under any Top Heavy Plans until the Participant's Combined Fraction is not greater than 1.00 when a factor of 1.00 is used in the denominators of the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction. Any provisions herein to the contrary notwithstanding, for Plan Years commencing prior to January 1, 2000, if the Plan is a Top Heavy Plan and the Plan does not meet the special requirements of Section 416(h)(2) of the Code in order to use 1.25 in the denominators of the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction, there shall be no further Annual Additions for a Participant whose Combined Fraction is greater than 1.00 when a factor of 1.00 is used in the denominator of the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction, until such time as the Participant's Combined Fraction is not greater than 1.00. This Section 12.03(d) shall not apply to any Plan Year commencing after December 31, 1997. (e) Transition Rule for a Super Top Heavy Plan. Notwithstanding the provisions of Sections 12.03(c) and 12.03(d), for each Plan Year commencing prior to January 1, 2000 in which the Plan is a Super Top Heavy Plan, (1) if an Employee was a participant in one or more defined benefit plans and in one or more defined contribution plans maintained by the employer before the plans became Super Top Heavy Plans, and (2) if such Participant's Combined Fraction exceeds 1.00 because of accruals and additions that were made before the plans became Super Top Heavy Plans and if immediately before the plans became Super Top Heavy Plans the Combined Fraction as then computed did not exceed 1.00, then a factor equal to the lesser of 1.25 or such lesser amount (but not less than 1.00) as shall be needed to make the Employee's Combined Fraction equal to 1.00 shall be used in the denominator of the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction if there are no further accruals or -61- annual additions under any Super Top Heavy Plans until the Participant's Combined Fraction is not greater than 1.00 when a factor of 1.00 is used in the denominators of the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction. Any provisions herein to the contrary notwithstanding, for Plan Years commencing prior to January 1, 2000, if the Plan is a Super Top Heavy Plan, there shall be no further Annual Additions for a Participant whose Combined Fraction is greater than 1.00 when a factor of 1.00 is used in the denominator of the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction until the Participant's Combined Fraction is not greater than 1.00. This Section 12.03(e) shall not apply to any Plan Year commencing after December 31, 1999. (f) Terminated Plan. If the Plan becomes a Top Heavy Plan after it has formally been terminated, has ceased contributions and has been or is distributing all plan assets to participants and their beneficiaries as soon as administratively feasible or if a terminated plan has distributed all benefits of participants and their beneficiaries, the provisions of Section 12.03 shall not apply to the Plan. (g) Frozen Plans. If the Plan becomes a Top Heavy Plan after contributions have ceased under the Plan but all assets have not been distributed to Participants or their Beneficiaries, the provisions of Section 12.03 shall apply to the Plan. ARTICLE XIII Miscellaneous Provisions 13.01 Employer Joinder. Any Employer immediately before the Effective Date that continues to be a Related Company immediately after the Effective Date shall continue as an Employer under this Plan. Any entity that is a Related Company as of the Effective Date or which is created by a transfer of assets from a Related Employer after the Effective Date, and that employs Employees within the United States who would be Eligible Employees if such Related Company were an Employer, shall be an Employer and shall be deemed to have adopted this Plan and the Trust unless such Related Company by resolution of its board of directors, or the Company by resolution of the Board of Directors, affirmatively provides that such Related Company shall not be an Employer. Any other Related Company shall become an Employer as of the date (if any) as of which such Related Company adopts the Plan by resolution of its board of directors, or as of which the Company designates such entity as an Employer under the Plan by resolution of the Board. Each Employer other than the Company so adopting or deemed to have adopted the Plan thereby irrevocably appoints the Company to as its agent to do on its behalf all acts and things required of an Employer under this Plan and authorizes the Plan Administrator to determine the Employer contributions required of such Employer under this Plan, to the end that Participants, Beneficiaries, the Trustee, the Plan Administrator, and all other persons may deal with the Company as if it were the only Employer under this Plan. 13.02 Non-Alienation of Benefits. Except as provided in Section 13.03, no benefit payable at any time under this Plan shall be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, or other legal processes, or encumbrance of any kind, other than federal tax levies and judgements which are enforceable under federal law. Any attempt to -62- alienate, sell, transfer, assign, pledge or otherwise encumber any such benefits, whether currently or thereafter payable, shall be void. No benefit, nor any fund which may be established for the payment of such benefits, shall, in any manner, be liable for or subject to the debts or liabilities of any person entitled to such benefits. 13.03 Qualified Domestic Relations Order. Notwithstanding Section 13.02, the Plan will pay all or the designated portion of a Participant's Accounts to an Alternate Payee (as defined below) pursuant to a Qualified Domestic Relations Order (defined below). Payments to an Alternate Payee pursuant to a Qualified Domestic Relations Order may not be made before the earlier of (i) the date on which the Participant corresponding to the Qualified Domestic Relations Order is entitled to a distribution under the Plan; or (ii) the later of (A) the date on which such Participant attains age 50 or (B) the earliest date on which such Participant could begin receiving benefits under the Plan if the Participant had separated from service; provided, however, that clause (ii)(A) shall not apply (and therefore the Plan will make distributions to an Alternate Payee under a Qualified Domestic Relations Order regardless of whether the Participant has attained age 50) if the Order specifies distributions at an earlier date than otherwise permitted by clause (ii)(A) or permits the Alternate Payee to request or consent to a distribution prior to the date specified by clause (ii)(A). The term "Qualified Domestic Relations Order" means any judgment, decree or order (including approval of a property settlement agreement) which: (a) relates to the provision of child support, alimony payments, or marital property rights to a spouse, child or other dependent of a Participant, (b) is made pursuant to a State domestic relations law (including a community property law), (c) creates or recognizes the existence of an Alternate Payee's right to, or assigns to an Alternate Payee the right to, receive all or a portion of the benefits payable with respect to the Participant, (d) clearly specifies the name and last known mailing address, if any, of the Participant and the name and mailing address of each Alternate Payee covered by the order, the amount and percentage of the Participant's benefits to be paid by the Plan to each Alternate Payee, or the manner in which such amount or percentage is to be determined, the number of payments or period to which such order applies and each plan to which such order applies, and (e) does not require the Plan to provide (i) any form or type of benefit, or any option, not otherwise provided under the Plan, (ii) increased benefits (determined on the basis of actuarial value), (iii) benefits to a beneficiary inconsistent with the form of distribution available under Article VIII (or, if applicable, Appendix A), (iv) benefits to an Alternate Payee which are required to be paid to another payee under another order previously determined by the Plan Administrator to be a Qualified Domestic Relations Order; or (v) payments or other benefits to a person other than an Alternate Payee. -63- The Plan Administrator shall establish reasonable procedures to determine the qualified status of domestic relations order and to administer distributions under such qualified orders, including the establishment of segregated accounts for Alternate Payees. All expenses incurred by the Plan Administrator in determining the qualified status of a domestic relations order shall be paid as an administrative expense of the Plan as a whole. The term "Alternate Payee" means any spouse, former spouse, child or other dependent of a Participant who is recognized by a Qualified Domestic Relations Order as having a right to receive all, or a portion of, the benefits payable under the Plan with respect to the Participant. To the extent provided in any Qualified Domestic Relations Order, the former spouse of a Participant shall be treated as the surviving spouse of such Participant for purposes of consenting to the naming of another Beneficiary to the extent provided in Sections 8.05 and Appendix A. An Alternate Payee shall be considered a Beneficiary under the terms of this Plan until the Alternate payee's benefits are distributed. In the case of any domestic relations order received by the Plan, the Plan Administrator shall separately account for the amounts payable under the domestic relations order. If it is determined that the order is not a Qualified Domestic Relations Order, the amounts separately accounted for during such determination shall no longer be accounted for separately. 13.04 Unclaimed Amounts. Unclaimed amounts shall consist of the amounts of the Accounts of a retired, deceased or terminated Participant which cannot be distributed because of the Plan Administrator's inability, after a reasonable search, to locate a Participant or his or her Beneficiary within a period of two (2) years after the payment of benefits becomes due in accordance with Section 8.03. Unclaimed amounts for a Plan Year shall become a Forfeiture and shall be applied in accordance with Section 4.10(f) as of the close of the Plan Year in which such two-year period shall end. If an unclaimed amount is subsequently properly claimed by the Participant or the Participant's Beneficiary, said amount shall be paid to such Participant or Beneficiary out of Forfeitures for the Plan Year in which such benefits are properly claimed and to the extent that Forfeitures for such Plan Year are not sufficient, such payments shall be charged ratably against income or gain of the Trust Fund unless paid by an Employer. 13.05 No Contract of Employment. Nothing contained in this Plan shall be construed as a contract of employment between any Employer and any Employee or as creating a right of any Employee to be continued in the employment of any Employer. 13.06 Recoupment of or Reduction for Overpayment. If the Plan Administrator determines that any payment previously made to a putative Participant or Beneficiary was not properly payable, the person to whom such payment was made shall promptly upon notice and demand from the Plan Administrator repay such amount to the Trust, subject to the right of such payee to request review of such determination in accordance with Section 10.02. If the person to whom such payment was made does not, within a reasonable time, make the requested repayment to the Plan, and if such person is entitled to other benefits from the Plan, the Plan Administrator may in his, her or its discretion treat the overpayment as an advance payment of benefits, and the Plan Administrator shall direct the Trustee to reduce all future benefits payable to that person, if any, by the amount of the overpayment. -64- 13.07 Employees' Trust. The Plan and Trust are created for the exclusive purpose of providing benefits to the Participants in the Plan and their Beneficiaries and defraying reasonable expenses of administering the Plan and Trust. The Plan and Trust shall be interpreted in a manner consistent with their being a Plan described in Section 401(a) of the Code and a Trust exempt under Section 501(a) of the Code. 13.08 Source of Benefits. All benefits payable under the Plan shall be paid or provided solely from the Trust and the Employers assume no liability or responsibility therefore. 13.09 Interest of Participants. No Participant or Beneficiary shall have any interest in any specific assets of the Trust Fund (other than notes representing a loan to the Participant pursuant to Section 7.02) but shall have only an undivided interest in the Trust Funds as a whole. 13.10 Indemnification. The Company shall indemnify and hold harmless the Plan Administrator the members of the Investment Committee, and, if the Trustees are one or more individuals, the Trustees, and each officer and employee of an Employer to whom are delegated duties, responsibilities, and authority with respect to the Plan, from and against all claims, liabilities, fines and penalties, and all expenses reasonably incurred by or imposed upon him or her (including, but not limited to, reasonable attorney fees) which arise as a result of his or her actions or failure to act in connection with the operation and administration of the Plan to the extent lawfully allowable and to the extent that such claim, liability, fine, penalty, or expense is not paid for by liability insurance purchased or paid for by the Company. Notwithstanding the foregoing, the Company shall not indemnify any person for any such amount incurred through any settlement or compromise of any action unless the Company consents in writing to such settlement or compromise. 13.11 Company Action. Any action this Plan requires or permits the Company to do (including any action taken by the Company as agent for any other Employer pursuant to Section 13.01) shall be properly done if done by resolution of its Board of Directors, or, unless this Plan expressly requires action by such Board of Directors, by any officer or employee of the Company authorized to take actions of such type on behalf of the Company (i) under the by-laws of the Company, (ii) by resolution of the Board of Directors), or (iii) by delegation from a person authorized under clause (i) or (ii). 13.12 Company Merger. In the event that any successor corporation to the Company, by merger, consolidation, purchase or otherwise, shall elect to adopt the Plan, such successor corporation shall be substituted hereunder for the Company upon filing in writing with the Trustee its election so to do. 13.13 Multiple Capacity. Any person or group of persons may serve in more than one capacity (including more than one fiduciary or nonfiduciary capacity or both a fiduciary and non-fiduciary capacity) with respect to the Plan. 13.14 Gender and Number. Except when the context indicates to the contrary, when used herein, masculine terms shall be deemed to include the feminine or neuter, and singular the plural. -65- 13.15 Headings. The headings of articles and sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of this Plan, the text shall control. 13.16 Uniform and Non-Discriminatory Application of Provisions. The provisions of this Plan shall be interpreted and applied in a uniform and non-discriminatory manner with respect to all similarly situated Participants, former Participants, and Beneficiaries. 13.17 Invalidity of Certain Provisions. If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof and the Plan shall be construed and enforced as if such provisions, to the extent invalid or unenforceable, had not been included. 13.18 Application to Merged Plans. The amendments to this Plan responding to statutory changes enacted by the GUST Amendments (defined below), as reflected in the Applicable Plan Sections (defined below), shall apply to each of the Howe-Baker Engineers, Inc. Employees' Profit-Sharing 401(k) Plan, the Matrix Engineering, Inc. Savings Plan, the A&B Builders, Inc. Savings Plan, and the Callidus Technologies 401(k) Savings Plan (collectively, the "Merged Plans"), for periods prior to the merger of Merged Plans into this Plan, to the extent necessary to ensure the continued qualification of the Merged Plans under Section 401(a) of the Code prior to and as of their merger into this Plan. For this purpose the GUST Amendments are the Uniformed Services Employment and Reemployment Rights Act of 1994, P.L. 103-353; the Uruguay Round Agreements Act, P.L. 103-465; the Small Business Job Protection Act of 1996, P.L. 104-188; and the Taxpayer Relief Act of 1997, P.L. 105-34; and the Applicable Plan Sections are Section 2.13(b) (relating to the definition of Statutory Compensation); Section 2.19(b) (relating to the definition of leased employees within the meaning of Section 414(n)(2) of the Code); Section 2.28 (relating to the definition of Highly Compensated Employee and repeal of family aggregation); Section 2.49 (relating to the Required Distribution Date); Sections 2.44 and 2.54 (relating to Qualified Military Leave); Sections 5.02 and 5.03 (relating to the computation and distribution of excess contributions, excess aggregate contributions and satisfying the multiple use test); Section 5.07(d) (relating to repeal of the combined limitation on certain benefits); and Sections 8.02, 8.03, 8.04, A-2, and A-3 (relating to the increase from $3,500 to $5,000 in the threshold for certain mandatory distributions) of this Plan. 13.19 Law Governing. The Plan shall be construed and enforced according to the laws of Illinois other than its laws with respect to choice of law, to the extent not preempted by ERISA. Executed this_______day of__________ , 2002. CHICAGO BRIDGE & IRON COMPANY By:________________________ ATTEST: __________________ -66- APPENDIX A A-1. Distribution of Restricted Accounts. Notwithstanding any provisions in the Plan to the contrary, the balance of a Participant's Restricted Accounts may be distributed, in addition to the options specified in Section 8.02(a) and (b), by purchase with the vested balance of his or her Restricted Accounts and distribution to the Participant of a nontransferable annuity contract, providing for payment in the form of a Qualified Joint and Survivor Annuity (as defined below), and in any other form of distribution to which the participant would have been entitled under Section 6.02(b) of the Hourly Plan as in effect on December 31, 1996. The Participant shall select the method by which his or her benefits shall be distributed in accordance with Section 8.03, except as modified by this Appendix A. If no other election has been made under Section 8.03 and this Appendix A, the Participant's benefits attributable to his or her Restricted Accounts will be distributed in the form of a Qualified Joint and Survivor Annuity. For purposes of this Appendix A, a "Qualified Joint and Survivor Annuity", for a Participant who is legally married on his or her Annuity Starting Date, is an immediate installment refund annuity for the life of the Participant with a survivor annuity for the life of such spouse (if such spouse survives the Participant) that is 50% of the amount of the annuity which is payable during the joint lives of the Participant and the spouse, and which is the amount of such benefit that can be purchased with the vested balance of the Participant's Restricted Accounts. If the Participant is not married on his or her Annuity Starting Date, a "Qualified Joint and Survivor Annuity" is an immediate installment refund annuity for the life of such Participant, which is the amount of such benefit that can be purchased with the vested balance of the Participant's Restricted Accounts. The "Annuity Starting Date" is the first day of the first period for which an amount is paid as an annuity or any other form. A-2. Election and Revocation of Joint and Survivor Annuity Form. If a Participant is married on his or her Annuity Starting Date, his or her Restricted Account balances shall be paid in the form of a Qualified Joint and Survivor Annuity, subject to the following provisions of this subsection. Within the 90-day period preceding the Participant's Annuity Starting Date, the Plan Administrator will provide, by a means reasonably calculated to reach the Participant and his or her spouse, election information consisting of: (a) a written description of the Qualified Joint and Survivor Annuity and the relative financial effect of payment of his or her Restricted Account balances in that form; and (b) a notification of the right to waive payment in that form, the rights of his or her spouse with respect to such waiver and the right to revoke such waiver, and the effect of such revocation. During an election period commencing on the date the Participant receives such election information and ending on the later of the 90th day thereafter or the Annuity Starting Date, a Participant may waive payment in the Qualified Joint and Survivor Annuity form and elect payment in such another form permitted by Section A-1; provided that, the Participant's surviving spouse, if any, has consented in writing to such waiver and the spouse's consent acknowledges the effect of such revocation and is witnessed by a notary public. A Participant -1- may, at any time during his or her election period, revoke any prior waiver of the Qualified Joint and Survivor Annuity form. However, the consent of his or her spouse once given shall be irrevocable unless and until the Participant revokes his or her prior waiver of the Joint and Survivor Annuity form. A Participant may request, by writing filed with the Plan Administrator during his or her election period, an explanation, written in nontechnical language, of the terms, conditions and financial effect (in terms of dollars per monthly benefit payment) of payment in the Qualified Joint and Survivor Annuity form. If not previously provided to the Participant, the Plan Administrator shall provide him or her with such explanation within 30 days of his or her request by a method reasonably calculated to reach the Participant and his or her spouse, and the Participant's election period will be extended, if necessary, to include the 90th day next following the date on which he or she receives such explanation. No distribution shall be made from a Participant's Restricted Accounts until his or her election period has terminated. Notwithstanding the foregoing, if the Participant's total distributable Account balances (not just Restricted Account balances) are less than $5,000, ($3500 for the Plan Year 1997) as of his or her date of Termination, the Trustee shall immediately distribute such benefits in a lump sum without such Participant's consent pursuant to Section 8.03 of the Plan. A-3. Pre-Retirement Survivor Annuity. The term "Pre-Retirement Survivor Annuity" means an installment refund annuity for the life of the Participant's surviving spouse, the payments under which are equal to the amount of benefit which can be purchased with the Participant's Restricted Accounts as of the date of his or her death. Payment of such benefits will commence as soon as practicable after the date of the Participant's death, unless the surviving spouse elects a later date. Any election to waive the Pre-Retirement Survivor Annuity must be made by the Participant in writing during the election period described herein and shall require the spouse's consent in the same manner provided for in Section A-2. The election period to waive the Pre-Retirement Survivor Annuity shall begin on the first day of the Plan Year in which the Participant attains age 35 and end on the date of the Participant's death. In the event a Participant separates from service prior to the beginning of the election period, the election period shall begin on the data of such separation from service. In connection with the election, the Plan Administrator shall provide each Participant within the period beginning with the first day of the Plan Year in which the Participant attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Participant attains age 35, a written explanation of the Pre-Retirement Survivor Annuity containing comparable information to that required pursuant to the provisions of subsections A-2(a) and (b). If the Participant enters the Plan after the first day of the Plan Year in which the Participant attained age 32, the Plan Administrator shall provide notice no later than the close of the second Plan Year following the entry of the Participant into the Plan. If the total distributable balance of the Participant's Accounts (not just Restricted Accounts) is less than $5,000 ($3,500) for the Plan Year 1997) as of his or her date of Termination, the Trustees shall provide for the immediate distribution of such Accounts to the Participant's spouse. If the value exceeds $3,500, an immediate distribution of the entire amount may be made to the surviving spouse, provided such surviving spouse consents in writing to such distribution. -2- SCHEDULE 1 CHICAGO BRIDGE & IRON COMPANY EMPLOYEE SAVINGS PLAN PARTICIPANT ACCOUNTS CB&I PLAN
CONTRIBUTION VESTING SOURCE NAME EXCHANGES MIX CHANGES WITHDRAWALS SCHEDULE - ----------------- -------------------- ------------ ----------- ----------- EMPLOYEE 401K permitted permitted Age 59-1/2 N/A Hardship Termination Loans PRIOR EMPLOYEE permitted N/A Age 59-1/2 N/A Hardship Termination Loans PRIOR EMPLOYER permitted (exchanges N/A Age 59-1/2 3 yr. cliff into stock are not Hardship permitted) Termination Loans PRIOR HOURLY permitted N/A Age 59-1/2 N/A EMPLOYEE 401K Hardship Termination ANNUAL COMPANY permitted permitted Age 59-1/2 5 yr. cliff CONTRIBUTION Termination Loans MPPP EMPLOYEE permitted N/A Age 59-1/2 N/A CONTRIBUTION Termination In-service Loans POST 86 AFTER-TAX permitted N/A In-service 100% Loans TRAVELERS BENEFIT permitted N/A Age 59-1/2 100% Termination ANNUITY SOURCE NAME RESTRICTIONS COMMENTS - ----------------- ------------------ ----------------------------------- EMPLOYEE 401K N/A Converted 12/31/96 from Towers Perrin for 401(K) Plan PRIOR EMPLOYEE Annuity provisions Contains pretax deferred money from Spousal consent Callidus, Howe-Baker, A&B, and Matrix Plans PRIOR EMPLOYER Annuity provisions Contains match and stock sources Spousal consent from Callidus Plan PRIOR HOURLY Annuity provisions Converted 12/31/96 from Principal EMPLOYEE 401K Spousal consent Financial for Hourly Employees Plan ANNUAL COMPANY N/A CONTRIBUTION MPPP EMPLOYEE Annuity provisions Converted 12/31/96 from Principal CONTRIBUTION Spousal consent Financial for Hourly Employees Plan POST 86 AFTER-TAX N/A Contains Howe-Baker, Matrix, A&B after-tax sources TRAVELERS BENEFIT N/A
-1-
CONTRIBUTION SOURCE NAME EXCHANGES MIX CHANGES WITHDRAWALS - -------------------- --------------- --------------- ------------------------- PRIOR PLAN permitted N/A Age 59-1/2 Termination In-service Loans MPPP COMPANY permitted N/A Termination CONTRIBUTION Loans PRE-2001 COMPANY permitted N/A Age 59-1/2 MATCH Termination Loans PRIOR QNEC permitted N/A Termination Loans PRIOR PROFIT SHARING none N/A Age 59-1/2 Termination In-service (20% available after 5 yrs. of service) Loans COMPANY no exchange out no exchange out Age 59-1/2 CONTRIBUTION CB&I Termination STOCK Loans PRIOR EMPLOYER permitted N/A Age 59-1/2 MATCH Termination Loans COMPANY MATCH permitted permitted Age 59-1/2 Termination Loans PRIOR PLAN & permitted permitted Age 59-1/2 ROLLOVERS Termination In-service Loans VESTING ANNUITY SOURCE NAME SCHEDULE RESTRICTIONS COMMENTS - -------------------- ------------ ------------------ ------------------------------------ PRIOR PLAN N/A Annuity provisions Converted 12/31/96 from Principal Spousal consent Financial for Hourly Employees Plans Contains rollover money from CB&I, Callidus, Howe-Baker, A&B, and Matrix Plans MPPP COMPANY 100% Annuity provisions Converted 12/31/96 from Principal CONTRIBUTION Spousal consent Financial for Hourly Employees Plans PRE-2001 COMPANY 100% N/A MATCH immediate PRIOR QNEC 100% Annuity provisions Contains Howe-Baker QNEC Spousal consent PRIOR PROFIT SHARING 100% Annuity provisions Contains Howe-Baker, Matrix, A&B Spousal consent PS sources COMPANY 100% N/A CONTRIBUTION CB&I STOCK PRIOR EMPLOYER 5 yr. graded Annuity provisions Contains match sources from Howe- MATCH Spousal consent Baker, Matrix, and A&B Plans COMPANY MATCH 5 yr. cliff N/A Will contain new company match for 2001 and forward PRIOR PLAN & N/A N/A Converted 12/31/96 from Towers ROLLOVERS Perrin for 401(K) Plan
-2- Exhibit 10.25(a) CHICAGO BRIDGE & IRON SAVINGS PLAN SIXTH AMENDMENT Pursuant to resolution of the Board of Directors of Chicago Bridge & Iron Company, a Delaware corporation ("Company) dated December 19, 2003, the Chicago Bridge & Iron Savings Plan, as amended and restated effective January 1, 1997, and previously amended ("Plan") is hereby further amended in this Sixth Amendment as follows: 1. Section 2.13(a) of the Plan (defining "Compensation") is amended to read as follows: (a) Compensation. Except as provided in subsection (b), Compensation means the total cash salary and wages paid by the Employer through the U.S. payroll system of an Employer to a Participant while an Eligible Employee, or paid by the Employer through its payroll system for U.S. Expatriate Employees (as defined in Section 2.19) to a Participant while an Eligible Employee and a U.S. Expatriate Employee, (i) including short-term disability payments made directly from the assets of the Employer, overtime, and cash bonuses under any annual or other short-term incentive pay or bonus plan, (ii) excluding long-term incentives, stock options, restricted stock, similar non-cash benefits, contributions or benefits under any employee benefit plan and special allowances provided to U.S. Expatriate Employees for the purpose of equalizing their salary and wages, (iii) increased by the amount of any Elective Deferrals under this Plan and any other elective contributions or deferrals made by an Employer on behalf of an Employee that are excluded from the Participant's income by Section 125, Section 132(f), Section 402(e)(3), Section 402(h)(1)(B), Section 403(b), Section 408(p)(2)(A)(i) or Section 457 of the Code, and (iv) excluding all compensation in excess of the Compensation Limit. 2. The introductory clause of Section 2.19 is amended to read as follows: 2.19 "Eligible Employee" means (i) any Employee who is employed by an Employer and paid through the U.S. payroll system of the Employer, including an Employee transferred from the United States to work outside the United States but retained on the U.S. payroll system of the Employer, and (ii) any Employee who is employed by a non-U.S. Employer whose salary and wages are not paid through the U.S. payroll system but who is considered to be a considered to be a U.S. expatriate employee under such Employer's employment and personnel policies (a "U.S. Expatriate Employee"), but excluding: 3. Subsection (b) of Section 2.19 is amended to read as follows: (b) Nonresident Aliens. Any Employee who (i) (A) is neither a citizen nor resident of the United States or (B) is first employed by an Employer or Related Company outside the United States other than as a U.S. Expatriate Employee, and (ii) receives no earned income (within the meaning at Section 911(d)(2) of the Code) from the Employer or a Related Company from sources within the United States (within the meaning of Section 861(a)(3) of the Code). Dated: December 19, 2003 By: /s/ Richard E. Goodrich --------------------------------------- Director, Chicago Bridge & Iron Company Exhibit 10.25(b) CHICAGO BRIDGE & IRON SAVINGS PLAN SEVENTH AMENDMENT Pursuant to resolution of the Board of Directors of Chicago Bridge & Iron Company, a Delaware corporation ("Company) dated December 19, 2003, the Chicago Bridge & Iron Savings Plan, as amended and restated effective January 1, 1997, and previously amended ("Plan"), is hereby further amended in this Seventh Amendment as follows: 1. Section 2.52 of the Plan is amended to read as follows: 2.52 "Rollover Contribution" means a contribution made from time to time by an Eligible Employee to the Trustee in accordance with Section 4.05 of the Plan (i) from a qualified trust as described in Section 402(c) of the Code, an annuity contract described in Section 403(b) of the Code or an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state; or (ii) from an individual retirement account or individual retirement annuity ("IRA") as described in Section 408(d)(3) of the Code if the sole source of contributions to such IRA was one or more rollover contributions from a qualified trust described in Section 402(c) of the Code. A Rollover Contribution shall include any direct transfer of an eligible rollover distribution described in Section 401(a)(31) of the Code from a qualified trust, annuity contract, eligible governmental plan or IRA described in the preceding sentence. 2. Section 3.01 of the Plan is amended to read as follows: 3.01 Participation. (a) Each Eligible Employee who was a Participant in the Former Plan immediately before the Effective Date shall continue as a Participant in the Plan from and after the Effective Date. (b) Except as provided in subsection (c), each other Eligible Employee shall become a Participant on the first day on which he or she is an Eligible Employee. (c) An Eligible Employee who is a shop employee at the Clive, Provo or Warren Shops or whose participation in this Plan is governed by a collective bargaining agreement that provides for an Eligibility Period of Service (defined below) shall become a Participant on the date he or she completes an Eligibility Period of Service, if he or she is then employed by an Employer as an Eligible Employee. If he or she is not then employed by an Employer as an Eligible Employee on such date he or she shall become a Participant on the first day thereafter that he or she is an employed by an Employer as an Eligible Employee, unless he or she had a Period of Severance of at least five consecutive years before again becoming an Eligible Employee; in which case he or she will not become a Participant until the date he or she completes an new Eligibility Period of Service under this subsection after the Period of Severance. For purposes of this subsection an "Eligibility Period of Service" is a one-year period beginning on the date the Employee first completes an Hour of Service (determined without regard to whether the Employee is an Eligible Employee on the first or last day of such period or the number of Hours of Service in such Period). 3. Section 3.03 of the Plan is amended to read as follows: 3.03 Participation Upon Re-Employment. A Participant who has a Termination of Employment, and thereafter resumes employment with an Employer as an Eligible Employee shall again become a Participant immediately upon becoming an Eligible Employee. An Eligible Employee described in Section 3.01(c) who has a Termination of Employment before becoming a Participant and thereafter resumes employment with an Employer as an Eligible Employee shall again become a Participant in accordance with Section 3.01. 4. Section 4.05 of the Plan is amended to read as follows: 4.05 Rollover Contributions into the Plan. At the request of any Eligible Employee the Plan Administrator shall direct the Trustee to accept a Rollover Contribution on behalf of the Eligible Employee. A Rollover Contribution shall be held in the Prior Plan and Rollovers Account for the Eligible Employee. If the Rollover Contribution includes amounts that would not be includible in gross income (except as provided by Sections 402(c), 403(a)(4), 403(b)(8) and 457(e)(16) of the Code) if not transferred as an Rollover Contribution, the Plan Administrator shall separately account for the portion of the Rollover Contribution which is so includible in gross income and the portion of such Rollover Contribution which is not so includible. Each Rollover Contribution shall be made in cash, in notes representing a loan to the Participant from a qualified trust under provisions of such qualified trust similar to Section 7.02, or in property (which may be stock or securities issued by the former employer) acceptable to the Trustee in its sole discretion for purposes of this Plan. Prior to accepting a Rollover Contribution, the Plan Administrator may require that the Eligible Employee who wants to make the Rollover Contribution shall provide evidence reasonably satisfactory to the Plan Administrator that such Contribution qualifies as a Rollover Contribution. Acceptance of a Rollover Contribution shall not in any manner guarantee the result of such contribution under any tax laws; and neither the Company, the Investment Committee, any Employer, the Plan Administrator, the Trustee nor any Investment Manager, shall be responsible for such tax results. If the Plan Administrator determines after any Rollover Contribution that such contribution did not in fact qualify as a Rollover Contribution, the amount of the Rollover Contribution, increased by income and gains and reduced (but not below zero) by losses and expenses, shall be returned to the Eligible Employee. 5. Section 8.02(b) of the Plan is amended to read as follows: (b) installments at monthly, quarterly or annual intervals over a period certain not exceeding the period determined under Section 8.06(b) and in compliance with the requirements of Section 8.06. 6. Section 8.05(d) of the Plan is amended to read as follows: (d) Time and Period of Distribution. Notwithstanding the foregoing provisions of this Section 8.05, if a Participant dies before distributions begin, the Participant's entire interest will be distributed, or begin to be distributed, no later than as follows: (i) If the Participant's surviving spouse is the Participant's sole designated Beneficiary, then distributions to the surviving spouse will begin no later than December 31 of the calendar year immediately following the calendar year containing the fifth anniversary of the Participant's death, or by December 31 of the calendar year in which the Participant would have attained age 70 1/2, if later, (ii) If the Participant's surviving spouse is not the Participant's sole designated Beneficiary, or if there is no designated Beneficiary, then the Participant's 1 entire interest will be distributed to the Beneficiary no later than December 31 of the calendar year containing the fifth anniversary of the Participant's death. If the Participant's surviving spouse is the Participant's sole designated Beneficiary and the surviving spouse dies after the Participant but before distributions to either the Participant or the surviving spouse begin, then this clause (ii) shall apply as if the surviving spouse were the Participant. (iii) Notwithstanding the foregoing provisions of this Article VIII or Section 8.06, if for any reason any portion of a Participant's vested Accrued Benefit is to be paid after his or her death to a trust or to an estate, distribution shall be made in the form of an immediate lump sum payment. For purposes of this Section 805(d) and Section 8.06, distributions are considered to begin on the Participant's Required Distribution Date. If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant's Required Distribution Date (or to the Participant's surviving spouse before the date distributions are required to begin to the surviving spouse under clause (i)), the date distributions are considered to begin is the date distributions actually commence. The minimum amount of distributions beginning pursuant to this Section 8.05(d) shall be determined under Section 8.06(e) 7. Section 8.06 of the Plan is amended to read as follows: 8.06 Minimum Distribution Requirements. (a) A Participant's entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant's Required Distribution Date. Unless a Participant's interest is distributed in a single sum on or before his or her Required Distribution Date, the amount required to be distributed for each calendar year, beginning with distributions for the first distribution calendar year (as defined in subsection (f)), will be made in accordance with this Section 8.06. If the Participant's interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Section 401(a)(9) of the Code and Treasury regulations (b) During the Participant's lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of: (i) the quotient obtained by dividing the Participant's account balance by the distribution period in the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the Treasury regulations, using the Participant's age as of the Participant's birthday in the distribution calendar year; or (ii) if the Participant's sole designated Beneficiary for the distribution calendar year is the Participant's spouse, the quotient obtained by dividing the Participant's account balance by the number in the Joint and Last Survivor Table set forth in Section 1.401(a)(9)-9 of the Treasury regulations, using the Participant's and spouse's attained ages as of the Participant's and spouse's birthdays in the distribution calendar year. Required minimum distributions will be determined under this Section 8.06 beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the Participant's date of death (c) If a Participant dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant's death is the quotient obtained by dividing the Participant's account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant's designated Beneficiary, determined as follows: 2 (i) The Participant's remaining life expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year. (ii) If the Participant's surviving spouse is the Participant's sole designated Beneficiary, the remaining life expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the Participant's death using the surviving spouse's age as of the spouse's birthday in that year. For distribution calendar years after the year of the surviving spouse's death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse's birthday in the calendar year of the spouse's death, reduced by one for each subsequent calendar year. (iii) If the Participant's surviving spouse is not the Participant's sole designated Beneficiary, the designated Beneficiary's remaining life expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant's death, reduced by one for each subsequent year. (d) If the Participant dies on or after the date distributions begin and there is no designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant's death is the quotient obtained by dividing the Participant's account balance by the Participant's remaining life expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year. (e) If the Participant dies before the date distributions begin then, subject to Section 8.05(d): (i) If there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant's death is the quotient obtained by dividing the Participant's account balance by the remaining life expectancy of the Participant's designated Beneficiary, determined as provided in subsection (d). (ii) If there is no designated Beneficiary, distribution of the Participant's entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death. (iii) If the Participant's surviving spouse is the Participant's sole designated Beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under section 8.05(d), this section 8.06(e) will apply as if the surviving spouse were the Participant. (f) For purposes of this Section 8.05(d) and this Section 8.06: (i) "Designated Beneficiary" means the individual who is designated as the Beneficiary under Section 8.05(a) of the Plan and is the designated Beneficiary under Section 401(a)(9) of the Internal Revenue Code and Section 1.401(a)(9)-1, Q&A-4, of the Treasury regulations. (ii) "Distribution calendar year" means a calendar year for which a minimum distribution is required. For distributions beginning before the Participant's death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant's Required Distribution Date. For distributions beginning after the Participant's death, the first distribution calendar year is the calendar year in which distributions are required to begin under Section 8.05(d). The required minimum 3 distribution for the Participant's first distribution calendar year will be made on or before the Participant's Required Distribution Date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participant's Required Distribution Date occurs, will be made on or before December 31 of that distribution calendar year. (iii) "Life expectancy" means life expectancy as computed by use of the Single Life Table in Section 1.401(a)(9)-9 of the Treasury regulations. (iv) "Participant's account balance" means the account balance as of the last valuation date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. The account balance for the valuation calendar year includes any amounts rolled over or transferred to the plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year. (g) The requirements of Section 8.05(d) and this Section 8.06 will take precedence over any inconsistent provisions of the Plan. Distributions required under Section 8.05(d) and this Section 8.06 will be determined and made in accordance with the Treasury Regulations under Section 401(a)(9) of the Internal Revenue Code 6. The foregoing amendment shall be effective as of January 1, 2003, and the amendments made by paragraphs 5, 6 and 7 shall be effective for purposes of determining required minimum distributions for calendar years beginning with the 2003 calendar year. Dated: December 19, 2003 By: Richard E. Goodrich --------------------------------------- Director, Chicago Bridge & Iron Company 4 EX-13 5 h23159exv13.htm PORTION OF 2004 ANNUAL REPORT TO SHAREHOLDERS exv13

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
We derived the following summary financial and operating data for the five years ended December 31, 2000 through 2004 from our audited consolidated financial statements, except for “Other Data”. You should read this information together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, including the related notes, appearing elsewhere in this Annual Report.
(In thousands, except per share and employee data)

Years Ended December 31, 2004⁽⁷⁾ 2003 2002 ⁽⁶⁾ 2001 2000

Income Statement Data

Revenue
$ 1,897,182 $ 1,612,277 $ 1,148,478 $ 1,081,824 $ 611,691

Cost of revenue
1,694,871 1,415,715 992,927 945,048 570,921

Gross profit
202,311 196,562 155,551 136,776 40,770

Selling and administrative expenses
98,503 93,506 73,155 67,519 41,913

Intangibles amortization
1,817 2,548 2,529 5,819 599

Other operating income, net ⁽¹⁾
(88 ) (2,833 ) (1,818 ) (691 ) (2,401 )

Exit costs / special charges ⁽²⁾
— — 3,972 9,686 27,464

Income (loss) from operations
102,079 103,341 77,713 54,443 (26,805 )

Interest expense
(8,232 ) (6,579 ) (7,114 ) (8,392 ) (5,187 )

Interest income
2,233 1,300 1,595 1,854 430

Income (loss) before taxes and minority interest
96,080 98,062 72,194 47,905 (31,562 )

Income tax (expense) benefit
(31,284 ) (29,713 ) (20,233 ) (13,480 ) 4,859

Income (loss) before minority interest
64,796 68,349 51,961 34,425 (26,703 )

Minority interest in loss (income)
1,124 (2,395 ) (1,812 ) (2,503 ) (1,341 )

Income (loss) from continuing operations
65,920 65,954 50,149 31,922 (28,044 )

Discontinued operations: ⁽³⁾

Loss from discontinued operations, net of taxes
— — — (2,321 ) (5,731 )

Loss on disposal of discontinued operations, net of taxes
— — — (9,898 ) —

Net income (loss)
$ 65,920 $ 65,954 $ 50,149 $ 19,703 $ (33,775 )

Per Share Data ^{(2) (5)}

Net income (loss)—basic

Income (loss) from continuing operations
$ 1.38 $ 1.46 $ 1.16 $ 0.74 $ (1.49 )

Loss from discontinued operations
— — — (0.28 ) (0.31 )

Net income (loss)
$ 1.38 $ 1.46 $ 1.16 $ 0.46 $ (1.80 )

Net income (loss)—diluted

Income (loss) from continuing operations
$ 1.33 $ 1.39 $ 1.12 $ 0.71 $ (1.49 )

Loss from discontinued operations
— — — (0.27 ) (0.31 )

Net income (loss)
$ 1.33 $ 1.39 $ 1.12 $ 0.44 $ (1.80 )

Dividends
$ 0.16 $ 0.16 $ 0.12 $ 0.12 $ 0.12

Balance Sheet Data

Goodwill
$ 233,386 $ 219,033 $ 157,903 $ 138,444 $ 132,426

Total assets
$ 1,102,718 $ 932,362 $ 754,613 $ 665,975 $ 553,156

Long-term debt
$ 50,000 $ 75,000 $ 75,000 $ 75,000 $ 101,800

Total shareholders’ equity
$ 469,238 $ 389,164 $ 282,147 $ 212,223 $ 155,747

Cash Flow Data

Cash flows from operating activities
$ 132,769 $ 90,366 $ 72,030 $ 105,796 $ 4,085

Cash flows from investing activities
$ (26,051 ) $ (102,030 ) $ (36,957 ) $ (35,775 ) $ (65,567 )

Cash flows from financing activities
$ 16,754 $ 22,046 $ 16,985 $ (27,034 ) $ 50,618

Other Financial Data

Gross profit percentage
10.7 % 12.2 % 13.5 % 12.6 % 11.3 %

Depreciation and amortization
$ 22,498 $ 21,431 $ 19,661 $ 25,105 $ 16,838

Capital expenditures
$ 17,430 $ 31,286 $ 23,927 $ 8,917 $ 6,353

Other Data

New business taken ⁽⁴⁾
$ 2,614,549 $ 1,708,210 $ 1,641,128 $ 1,160,374 $ 680,776

Backlog ⁽⁴⁾
$ 2,339,114 $ 1,590,381 $ 1,310,987 $ 835,255 $ 597,350

Number of employees:

Salaried
3,204 2,895 2,152 2,054 1,676

Hourly and craft
7,824 7,337 4,770 5,204 3,618

FOOTNOTES FOR PREVIOUS TABLE

(1) Other operating income, net generally represents gains on the sale of property, plant and equipment.

(2) In 2002, we recognized special charges of $4.0 million. Included in the 2002 special charges were $3.4 million for personnel costs including severance and personal moving expenses associated with the relocation of our administrative offices, $0.5 million for integration costs related to integration initiatives associated with the acquisition of the Engineered Construction and Water Divisions (“PDM Divisions”) of Pitt-Des Moines, Inc. and $0.4 million for facilities costs relating to the closure and relocation of facilities. During 2002, we also recorded income of $0.4 million in relation to adjustments associated with the sale of our XL Technology Systems, Inc. subsidiary. In 2001, we recognized special charges of $9.7 million. Included in the 2001 special charges were $5.7 million for personnel costs including severance and personal moving expenses associated with the relocation, closure or downsizing of offices, and our voluntary resignation offer; $2.8 million for facilities and other charges related to the sale, closure, downsizing or relocation of operations; and $1.2 million for integration costs primarily related to integration initiatives associated with the PDM Divisions acquisition. In 2000, we recognized special charges of $27.5 million. Included in the 2000 special charges were $22.2 million for payments associated with our voluntary resignation offer, severance and other benefits-related costs and $5.3 million in facilities-related expenses. See Note 4 to our Consolidated Financial Statements for additional details on special charges.
(3) During the second quarter of 2001, we decided to discontinue our high purity piping business, UltraPure Systems, due primarily to continuing weak market conditions in the microelectronics industry. The loss on disposal of discontinued operations of $9.9 million after tax includes the write-down of equipment (net of proceeds), lease terminations, severance and other costs, and losses during the phase-out period. As a result of this operation being classified as discontinued, prior periods have been previously restated. Our actions necessary to discontinue UltraPure Systems were essentially complete at December 31, 2001.
(4) New business taken represents the value of new project commitments received by us during a given period. These commitments are included in backlog until work is performed and revenue is recognized or until cancellation. Backlog may also fluctuate with currency movements.
(5) On February 25, 2005, we declared a two-for-one stock split effective in the form of a stock dividend payable March 31, 2005 to stockholders of record at the close of business on March 21, 2005. The following per share amounts reflect the pro-forma impact of the stock split for all periods presented:

Years Ended December 31, 2004 2003 2002 2001 2000

Per Share Data - Split Adjusted

Net income (loss)—basic

Income (loss) from continuing operations
$ 0.69 $ 0.73 $ 0.58 $ 0.37 $ (0.75 )

Loss from discontinued operations
— — — (0.14 ) (0.16 )

Net income (loss)
$ 0.69 $ 0.73 $ 0.58 $ 0.23 $ (0.91 )

Net income (loss)—diluted

Income (loss) from continuing operations
$ 0.67 $ 0.69 $ 0.56 $ 0.36 $ (0.75 )

Loss from discontinued operations
— — — (0.14 ) (0.16 )

Net income (loss)
$ 0.67 $ 0.69 $ 0.56 $ 0.22 $ (0.91 )

Dividends
$ 0.08 $ 0.08 $ 0.06 $ 0.06 $ 0.06

(6) We changed our method of accounting for goodwill upon adoption of SFAS No. 142 on January 1, 2002. See Note 6 to our Consolidated Financial Statements.
(7) Included in our 2004 results of operations were significant losses associated with the recognition of potentially unrecoverable costs on two projects, one in our EAME segment’s Saudi Arabia region and the other in our North America segment, as fully described in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is provided to assist readers in understanding our financial performance during the periods presented and significant trends which may impact our future performance. This discussion should be read in conjunction with our Consolidated Financial Statements and the related notes thereto included elsewhere in this Annual Report.
We are a global specialty engineering, procurement and construction (“EPC”) company serving customers in a number of key industries including oil and gas; petrochemical and chemical; power; water and wastewater; and metals and mining. We have been helping our customers produce, process, store and distribute the earth’s natural resources for more than 100 years by supplying a comprehensive range of engineered steel structures and systems. We offer a complete package of design, engineering, fabrication, procurement, construction and maintenance services. Our projects include hydrocarbon processing plants, liquefied natural gas (“LNG”) terminals and peak shaving plants, offshore structures, pipelines, bulk liquid terminals, water storage and treatment facilities, and other steel structures and their associated systems. We have been continuously engaged in the engineering and construction industry since our founding in 1889.
RESULTS OF OPERATIONS
Our new business taken, revenue and income from operations in the following geographic segments are as follows:

(In thousands)

Years Ended December 31, 2004 2003 2002

New Business Taken ⁽¹⁾

North America
$ 1,448,055 $ 1,105,369 $ 1,014,375

Europe, Africa, Middle East
962,299 380,493 375,897

Asia Pacific
135,226 147,238 139,907

Central and South America
68,969 75,110 110,949

Total new business taken
$ 2,614,549 $ 1,708,210 $ 1,641,128

Revenue

North America
$ 1,130,096 $ 970,851 $ 801,624

Europe, Africa, Middle East
508,735 329,947 132,853

Asia Pacific
175,883 218,201 95,935

Central and South America
82,468 93,278 118,066

Total revenue
$ 1,897,182 $ 1,612,277 $ 1,148,478

Income From Operations

North America
$ 73,709 $ 67,762 $ 49,413

Europe, Africa, Middle East
12,625 17,384 3,032

Asia Pacific
4,445 6,000 1,950

Central and South America
11,300 12,195 23,318

Total income from operations
$ 102,079 $ 103,341 $ 77,713

⁽¹⁾ New business taken represents the value of new project commitments received by us during a given period. These commitments are included in backlog until work is performed and revenue is recognized or until cancellation.

2004 VERSUS 2003
New Business Taken/Backlog – New business taken was $2.6 billion during 2004, compared with $1.7 billion in 2003. Approximately 55% of the new business taken during 2004 was for contracts awarded in North America. During 2004, new business taken increased 31% in the North America segment, due primarily to significant LNG expansion and peak shaving awards in the United States. New business taken for the Europe, Africa, Middle East (“EAME”) segment increased 153% primarily due to the award of an LNG import terminal project in the United Kingdom valued in excess of $700.0 million. New business taken in our Asia Pacific (“AP”) segment decreased 8% primarily due to fewer standard tank awards in China and Thailand. New business taken in the Central and South America (“CSA”) segment decreased 8% during 2004 as a result of fewer LNG awards in the Caribbean. We anticipate new business in 2005 to range between $2.2 and $2.4 billion due to our strength in markets such as LNG and clean fuels, together with the increased demand for lump sum, turnkey contracting.
Backlog increased $748.7 million or 47% to $2.3 billion at December 31, 2004, primarily due to the LNG import terminal new award in the United Kingdom, noted above.
Revenue – Revenue in 2004 of $1.9 billion increased $285 million, or 18% compared with 2003. The growth over 2003 was primarily attributable to strong backlog going into 2004 and progress on significant projects in our North America and EAME segments. Our revenue fluctuates based on the changing project mix and is dependent on the amount and timing of new awards, and on other matters
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such as project schedules. During 2004, revenue increased 16% in the North America segment and 54% in the EAME segment, but declined 19% in the AP segment and 12% in the CSA segment. The increase in the North America segment related primarily to higher volumes of LNG and turnaround projects in the United States. Revenue growth in the EAME segment resulted from significant LNG projects under way in Nigeria and Russia and the inclusion of a full year of revenue from the John Brown Hydrocarbons Limited (“John Brown”) acquisition made in 2003. AP’s decrease is primarily attributable to the completion of significant projects in Australia, while CSA’s decline was a result of fewer new awards in certain Latin American markets. We anticipate total revenue for 2005 will be between $2.0 and $2.2 billion. Based upon the current backlog, we expect the majority of our 2005 revenue growth to come in the North America and EAME segments.
Gross Profit – Gross profit in 2004 was $202.3 million, or 10.7% of revenue, compared with $196.6 million, or 12.2% of revenue, in 2003. Gross profit as a percentage of revenue fell primarily as a result of the recognition of potentially unrecoverable costs on two projects, one in our EAME segment’s Saudi Arabia region and the other in our North America segment. The overall decrease as a percentage of revenue was partially offset by the impact of strong project execution, which resulted in cost savings.
Saudi Arabian Project
The Saudi project was forecasted to close in a loss position of $1.4 million as of the end of 2003. In the first quarter of 2004, we recognized unanticipated costs for work performed on the project for which we were contractually obligated without the benefit of immediate owner approval. The increased costs were provided for in the period, resulting in a total charge of $6.9 million in the first quarter. Events in the Saudi Arabia region of our EAME segment during the second quarter resulted in an unanticipated level of uncertainty and instability in the region. As a result of disruptions, real or perceived, caused by terrorist activity beginning in May 2004, we incurred additional costs and encountered unexpected difficulties and delays on the Saudi project due to increased physical security requirements and the inefficiencies, delays and disruption caused by the need to replace employees choosing to depart the Kingdom. In the second quarter, we increased our estimate of all costs expected to be incurred to complete the project. As the project was still forecasted to result in a loss in the second quarter, additional provision for such loss was made, resulting in a $16.4 million charge in the second quarter. Provision for additional loss on the project resulted in a $2.1 million charge to earnings in the third quarter and $1.2 million in the fourth quarter. Total provisions charged to earnings during 2004 for this project were $26.6 million.

At December 31, 2004, we had not recognized revenue for unapproved change orders or claims associated with this project. However, we intend to continue pursuing customer approval. If these change orders or claims are approved, associated revenue will be recognized at such time, which would impact future operating results. The project was essentially complete at December 31, 2004.
Other than the Saudi project, we have active smaller projects in the Saudi Arabia region of our EAME segment where terrorist activity might significantly increase our costs or cause a delay in the completion of a project. We have taken steps to reduce risks from terrorist activity, including moving certain employees and support services out of Saudi Arabia and continuing to implement appropriate security measures at our jobsites and facilities. While no assurances can be given, at the present time we do not believe that potential terrorist activity in Saudi Arabia will have a material impact on our future results of operations.
North American Project
On the North America segment project, a major general contractor for us (Jones LG LLC) filed for bankruptcy in late September 2003, and we undertook to take over and complete the project on an expedited basis to ensure that our significant client’s requirements were met. During the fourth quarter of 2003, work that had been performed by the contractor’s subcontractors was suspended at a critical stage pending authorization from the bankruptcy court to proceed. Also during the fourth quarter of 2003, the general contractor gave us an estimate of the amount of the work completed and remaining to be completed. Late in the fourth quarter, we began to mobilize and believed we could perform within the budget. During the first quarter of 2004, costs increased from the impact of our taking over the work and included the continuation of mobilization; hiring and deployment of craft labor; selection of subcontractors and planning and organization of the takeover of the work and performance of work that had not been satisfactorily completed by the general contractor or its subcontractors. An $8.0 million charge to earnings was recognized in the first quarter for the increase in forecasted total costs and the resulting reduced forecasted gross margin on the project.

During the second quarter of 2004, our forecast of total project costs increased as a result of a series of unexpected events that required us to perform unplanned work and incur unforecasted costs including the rework of components of the most critical equipment on the project, decreases in labor productivity and longer than anticipated equipment utilization. Additionally, commissioning and preparation for start-up of the facility began before construction was complete and much of the work had to be completed on an expedited basis in order to support an aggressive commissioning and start-up program, necessitating additional costs. Due to these previously unforeseen costs, the project was now forecasted to result in a negative gross margin. As a result, a provision for such loss was made, resulting in a $15.0 million charge to earnings in the second quarter. Total provisions charged to earnings during 2004 for this project were $23.0 million. At December 31, 2004, the project was complete.
Other
Based on the current mix of projects in backlog, 2005 gross profit as a percentage of revenue is anticipated to be in line with 2003 levels. As discussed in Note 2 to our Consolidated Financial Statements, we have recorded $46.1 million of unapproved claims/change orders at cost, net of reserves, of which $36.8 million is associated with an ongoing project in our EAME segment. While this project is substantially complete, we have not reached agreement regarding the final value of certain change orders and agreements. As of December 31, 2004, we had received cash advances totaling $17.8 million to fund a portion of the costs associated with the change orders and agreements. Subsequent to year-end, we received an additional $10.0 million of funding associated with the change orders and agreements and reached agreement on an additional $3.5 million with receipt expected in the first quarter of 2005. If the final

4

settlement is less than the revenue recognized on these changes through December 31, 2004, our 2005 results of operations could be negatively impacted.
Selling and Administrative Expenses – Selling and administrative expenses were $98.5 million, or 5.2% of revenue, in 2004, compared with $93.5 million, or 5.8% of revenue, in 2003. The absolute dollar increase compared with 2003 related primarily to increased professional fees and labor costs associated with Sarbanes-Oxley documentation and compliance testing, higher incentive program costs and the full-year impact of operations acquired in the second quarter of 2003.
Income from Operations – Income from operations in 2004 was $102.1 million, representing a $1.3 million decrease compared with 2003. Operating income decreased due to the impact of loss provisions for the North America and EAME segment projects discussed above, partially offset by higher revenue volume, cost savings attributable to strong project execution, and higher fixed cost coverage related to overhead and selling and administrative expenses.
Interest Expense and Interest Income – Interest expense increased $1.7 million from the prior year to $8.2 million, primarily due to fees associated with our increased capacity on revolving credit facilities and higher foreign short-term borrowing levels. Interest income increased $0.9 million from 2003 to $2.2 million primarily due to higher short-term investment levels.
Income Tax Expense – Income tax expense for 2004 and 2003 was $31.3 million, or 32.6% of pre-tax income, and $29.7 million, or 30.3% of pre-tax income, respectively. The rate increase compared with 2003 is primarily due to the establishment of valuation allowances on non-U.S. losses and adjustments to tax reserves. As of December 31, 2004, we had U.S. net operating loss carryforwards (“NOLs”) of approximately $30.5 million, of which $6.4 million is subject to limitation under Internal Revenue Code Section 382. The U.S. NOLs will expire from 2019 to 2024.
We operate in more than 60 locations worldwide and, therefore, are subject to the jurisdiction of multiple taxing authorities. Determination of taxable income in any given jurisdiction requires the interpretation of applicable tax laws, regulations, treaties, tax pronouncements and other tax agreements. As a result, we are subject to tax assessments in such jurisdictions, including assessments related to the determination of taxable income, transfer pricing and the application of tax treaties, among others. We believe we have adequately provided for any such known or anticipated challenges. We believe that the amount currently provided under Statement of Financial Accounting Standards (“SFAS”) No. 5, “Accounting for Contingencies,” will not be settled in the next 12 months and such amount does not have a significant impact on our liquidity.
Minority Interest in Loss (Income) – Minority interest in loss in 2004 was $1.1 million compared with minority interest in income of $2.4 million in 2003. The change over 2003 primarily relates to recognition of our minority partner’s share of losses resulting from the Saudi Arabian project discussed above.
2003 VERSUS 2002
New Business Taken/Backlog—New business taken during 2003 was $1.7 billion, compared with $1.6 billion in 2002. Approximately 65% of the new business taken during 2003 was for contracts awarded in North America. During 2003, new business taken increased 9% in the North America segment due primarily to increased awards of EPC contracts for the hydrocarbon industries. Significant awards in the United States included two LNG expansion projects, one in excess of $90 million and another in excess of $80 million, and a $65 million hydrotreater project. New business taken for the EAME segment approximated 2002, with significant awards including a $95 million LNG terminal project in Russia, a $50 million tankage project in Oman and a $50 million liquefied petroleum gas (“LPG”) storage project in Qatar. New business taken in our AP segment increased 5%, with significant awards including a refrigerated storage project in Australia and a butane storage facility in China. New business taken in the CSA segment decreased 32% during 2003 as a result of continued negative political and economic conditions in certain Latin American markets, principally Venezuela.
Backlog increased $279.4 million or 21% to $1.6 billion at December 31, 2003.
Revenue—Revenue in 2003 of $1.6 billion rose 40% compared with 2002. The growth over 2002 was primarily attributable to the strong backlog going into 2003, as projects moved into the field construction phase. During 2003, revenue increased 21% in the North America segment, 148% in the EAME segment, 127% in the AP segment, but declined 21% in the CSA segment. The increase in the North America segment related primarily to higher volumes of process-related work as backlog carried over from 2002 was put in place and strong new business continued in 2003. Revenue growth in the EAME segment resulted from large projects under way in Saudi Arabia and Nigeria and the inclusion of post-acquisition revenue from the John Brown acquisition. The increase in the AP segment related to large projects under way in China and Australia, while CSA’s decrease was a result of lower new awards in certain Latin American markets.
Gross Profit—Gross profit in 2003 was $196.6 million, or 12.2% of revenue, compared with $155.6 million or 13.5% of revenue, in 2002. Gross profit as a percentage of revenue fell as a result of timing and mix of projects being executed.
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Selling and Administrative Expenses—Selling and administrative expenses were $93.5 million, or 5.8% of revenue, in 2003, compared with $73.2 million, or 6.4% of revenue, in 2002. The absolute dollar increase compared with 2002 related primarily to higher incentive compensation program costs, higher insurance costs and the impact of acquired operations.
Exit Costs/Special Charges—There were no exit costs/special charges incurred during 2003 compared with $4.0 million in 2002. During 2002, we recorded special charges of $3.4 million for personnel costs, including severance and personal moving expenses associated with the relocation of our Plainfield, Illinois office personnel to The Woodlands, Texas. Additionally, during 2002 we also recorded $0.4 million relating to the closure and relocation of facilities and $0.5 million for integration activities associated with the acquisition of the PDM Divisions. During 2002, we also recorded income of $0.4 million in relation to adjustments associated with the sale of our XL Technology Systems, Inc. subsidiary. Moving, replacement personnel and integration costs have been expensed as incurred.
Income from Operations—Income from operations in 2003 was $103.3 million, representing a $25.6 million increase compared with 2002. The North America, EAME and AP segments benefited from higher revenue and continued cost control of overhead and administrative expenses. Operating income declined in the CSA segment due to lower revenue and the recognition in 2002 of cost savings on several major contracts nearing completion.
Interest Expense and Interest Income—Interest expense decreased $0.5 million from the prior year to $6.6 million for 2003, due to lower average debt levels in 2003. Interest income decreased $0.3 million from 2002 to $1.3 million in 2003.
Income Tax Expense—Income tax expense was $29.7 million and $20.2 million in 2003 and 2002, respectively. The effective tax rates for 2003 and 2002 were 30.3% and 28.0%, respectively. The rate increased in 2003 as a larger portion of earnings were generated in North America. As of December 31, 2003, we had U.S. NOLs of approximately $17.6 million.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2004, cash and cash equivalents totaled $236.4 million.
Operating – During 2004, our operations generated $132.8 million of cash flows, primarily attributable to strong profitability and decreased working capital levels. During the fourth quarter of 2004, we settled a previously accrued $17.4 million obligation to our former parent to fund certain defined benefit and postretirement benefit obligations. This obligation, which we settled early, had required ratable payments with interest at 7.5% through December 2008.
Investing – In 2004, we incurred $17.4 million for capital expenditures, primarily for field equipment to support projects in our EAME and North America segments. For 2005, capital expenditures are anticipated to be in the $25.0 to $30.0 million range. Our 2004 utilization of cash also included approximately $10.6 million of deferred purchase consideration, including $8.6 million of contingent consideration associated with our acquisition of Howe-Baker International, L.L.C. (“Howe-Baker”) in 2000.
In connection with our acquisition of Howe-Baker, we assumed two earnout arrangements contingent upon the performance of the underlying acquired entities. One of the arrangements, which required us to make cash payments to the previous owners, expired in July 2004 (of which $1.4 million is included in accrued liabilities with final settlement expected in 2005), while the other arrangement was settled during 2003.
We continue to evaluate and selectively pursue opportunities for expansion of our business through acquisition of complementary businesses. These acquisitions, if they arise, may involve the use of cash or may require debt or equity financing.
Financing – Net cash flows provided by financing activities were $16.8 million, primarily attributable to the issuance of common stock resulting from the exercise of stock options, and increased short-term international borrowings. Cash dividends of $7.6 million were paid during 2004. In February 2005, we announced a two-for-one stock split in the form of a stock dividend, as well as a 50% increase in our annual dividend from $0.16 to $0.24 per share ($0.08 to $0.12 per share on a split-adjusted basis). As a result, our 2005 dividend is expected to be in the $11.0 to $12.0 million range. During the third quarter of 2005, the first of three equal annual installments of $25.0 million is due on our senior notes.
Our primary internal source of liquidity is cash flow generated from operations. Capacity under revolving credit agreements is also available, if necessary, to fund operating or investing activities. We have a three-year $233.3 million revolving credit facility and a five-year $116.7 million letter of credit facility, which terminate in August 2006 and August 2008, respectively. Both facilities are committed and unsecured. As of December 31, 2004, no direct borrowings existed under the revolving credit facility, but we had issued $83.3 million of letters of credit under the three-year facility and $72.0 million under the five-year facility. As of December 31, 2004, we had $194.7 million of available capacity under these facilities. The facilities contain certain restrictive covenants including minimum levels of net worth, fixed charge and leverage ratios, among other restrictions. The facilities also place restrictions on us with regard to subsidiary indebtedness, sales of assets, liens, investments, type of business conducted, and mergers and acquisitions, among other restrictions. We were in compliance with all covenants at December 31, 2004.
We also have various short-term, uncommitted revolving credit facilities across several geographic regions of approximately $371.1 million. These facilities are generally used to provide letters of credit or bank guarantees to customers in the ordinary course of business to support advance payments, as performance guarantees or in lieu of retention on our contracts. At December 31, 2004, we
6

had available capacity of $141.9 million under these uncommitted facilities. In addition to providing letters of credit or bank guarantees, we also issue surety bonds in the ordinary course of business to support our contract performance. For a further discussion of letters of credit and surety bonds, see Note 11 to our Consolidated Financial Statements.
Our $75.0 million of senior notes also contain a number of restrictive covenants, including a maximum leverage ratio and minimum levels of net worth and debt and fixed charge ratios, among other restrictions. The notes also place restrictions on us with regard to investments, other debt, subsidiary indebtedness, sales of assets, liens, nature of business conducted and mergers, among other restrictions. We were in compliance with all covenants at December 31, 2004.
As of December 31, 2004, the following commitments were in place to support our ordinary course obligations:

Commitments Amounts by Expiration Period

(In thousands) Total Less than 1 Year 1-3 Years 4-5 Years After 5 Years

Letters of credit/bank guarantees
$ 384,548 $ 193,687 $ 112,008 $ 78,853 $ —

Surety bonds
361,387 318,564 42,767 56 —

Total commitments
$ 745,935 $ 512,251 $ 154,775 $ 78,909 $ —

Note: Letters of credit includes $20,604 of letters of credit issued in support of our insurance program.

Contractual obligations at December 31, 2004 are summarized below:

Contractual Obligations Payments Due by Period

(In thousands) Total Less than 1 Year 1-3 Years 4-5 Years After 5 Years

Senior notes ^{( 1 )}
$ 86,010 $ 30,505 $ 55,505 $ — $ —

Operating leases
126,664 24,368 26,469 20,878 54,949

Purchase obligations ⁽²⁾
— — — — —

Self-insurance obligations ^{( 3 )}
14,740 14,740

Pension funding obligations ^{( 4 )}
5,166 5,166 — — —

Postretirement benefit funding obligations ^{( 4 )}
2,103 2,103 — — —

Total contractual obligations
$ 234,683 $ 76,882 $ 81,974 $ 20,878 $ 54,949

⁽¹⁾ Includes interest accruing at a rate of 7.34%.

⁽²⁾ In the ordinary course of business, we enter into purchase commitments to satisfy our requirements for materials and supplies for contracts that have been awarded. These purchase commitments, that are to be recovered from our customers, are generally settled in less than one year. We do not enter into long-term purchase commitments on a speculative basis for fixed or minimum quantities.
⁽³⁾Amount represents expected 2005 payments associated with our self-insurance program. Payments beyond one year have not been included as non-current amounts are not determinable on a year-by-year basis.

⁽⁴⁾ Amounts represent expected 2005 contributions to fund our defined benefit and other postretirement plans, respectively. Contributions beyond one year have not been included as amounts are not determinable.
We believe cash on hand, funds generated by operations, amounts available under existing credit facilities and external sources of liquidity, such as the issuance of debt and equity instruments, will be sufficient to finance capital expenditures, the settlement of commitments and contingencies (as fully described in Note 11 to our Consolidated Financial Statements) and working capital needs for the foreseeable future. However, there can be no assurance that such funding will be available, as our ability to generate cash flows from operations and our ability to access funding under the revolving credit facilities may be impacted by a variety of business, economic, legislative, financial and other factors which may be outside of our control. Additionally, while we currently have a significant, uncommitted bonding facility, primarily to support various commercial provisions in our engineering and construction contracts, a termination or reduction of the bonding facility could result in the utilization of letters of credit in lieu of performance bonds, thereby reducing our available capacity under the revolving credit facilities. Although we do not anticipate a reduction or termination of the bonding facility, there can be no assurance that such a facility will be available at reasonable terms to service our ordinary course obligations.
7

We are a defendant in a number of lawsuits arising in the normal course of business, including among others, lawsuits wherein plaintiffs allege exposure to asbestos due to work we may have performed at various locations. We have never been a manufacturer, distributor or supplier of asbestos products, and we have in place appropriate insurance coverage for the type of work that we have performed. During 2004, we were named as a defendant in additional asbestos-related lawsuits. To date, the claims which have been resolved have been dismissed or settled without a material impact on our operating results or financial position and we do not currently believe that unresolved asserted claims will have a material adverse effect on our future results of operations or financial position. As a matter of standard policy, we continually review our litigation accrual and as further information is known on pending cases, increases or decreases, as appropriate, may be recorded in accordance with SFAS No. 5.
For a discussion of other pending litigation, including matters involving the U.S. Federal Trade Commission, see Note 11 to our Consolidated Financial Statements.
OFF-BALANCE SHEET ARRANGEMENTS
We use operating leases for facilities and equipment when they make economic sense. In 2001, we entered into a sale (for approximately $14.0 million) and leaseback transaction of our Plainfield, Illinois administrative office with a lease term of 20 years. The leaseback structure is not subject to consolidation and the future payments are accounted for as an operating lease. Rentals under this and all other lease commitments are reflected in rental expense and future rental commitments as summarized in Note 11 to our Consolidated Financial Statements.
We have no other off-balance sheet arrangements.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to market risk from changes in foreign currency exchange rates, which may adversely affect our results of operations and financial condition. One exposure to fluctuating exchange rates relates to the effects of translating the financial statements of our non-U.S. subsidiaries, which are denominated in currencies other than the U.S. dollar, into the U.S. dollar. The foreign currency translation adjustments are recognized in shareholders’ equity in accumulated other comprehensive income (loss) as cumulative translation adjustment, net of tax. We generally do not hedge our exposure to potential foreign currency translation adjustments.
Another form of foreign currency exposure relates to our non-U.S. subsidiaries’ normal contracting activities. We generally try to limit our exposure to foreign currency fluctuations in most of our engineering and construction contracts through provisions that require client payments in U.S. dollars or other currencies corresponding to the currency in which costs are incurred. As a result, we generally do not need to hedge foreign currency cash flows for contract work performed. However, where construction contracts do not contain foreign currency provisions, we use forward exchange contracts to hedge foreign currency transaction exposure. The gains and losses on these contracts offset changes in the value of the related exposures. As of December 31, 2004, the notional amount of cash flow hedge contracts outstanding was $144.5 million, and the notional amount exceeded the fair value of these contracts by approximately $2.8 million. The terms of these contracts extend up to three years.
In circumstances where intercompany loans and/or borrowings are in place with non-U.S. subsidiaries, we will also use forward contracts. If the timing or amount of foreign-denominated cash flows vary, we incur foreign exchange gains or losses, which are included in the consolidated statements of income. We do not use financial instruments for trading or speculative purposes.
8

The carrying value of our cash and cash equivalents, accounts receivable, accounts payable and notes payable approximates their fair values because of the short-term nature of these instruments. At December 31, 2004 and 2003, the fair value of our fixed rate long-term debt was $53.1 million and $82.0 million respectively, based on the current market rates for debt with similar credit risk and maturities. See Note 9 to our Consolidated Financial Statements for quantification of our financial instruments.
NEW ACCOUNTING STANDARDS
In December 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” The revised standard requires annual and interim disclosures in addition to those in the original standard concerning the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. We adopted this statement, effective for fiscal years ending after December 15, 2003, on January 1, 2004. The disclosure requirements of this statement are reflected in Note 10 to our Consolidated Financial Statements.
In May 2004, the FASB issued FASB Staff Position (“FSP”) No. 106-2 (“FSP 106-2”), “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” which supersedes FSP 106-1. FSP 106-2 provides guidance on accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) for employers that sponsor postretirement health care plans that provide prescription drug benefits. FSP 106-2 also requires certain disclosures regarding the effect of the federal subsidy provided by the Act. FSP 106-2 is effective for the first interim and annual period beginning after June 15, 2004. Although we are currently evaluating our qualification status for any Medicare Prescription Drug subsidies, the effect of our adoption of FSP 106-2 is not anticipated to have a significant impact on our financial condition or results of operations.
In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment”. This standard requires compensation costs related to share-based payment transactions to be recognized in the financial statements. Compensation cost will generally be based on the grant-date fair value of the equity or liability instrument issued, and will be recognized over the period that an employee provides service in exchange for the award. SFAS No. 123(R) applies to all awards granted after June 30, 2005, to awards modified, repurchased, or cancelled after that date and to the portion of outstanding awards for which the requisite service has not yet been rendered. We do not anticipate applying the modified version of retrospective application under which financial statements for prior periods are adjusted. Pro forma results, which approximate the historical impact of this standard, are presented under the stock plans heading of Note 2 to our Consolidated Financial Statements.
CRITICAL ACCOUNTING ESTIMATES
The discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an on-going basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Our management has discussed the development and selection of our critical accounting estimates with the Audit Committee of our Supervisory Board of Directors. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:
Revenue Recognition— Revenue is recognized using the percentage-of-completion method. A significant portion of our work is performed on a fixed price or lump sum basis. The balance of our work is performed on variations of cost reimbursable and target price approaches. Contract revenue is accrued based on the percentage that actual costs-to-date bear to total estimated costs. We utilize this cost-to-cost approach as we believe this method is less subjective than relying on assessments of physical progress. We follow the guidance of the Statement of Position 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts,” for accounting policy relating to our use of the percentage-of-completion method, estimating costs, revenue recognition and unapproved change order/claim recognition. The use of estimated cost to complete each contract, while the most widely recognized method used for percentage-of-completion accounting, is a significant variable in the process of determining income earned and is a significant factor in the accounting for contracts. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known. Due to the various estimates inherent in our contract accounting, actual results could differ from those estimates.
Contract revenue reflects the original contract price adjusted for approved change orders and estimated minimum recoveries of unapproved change orders and claims. We recognize unapproved change orders and claims to the extent that related costs have been incurred when it is probable that they will result in additional contract revenue and their value can be reliably estimated. At December 31, 2004, we had outstanding unapproved change orders/claims recognized of $46.1 million, net of reserves; however, through December 31, 2004, we had received cash advances totaling $17.8 million to fund a portion of the costs associated with certain change orders and agreements. Subsequent to year-end 2004, we received an additional $10.0 million of funding associated with the change orders and agreements and reached agreement on an additional $3.5 million, with receipt expected during the first quarter of 2005. Net
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outstanding unapproved change orders/claims recognized at December 31, 2003 were $7.0 million. Losses expected to be incurred on contracts in progress are charged to earnings in the period such losses are known.
Credit Extension—We extend credit to customers and other parties in the normal course of business only after a review of the potential customer’s creditworthiness. Additionally, management reviews the commercial terms of all significant contracts before entering into a contractual arrangement. We regularly review outstanding receivables and provide for estimated losses through an allowance for doubtful accounts. In evaluating the level of established reserves, management makes judgments regarding the parties’ ability to make required payments, economic events and other factors. As the financial condition of these parties changes, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required.
Estimated Reserves for Insurance Matters—We maintain insurance coverage for various aspects of our business and operations. However, we retain a portion of anticipated losses through the use of deductibles and self-insured retentions for our exposures related to third-party liability and workers’ compensation. Management regularly reviews estimates of reported and unreported claims through analysis of historical and projected trends, in conjunction with actuaries and other consultants, and provides for losses through insurance reserves. As claims develop and additional information becomes available, adjustments to loss reserves may be required. If actual results are not consistent with our assumptions, we may be exposed to gains or losses that could be material. A 10% change in our self-insurance reserves at December 31, 2004 would have impacted our net income by approximately $2.1 million for the year ended December 31, 2004.
Recoverability of Goodwill—Effective January 1, 2002, we adopted SFAS No. 142 “Goodwill and Other Intangible Assets,” which states that goodwill and indefinite-lived intangible assets are no longer to be amortized but are to be reviewed annually for impairment. The goodwill impairment analysis required under SFAS No. 142 requires us to allocate goodwill to our reporting units, compare the fair value of each reporting unit with our carrying amount, including goodwill, and then, if necessary, record a goodwill impairment charge in an amount equal to the excess, if any, of the carrying amount of a reporting unit’s goodwill over the implied fair value of that goodwill. The primary method we employ to estimate these fair values is the discounted cash flow method. This methodology is based, to a large extent, on assumptions about future events which may or may not occur as anticipated, and such deviations could have a significant impact on the estimated fair values calculated. These assumptions include, but are not limited to, estimates of future growth rates, discount rates and terminal values of reporting units. See further discussion in Note 6 to our Consolidated Financial Statements. Our goodwill balance at December 31, 2004, was $233.4 million.
FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements. You should read carefully any statements containing the words “expect,” “believe,” “anticipate,” “project,” “estimate,” “predict,” “intend,” “should,” “could,” “may,” “might,” or similar expressions or the negative of any of these terms.
Forward-looking statements involve known and unknown risks and uncertainties. In addition to the material risks described under “Risk Factors,” as set forth in our Form 10-K filed with the Securities and Exchange Commission (“SEC”), that may cause our actual results, performance or achievements to be materially different from those expressed or implied by any forward-looking statements, the following factors could also cause our results to differ from such statements:

•   our ability to realize cost savings from our expected execution performance of contracts;

•   the uncertain timing and the funding of new contract awards, and project cancellations and operating risks;

•   cost overruns on fixed price, target price or similar contracts;

•   risks associated with percentage of completion accounting;

•   our ability to settle or negotiate unapproved change orders and claims;

•   changes in the costs or availability of or delivery schedule for components and materials and labor;

•   increased competition;

•   fluctuating revenue resulting from a number of factors, including the cyclical nature of the individual markets in which our customers operate;

•   lower than expected activity in the hydrocarbon industry, demand from which is the largest component of our revenue;

•   lower than expected growth in our primary end markets, including but not limited to LNG and clean fuels;

•   risks inherent in our acquisition strategy and our ability to obtain financing for proposed acquisitions;

•   our ability to integrate and successfully operate acquired businesses and the risks associated with those businesses;

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•   adverse outcomes of pending claims or litigation or the possibility of new claims or litigation;

•   the ultimate outcome or effect of the pending Federal Trade Commission (“FTC”) order and Department of Justice (“DOJ”) investigation on our business, financial condition and results of operations;

•   lack of necessary liquidity to finance expenditures prior to the receipt of payment for the performance of contracts and to provide bid and performance bonds and letters of credit securing our obligations under our bids and contracts;

•   proposed and actual revisions to U.S. and non-U.S. tax laws, and interpretation of said laws, and U.S. tax treaties with non-U.S. countries (including The Netherlands), that seek to increase income taxes payable;

•   political and economic conditions including, but not limited to, war, conflict or civil or economic unrest in countries in which we operate; and

•   a downturn or disruption in the economy in general.

Although we believe the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future performance or results. We are not obligated to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should consider these risks when reading any forward-looking statements.
11

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
     Our management is responsible for establishing and maintaining adequate internal controls over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Included in our system of internal control are written policies, an organizational structure providing division of responsibilities, the selection and training of qualified personnel and a program of financial and operations reviews by our professional staff of corporate auditors.
     Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the underlying transactions, including the acquisition and disposition of assets; (ii) provide reasonable assurance that our assets are safeguarded and transactions are executed in accordance with management’s and our directors’ authorization and are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
     Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Our evaluation was based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
     Based on our evaluation under the framework in Internal Control – Integrated Framework, our principal executive officer and principal financial officer concluded that our internal control over financial reporting was effective as of December 31, 2004. The conclusion of our principal executive officer and principal financial officer is based on the recognition that there are inherent limitations in all systems of internal control, including the possibility of human error and the circumvention or overriding of controls. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
     Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.

/s/ Gerald M. Glenn
/s/ Richard E. Goodrich

Gerald M. Glenn
Chairman, President and
Richard E. Goodrich
Executive Vice President and

Chief Executive Officer
Chief Financial Officer

March 11, 2005
12

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Supervisory Board of
Chicago Bridge & Iron Company N. V.
      We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Chicago Bridge & Iron Company N. V. (a Netherlands corporation) and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.
      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
      A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
      Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
      In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
      We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of the Company as of December 31, 2004 and for the year then ended; and our report dated March 11, 2005 expressed an unqualified opinion on those consolidated financial statements.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
March 11, 2005
13

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Supervisory Board of
Chicago Bridge & Iron Company N. V.
      We have audited the accompanying consolidated balance sheets of Chicago Bridge & Iron Company N. V. (a Netherlands corporation) and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
      In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Chicago Bridge & Iron Company N. V. and subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
      We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 11, 2005 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
March 11, 2005
14

CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

Years Ended December 31, 2004 2003 2002

Revenue
$ 1,897,182 $ 1,612,277 $ 1,148,478

Cost of revenue
1,694,871 1,415,715 992,927

Gross profit
202,311 196,562 155,551

Selling and administrative expenses
98,503 93,506 73,155

Intangibles amortization (Note 6)
1,817 2,548 2,529

Other operating income, net
(88 ) (2,833 ) (1,818 )

Exit costs / special charges (Note 4)
— — 3,972

Income from operations
102,079 103,341 77,713

Interest expense
(8,232 ) (6,579 ) (7,114 )

Interest income
2,233 1,300 1,595

Income before taxes and minority interest
96,080 98,062 72,194

Income tax expense (Note 14)
(31,284 ) (29,713 ) (20,233 )

Income before minority interest
64,796 68,349 51,961

Minority interest in loss (income)
1,124 (2,395 ) (1,812 )

Net income
$ 65,920 $ 65,954 $ 50,149

Net income per share (Note 2)

Basic
$ 1.38 $ 1.46 $ 1.16

Diluted
$ 1.33 $ 1.39 $ 1.12

Net income per share — Split Adjusted⁽¹⁾

Basic
$ 0.69 $ 0.73 $ 0.58

Diluted
$ 0.67 $ 0.69 $ 0.56

⁽¹⁾ On February 25, 2005, we declared a two-for-one stock split effective in the form of a stock dividend payable March 31, 2005 to stockholders of record at the close of business on March 21, 2005. The above per share amounts reflect the pro-forma impact of the stock split for all periods presented.

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
15

CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

December 31, 2004 2003

Assets

Cash and cash equivalents
$ 236,390 $ 112,918

Accounts receivable, net of allowance for doubtful accounts of $726 in 2004 and $1,178 in 2003
252,377 200,521

Contracts in progress with costs and estimated earnings exceeding related progress billings (Note 5)
135,902 142,235

Deferred income taxes (Note 14)
26,794 23,509

Other current assets
33,816 33,244

Total current assets
685,279 512,427

Property and equipment, net (Note 7)
119,474 124,505

Non-current contract retentions
5,635 11,254

Deferred income taxes (Note 14)
3,293 2,876

Goodwill (Note 6)
233,386 219,033

Other intangibles, net of accumulated amortization of $6,088 in 2004 and $7,494 in 2003 (Note 6)
29,346 30,949

Other non-current assets
26,305 31,318

Total assets
$ 1,102,718 $ 932,362

Liabilities

Notes payable (Note 8)
$ 9,704 $ 1,901

Current maturity of long-term debt (Note 8)
25,000 —

Accounts payable
180,362 143,258

Accrued liabilities (Note 7)
89,104 95,237

Contracts in progress with progress billings exceeding related costs and estimated earnings (Note 5)
169,470 130,497

Income taxes payable
7,550 5,359

Total current liabilities
481,190 376,252

Long-term debt (Note 8)
50,000 75,000

Other non-current liabilities (Note 7)
97,155 85,038

Minority interest in subsidiaries
5,135 6,908

Total liabilities
633,480 543,198

Commitments and contingencies (Note 11)
— —

Shareholders’ Equity

Common stock, Euro .01 par value; shares authorized: 125,000,000 in 2004 and 80,000,000 in 2003; shares issued: 48,464,584 in 2004 and 46,697,732 in 2003; shares outstanding: 48,415,653 in 2004 and 46,694,415 in 2003
497 475

Additional paid-in capital
313,337 283,625

Retained earnings
184,793 126,521

Stock held in Trust (Note 12)
(13,425 ) (11,719 )

Treasury stock, at cost
(1,495 ) (108 )

Accumulated other comprehensive loss (Note 12)
(14,469 ) (9,630 )

Total shareholders’ equity
469,238 389,164

Total liabilities and shareholders’ equity
$ 1,102,718 $ 932,362

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
16

CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Years Ended December 31, 2004 2003 2002

Cash Flows from Operating Activities

Net income
$ 65,920 $ 65,954 $ 50,149

Adjustments to reconcile net income to net cash provided by operating activities:

Exit costs/special charges, net of deferred income taxes of $1,350
— — 2,622

Payments related to exit costs/special charges
(1,503 ) (1,511 ) (5,954 )

Depreciation and amortization
22,498 21,431 19,661

Gain on sale of property and equipment
(88 ) (2,833 ) (1,123 )

Change in operating assets and liabilities (see below)
45,942 7,325 6,675

Net cash provided by operating activities
132,769 90,366 72,030

Cash Flows from Investing Activities

Cost of business acquisitions, net of cash acquired
(10,551 ) (79,029 ) (17,588 )

Capital expenditures
(17,430 ) (31,286 ) (23,927 )

Proceeds from sale of assets held for sale
— 4,935 —

Proceeds from sale of property and equipment
1,930 3,350 4,558

Net cash used in investing activities
(26,051 ) (102,030 ) (36,957 )

Cash Flows from Financing Activities

Increase (decrease) in notes payable
9,703 (13 ) (5,841 )

Issuance of common stock
16,085 27,084 25,207

Purchase of treasury stock
(1,386 ) (2,029 ) (668 )

Issuance of treasury stock
— 4,261 3,474

Dividends paid
(7,648 ) (7,257 ) (5,187 )

Net cash provided by financing activities
16,754 22,046 16,985

Increase in cash and cash equivalents
123,472 10,382 52,058

Cash and cash equivalents, beginning of the year
112,918 102,536 50,478

Cash and cash equivalents, end of the year
$ 236,390 $ 112,918 $ 102,536

Change in Operating Assets and Liabilities

(Increase) decrease in receivables, net
$ (51,856 ) $ 10,614 $ (26,874 )

Decrease (increase) in contracts in progress, net
45,306 (80,479 ) 21,776

Decrease (increase) in non-current contract retentions
5,619 (4,867 ) (3,387 )

Increase in accounts payable
37,104 49,048 10,690

Decrease (increase) in other current assets
499 (7,679 ) 6,559

Increase in income taxes payable and deferred income taxes
12,957 12,701 9,711

(Decrease) increase in accrued and other non-current liabilities
(5,436 ) 21,904 197

Decrease (increase) in other
1,749 6,083 (11,997 )

Total
$ 45,942 $ 7,325 $ 6,675

Supplemental Cash Flow Disclosures

Cash paid for interest
$ 6,670 $ 7,341 $ 7,750

Cash paid for income taxes (net of refunds)
$ 6,113 $ 16,557 $ 8,450

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
17

CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands)

Accumulated

Common Stock Additional Stock Held in Trust Treasury Stock Other Total

Number of Paid-In Retained Number of Number of Comprehensive Shareholders’

Shares Amount Capital Earnings Shares Amount Shares Amount Income (Loss) Equity

Balance at January 1, 2002
41,960 $ 210 $ 241,559 $ 23,102 1,601 $ (14,301 ) 2,605 $ (25,279 ) $ (13,068 ) $ 212,223

Comprehensive income (loss)
— — — 50,149 — — — — (3,807 ) 46,342

Dividends to common shareholders
— — — (5,187 ) — — — — — (5,187 )

Long-Term Incentive Plan amortization
— — 756 — — — — — — 756

Issuance of treasury stock to Trust
43 — 88 — 43 (641 ) (43 ) 553 — —

Release of Trust shares
— — (2,610 ) — (194 ) 2,610 — — — —

Purchase of treasury stock
(50 ) — — — — — 50 (668 ) — (668 )

Issuance of treasury stock
2,373 — 6,123 — — — (2,373 ) 22,558 — 28,681

Balance at December 31, 2002
44,326 210 245,916 68,064 1,450 (12,332 ) 239 (2,836 ) (16,875 ) 282,147

Comprehensive income
— — — 65,954 — — — — 7,245 73,199

Stock dividends to common shareholders
— 240 — (240 ) — — — — — —

Dividends to common shareholders
— — — (7,257 ) — — — — — (7,257 )

Long-Term Incentive Plan amortization
— — 3,962 — — — — — — 3,962

Issuance of treasury stock to Trust
5 — 18 — 5 (70 ) (5 ) 52 — —

Issuance of common stock to Trust
40 1 869 — 40 (870 ) — — — —

Release of Trust shares
— — (1,553 ) — (130 ) 1,553 — — — —

Purchase of treasury stock
(192 ) — — — — — 192 (4,152 ) — (4,152 )

Issuance of treasury stock
423 — (2,567 ) — — — (423 ) 6,828 — 4,261

Issuance of common stock
2,092 24 36,980 — — — — — — 37,004

Balance at December 31, 2003
46,694 475 283,625 126,521 1,365 (11,719 ) 3 (108 ) (9,630 ) 389,164

Comprehensive income (loss)
— — — 65,920 — — — — (4,839 ) 61,081

Dividends to common shareholders
— — — (7,648 ) — — — — — (7,648 )

Long-Term Incentive Plan amortization
— — 2,662 — — — — — — 2,662

Issuance of common stock to Trust
84 1 2,555 — 84 (2,556 ) — — — —

Release of Trust shares
— — (850 ) — (69 ) 850 — — — —

Purchase of treasury stock
(46 ) — 1 — — — 46 (1,387 ) — (1,386 )

Issuance of common stock
1,684 21 25,344 — — — — — — 25,365

Balance at December 31, 2004
48,416 $ 497 $ 313,337 $ 184,793 1,380 $ (13,425 ) 49 $ (1,495 ) $ (14,469 ) $ 469,238

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
18

CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
1. ORGANIZATION AND NATURE OF OPERATIONS
Organization—Chicago Bridge & Iron Company N.V. (a corporation organized under the laws of The Netherlands) and Subsidiaries, is a global technology and specialty engineering, procurement and construction (“EPC”) company serving customers in several key industries including oil and gas; petrochemical and chemical; power; water and wastewater; and metals and mining. We have been helping customers produce, process, store and distribute the earth’s natural resources for more than 100 years by supplying a comprehensive range of engineered steel structures and systems. We offer a complete package of design, engineering, fabrication, procurement, construction and maintenance services. Our projects include hydrocarbon processing plants, liquefied natural gas (“LNG”) terminals and peak shaving plants, offshore structures, pipelines, bulk liquid terminals, water storage and treatment facilities, and other steel structures and their associated systems. We have been continuously engaged in the engineering and construction industry since our founding in 1889.
Nature of Operations—Projects for the worldwide petroleum and petrochemical industry accounted for a majority of our revenue in 2004, 2003 and 2002. Numerous factors influence capital expenditure decisions in this industry, which are beyond our control. Therefore, no assurance can be given that our business, financial condition and results of operations will not be adversely affected because of reduced activity due to the price of oil or changing taxes, price controls and laws and regulations related to the petroleum and petrochemical industry.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting and Consolidation—These financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements include all majority owned subsidiaries. Significant intercompany balances and transactions are eliminated in consolidation. Investments in non-majority owned affiliates are accounted for by the equity method. For the years ended 2004 and 2003 we did not have any non-majority owned affiliates.
Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosed amounts of contingent assets and liabilities, and the reported amounts of revenue and expenses. We believe the most significant estimates and assumptions are associated with revenue recognition on engineering and construction contracts, recoverability tests that must be periodically performed with respect to goodwill and intangible asset balances, valuation of accounts receivable, and the determination of liabilities related to self-insurance programs. If the underlying estimates and assumptions upon which the financial statements are based change in the future, actual amounts may differ from those included in the accompanying consolidated financial statements.
Revenue Recognition—Revenue is recognized using the percentage-of-completion method. A significant portion of our work is performed on a fixed price or lump sum basis. The balance of our work is performed on variations of cost reimbursable and target price approaches. Contract revenue is accrued based on the percentage that actual costs-to-date bear to total estimated costs. We utilize this cost-to-cost approach as we believe this method is less subjective than relying on assessments of physical progress. We follow the guidance of the Statement of Position 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts,” for accounting policy relating to our use of the percentage-of-completion method, estimating costs, revenue recognition and unapproved change order/claim recognition. The use of estimated cost to complete each contract, while the most widely recognized method used for percentage-of-completion accounting, is a significant variable in the process of determining income earned and is a significant factor in the accounting for contracts. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known. Due to the various estimates inherent in our contract accounting, actual results could differ from those estimates.
Contract revenue reflects the original contract price adjusted for approved change orders and estimated minimum recoveries of unapproved change orders and claims. We recognize unapproved change orders and claims to the extent that related costs have been incurred when it is probable that they will result in additional contract revenue and their value can be reliably estimated. At December 31, 2004, we had outstanding unapproved change orders/claims recognized of $46,133, net of reserves, of which $36,795 is associated with an ongoing project in our EAME segment. While this project is substantially complete, we have not reached agreement with regards to the final value of certain change orders and agreements. As of December 31, 2004 we had received cash advances totaling $17,790, to fund a portion of the costs associated with the change orders and agreements. Subsequent to year-end, we received an additional $10,000 of funding associated with the change orders and agreements and reached agreement on an additional $3,500 with receipt expected in the first quarter of 2005. Net outstanding unapproved change orders/claims recognized at December 31, 2003 were $6,970.
Losses expected to be incurred on contracts in progress are charged to earnings in the period such losses are known. Provisions for additional costs associated with contracts projected to be in a significant loss position at December 31, 2004 resulted in a $53,493 charge to earnings during 2004. There were no equivalent charges to earnings during 2003.
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Cost and estimated earnings to date in excess of progress billings on contracts in process represent the cumulative revenue recognized less the cumulative billings to the customer. Any billed revenue that has not been collected is reported as accounts receivable. Unbilled revenue is reported as contracts in progress with costs and estimated earnings exceeding related progress billings on the consolidated balance sheet. The timing of when we bill our customers is generally contingent on completion of certain phases of the work as stipulated in the contract. Progress billings in accounts receivable at December 31, 2004 and 2003 were currently due and included retentions totaling $36,095 and $32,533, respectively, to be collected within one year. Contract retentions collectible beyond one year are included in non-current contract retentions on our consolidated balance sheets and totaled $5,635 ($5,390 expected to be collected in 2006 and $245 in 2007) and $11,254 at December 31, 2004 and 2003, respectively. Cost of revenue includes direct contract costs such as material and construction labor, and indirect costs which are attributable to contract activity.
Precontract Costs — Precontract costs are generally charged to cost of revenue as incurred, but, in certain cases, may be deferred to the balance sheet if specific probability criteria are met. There were no precontract costs deferred as of December 31, 2004 or 2003.
Research and Development — Expenditures for research and development activities, which are charged to expense as incurred, amounted to $4,141 in 2004, $4,403 in 2003 and $3,056 in 2002.
Depreciation and Amortization — Property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives: buildings and improvements, 10 to 40 years; plant and field equipment, 3 to 20 years. Renewals and betterments, which substantially extend the useful life of an asset, are capitalized and depreciated. Depreciation expense was $20,681 in 2004, $18,883 in 2003 and $17,132 in 2002.
Goodwill and indefinite-lived intangibles are no longer amortized in accordance with the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 142 (see Note 6). Finite-lived other intangibles are amortized on a straight-line basis over 5 to 11 years, while other intangibles with indefinite useful lives are not amortized.
Impairment of Long-Lived Assets — Management reviews tangible assets and finite-lived intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If an evaluation is required, the estimated cash flows associated with the asset or asset group will be compared to the asset’s carrying amount to determine if an impairment exists. See Note 6 for additional discussion relative to goodwill and indefinite-lived intangibles impairment testing.
Per Share Computations — Basic earnings per share (“EPS”) is calculated by dividing net income by the weighted average number of common shares outstanding for the period, which includes stock held in trust. Diluted EPS reflects the assumed conversion of all dilutive securities, consisting of employee stock options/restricted shares/performance shares and directors deferred fee shares. No shares were considered antidilutive for 2004 or 2003. Excluded from our per share calculations for 2002 were 357,714 shares, as they were considered antidilutive.
The following schedule reconciles the shares utilized in the basic and diluted EPS computations:

Years Ended December 31, 2004 2003 2002

Net income
$ 65,920 $ 65,954 $ 50,149

Weighted average shares outstanding — basic
47,683,526 45,314,808 43,176,888

Effect of stock options/restricted shares/performance shares
1,637,515 2,162,881 1,512,484

Effect of directors deferred fee shares
179,684 49,312 47,166

Weighted average shares outstanding — diluted
49,500,725 47,527,001 44,736,538

Net income per share

Basic
$ 1.38 $ 1.46 $ 1.16

Diluted
$ 1.33 $ 1.39 $ 1.12

Cash Equivalents — Cash equivalents are considered to be all highly liquid securities with original maturities of three months or less.
Concentrations of Credit Risk — The majority of accounts receivable and contract work in progress are from clients in the petroleum and petrochemical industries around the world. Most contracts require payments as projects progress or in certain cases advance payments. We generally do not require collateral, but in most cases can place liens against the property, plant or equipment constructed or terminate the contract if a material default occurs. We maintain reserves for potential credit losses.
Foreign Currency — The nature of our business activities involves the management of various financial and market risks, including those related to changes in currency exchange rates. The primary effects of foreign currency translation adjustments are recognized in shareholders’ equity in accumulated other comprehensive income as cumulative translation adjustment, net of tax. Foreign currency exchange gains/(losses) are included in the consolidated statements of income, and were $2,380 in 2004, $1,002 in 2003 and $2,340 in 2002.
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Financial Instruments — Although we do not engage in currency speculation, we periodically use forward contracts to mitigate certain operating exposures, as well as hedge intercompany loans utilized to finance non-U.S. subsidiaries. Forward contracts utilized to mitigate operating exposures are generally designated as “cash flow hedges” under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Therefore, gains and losses associated with marking these instruments to market are included in accumulated other comprehensive income (loss) on our consolidated balance sheet. Gains or losses on forward contracts to hedge intercompany loans are included in the consolidated statements of income. Our other financial instruments are not significant.
Stock Plans — We account for stock-based compensation using the intrinsic value method prescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of our stock at the date of the grant over the amount an employee must pay to acquire the stock, subject to any vesting provisions. Reported net income does not include any compensation expense associated with stock options, but does include compensation expense associated with restricted stock and performance share awards. See Note 13 for additional discussion relative to our stock plans.
Had compensation expense for the Employee Stock Purchase Plan and Long-Term Incentive Plans been determined consistent with the fair value method of SFAS No. 123(R), “Share-Based Payment”, (using the Black-Scholes pricing model for stock options), our net income and net income per common share would have reflected the following pro forma amounts:

Years Ended December 31, 2004 2003 2002

Net Income, as reported
$ 65,920 $ 65,954 $ 50,149

Add: Stock-based compensation for restricted stock and performance share awards included in reported net income, net of tax
1,611 2,397 457

Deduct: Stock-based compensation determined under the fair value method, net of tax
(3,137 ) (5,340 ) (3,945 )

Pro forma net income
$ 64,394 $ 63,011 $ 46,661

Basic EPS

As reported
$ 1.38 $ 1.46 $ 1.16

Pro forma
$ 1.35 $ 1.39 $ 1.08

Diluted EPS

As reported
$ 1.33 $ 1.39 $ 1.12

Pro forma
$ 1.30 $ 1.33 $ 1.04

Using the Black-Scholes option-pricing model, the fair value of each option grant is estimated on the date of grant based on the following weighted-average assumptions:

2004 2003 2002

Risk-free interest rate
3.81 % 3.28 % 4.74 %

Expected dividend yield
0.57 % 1.05 % 0.86 %

Expected volatility
46.18 % 48.52 % 42.73 %

Expected life in years
6 6 6

Income Taxes — Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is provided to offset any net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The final realization of the deferred tax asset depends on our ability to generate sufficient taxable income of the appropriate character in the future and in appropriate jurisdictions.
Reclassification of Prior Year Balances — Certain prior year balances have been reclassified to conform with the current year presentation.
New Accounting Standards — In December 2003, the FASB issued SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” The revised standard requires annual and interim disclosures in addition to those in the original standard concerning the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. We adopted this statement, effective for fiscal years ending after December 15, 2003, on January 1, 2004. The disclosure requirements of this statement are reflected in Note 10 to our Consolidated Financial Statements.
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In May 2004, the FASB issued FASB Staff Position (“FSP”) No. 106-2 (“FSP 106-2”), “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” which supersedes FSP 106-1. FSP 106-2 provides guidance on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) for employers that sponsor postretirement health care plans that provide prescription drug benefits. FSP 106-2 also requires certain disclosures regarding the effect of the federal subsidy provided by the Act. FSP 106-2 is effective for the first interim and annual period beginning after June 15, 2004. Although we are currently evaluating our qualification status for any Medicare Prescription Drug subsidies, the effect of our adoption of FSP 106-2 is not anticipated to have a significant impact on our financial condition or results of operations.
In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment”. This standard requires compensation costs related to share-based payment transactions to be recognized in the financial statements. Compensation cost will generally be based on the grant-date fair value of the equity or liability instrument issued, and will be recognized over the period that an employee provides service in exchange for the award. SFAS No. 123(R) applies to all awards granted after June 30, 2005, to awards modified, repurchased, or cancelled after that date and to the portion of outstanding awards for which the requisite service has not yet been rendered. We do not anticipate applying the modified version of retrospective application under which financial statements for prior periods are adjusted. Pro forma results, which approximate the historical impact of this standard, are presented under the stock plans heading of this note.
3. ACQUISITIONS
2004

During 2004, we increased our purchase consideration by $6,529 related to contingent earnout obligations associated with the 2000 Howe-Baker International L.L.C. (“Howe-Baker”) acquisition. Adjustments to the initial purchase price allocation of our 2003 acquisitions are reflected below.
2003

On April 29, 2003, we acquired certain assets and assumed certain liabilities of Petrofac Inc. (“Petrofac”), an EPC company serving the hydrocarbon processing industry for consideration of $26,616, including transaction costs, of which $24,355 was paid during 2003. The remaining purchase price, $1,900, was reflected as notes payable on the December 31, 2003 Consolidated Balance Sheet, and was paid in monthly installments through the second quarter of 2004. The acquired operations located in Tyler, Texas, have been fully integrated within our North America segment’s CB&I Howe-Baker unit and has expanded our capacity to engineer, fabricate and install EPC projects for the oil refining, oil production, gas treating and petrochemical industries.
On May 30, 2003, we acquired certain assets and assumed certain liabilities of John Brown Hydrocarbons Limited (“John Brown”), for consideration of $29,631, including transaction costs, net of cash acquired. John Brown provides comprehensive engineering, program and construction management services for the offshore, onshore and pipeline sectors of the hydrocarbon industry, as well as for LNG terminals and flue gas desulfurization plants. The acquired operations, located in London, Moscow, the Caspian Region and Canada, have been integrated into our Europe, Africa, Middle East (“EAME”) segment. This addition has strengthened our international engineering and execution platform and expanded our capabilities into the upstream oil and gas sector.
The purchase prices, including transaction costs, for the above acquisitions were allocated to the net assets acquired based upon their estimated fair market values on the date of acquisition and the balance of $52,760 has been recorded as goodwill. The net assets and operating results have been included in our financial statements from the respective dates of the acquisitions. Pro-forma financial information has not been disclosed separately as the amounts were not material to our overall financial condition or results of operations. The following table summarizes the purchase price allocation of Petrofac and John Brown net assets acquired at the date of acquisition:

Purchase Price Allocation 2003

Current assets
$ 28,032

Property, plant and equipment
4,306

Goodwill
52,760

Current liabilities
14,332

Non-current liabilities
14,519

Total Consideration $ 56,247

The change in the initial purchase price allocation since December 31, 2003 primarily relates to an adjustment resulting from the valuation of pension liabilities associated with our acquisition of John Brown.
Also during 2003, we increased our purchase consideration by $17,901 related to contingent earnout obligations associated with the Howe-Baker acquisition.
22

2002

On February 5, 2002, we purchased the assets and assumed certain liabilities of TPA, Inc. for $4,658. The acquired business is a full-service EPC company specializing in sulfur removal and recovery technologies for the refining, gas processing and chemical manufacturing industries.
The purchase price was allocated to the net assets acquired based upon their estimated fair market values at the date of acquisition and the balance of approximately $3,360 and $1,200 was recorded as goodwill and other intangibles, respectively. Financial information has not been disclosed separately as the amounts were not material to our overall financial condition or results of operations.
Also during 2002, we increased our purchase consideration by $7,596 related to contingent earnout obligations associated with the Howe-Baker acquisition and $5,334 for final purchase price adjustments related to the PDM Divisions acquisition.
4. EXIT COSTS / SPECIAL CHARGES
Prior to January 1, 2003 we recorded special charges in accordance with EITF 94-3. Our accrued expense balances and activity relating to special charges for the years ended December 31, 2004, 2003 and 2002 were as follows:

Personnel Facilities

Costs and Other Integration Total

Balance at January 1, 2002
$ 4,811 $ 1,284 $ — $ 6,095

Special charges
3,428 18 ⁽¹⁾ 526 3,972

Cash payments
(4,618 ) (810 ) (526 ) (5,954 )

Balance at December 31, 2002
3,621 492 — 4,113

Cash payments
(1,511 ) — — (1,511 )

Balance at December 31, 2003
2,110 492 — 2,602

Cash payments
(1,503 ) — — (1,503 )

Balance at December 31, 2004
$ 607 $ 492 $ — $ 1,099

⁽¹⁾Includes a $360 non-cash credit associated with the sale of our XL Technology Systems, Inc. subsidiary as described below.

Personnel Costs — Personnel costs include severance and personal moving expenses associated with the relocation, closure or downsizing of offices, and a voluntary resignation offer (the “Offer”). During 2002, we recorded personnel costs of $3,428, primarily consisting of $2,688 to relocate our Plainfield, Illinois administrative office to The Woodlands, Texas (“the Move”), $360 of costs to relocate our welding lab facility personnel from Houston, Texas to Plainfield, Illinois, and $270 of additional costs relative to the Offer. Previously accrued expenses of $170 associated with the Move and $1,341 associated with the Offer were paid during 2003, while obligations of $1,503 associated with the Offer were paid during 2004. The remaining balance associated with personnel costs is anticipated to be paid during 2005 and 2006.
Facilities and Other — Facilities and other include charges related to the sale, closure, downsizing or relocation of operations. During 2002, we recorded facility and other costs of $378, which included $191 to relocate our welding lab facility from Houston, Texas to Plainfield, Illinois and $116 to move our Fairbanks, Texas administrative facility offices to The Woodlands, Texas. Also during 2002, we recorded income of $360 in relation to adjustments associated with the sale of our XL Technology Systems, Inc. subsidiary. The remaining accrued expense balance is anticipated to be paid during 2005. During 2000, we made a commitment to downsize or lower costs at five facilities worldwide including non-cash asset write-downs and lease terminations. During the second quarter of 2001, we completed the sale and leaseback of our Plainfield, Illinois administrative office, one of the three facilities anticipated to be sold at December 31, 2000. Two facilities remained unsold at December 31, 2004. The net carrying amount for these assets was $2,782 at December 31, 2004. We anticipate selling these assets in 2005 or 2006.
Integration — During 2002, we recorded integration costs of $526, which included $216 to integrate our safety program with the acquired PDM Divisions and $289 to integrate our engineering practices with those of the acquired PDM Divisions. These costs were expensed as incurred.
Effective January 1, 2003, we were required to record costs for exit or disposal activities in accordance with SFAS No. 146. Under the provisions of SFAS No. 146, moving replacement personnel and integration costs will be recorded as incurred. There have been no exit or disposal activities initiated after January 1, 2003.
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5. CONTRACTS IN PROGRESS
Contract terms generally provide for progress billings based on completion of certain phases of the work. The excess of costs and estimated earnings for construction contracts over progress billings on contracts in progress is reported as a current asset and the excess of progress billings over costs and estimated earnings on contracts in progress is reported as a current liability as follows:

December 31, 2004 2003

Contracts in Progress

Revenue recognized on contracts in progress
$ 4,213,625 $ 3,097,942

Billings on contracts in progress
(4,247,193 ) (3,086,204 )

$ (33,568 ) $ 11,738

Shown on balance sheet as:

Contracts in progress with costs and estimated earnings exceeding related progress billings
$ 135,902 $ 142,235

Contracts in progress with progress billings exceeding related costs and estimated earnings
(169,470 ) (130,497 )

$ (33,568 ) $ 11,738

6. GOODWILL AND OTHER INTANGIBLES
Goodwill
General — At December 31, 2004 and 2003, our goodwill balance was $233,386 and $219,033, respectively, attributable to the excess of the purchase price over the fair value of assets acquired relative to acquisitions within our North America and EAME segments.
Aggregate goodwill recorded during 2004 of $14,353 primarily relates to direct acquisition costs and final asset and liability valuations associated with our 2003 acquisitions of Petrofac and John Brown, a contingent earnout obligation associated with our 2000 acquisition of Howe-Baker, the impact of foreign currency translation ($1,520) and a reduction in accordance with SFAS No. 109, “Accounting for Income Taxes,” where tax goodwill exceeded book goodwill. The change in goodwill by segment for 2003 and 2004 is as follows:

North America EAME Total

Balance at December 31, 2002
$ 157,903 $ — $ 157,903

Acquisitions, foreign currency translation and contingent earnout obligations
41,307 19,823 61,130

Balance at December 31, 2003
199,210 19,823 219,033

Resolution of pre-acquisition contingencies, foreign currency translation and contingent earnout obligations
5,242 9,111 14,353

Balance at December 31, 2004
$ 204,452 $ 28,934 $ 233,386

Impairment Testing — SFAS No. 142 “Goodwill and Other Intangible Assets” states goodwill and indefinite-lived intangible assets are no longer amortized to earnings, but instead are reviewed for impairment at least annually via a two-phase process, absent any indicators of impairment. The first phase screens for impairment, while the second phase (if necessary) measures impairment. We have elected to perform our annual analysis during the fourth quarter of each year based upon goodwill and indefinite-lived intangible balances as of the end of the third calendar quarter. Upon completion of our 2004 impairment test, no impairment charge was necessary. Impairment testing for goodwill was accomplished by comparing an estimate of discounted future cash flows to the net book value of each reporting unit. Multiples of each reporting unit’s earnings before interest, taxes, depreciation and amortization were also utilized in our analysis as a comparative measure. Impairment testing of indefinite-lived intangible assets, which primarily consist of tradenames associated with the 2000 Howe-Baker acquisition, was accomplished by demonstrating recovery of the underlying intangible assets, utilizing an estimate of discounted future cash flows. There can be no assurance that future goodwill or other intangible asset impairment tests will not result in a charge to earnings.
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Other Intangible Assets
In accordance with SFAS No. 142, the following table provides information concerning our other intangible assets for the years ended December 31, 2004 and 2003:

2004 2003

Gross Carrying Accumulated Gross Carrying Accumulated

Amount Amortization Amount Amortization

Amortized intangible assets

Technology (5 to 10 years)
$ 4,914 $ (3,261 ) $ 6,221 $ (3,795 )

Non-compete agreements (8 years)
3,100 (1,600 ) 4,810 (2,648 )

Strategic alliances, customer contracts, patents (5 to 11 years)
2,564 (1,227 ) 2,695 (1,051 )

Total
$ 10,578 $ (6,088 ) $ 13,726 $ (7,494 )

Unamortized intangible assets

Tradenames
$ 24,717 $ 24,717

Minimum pension liability adjustment
139 —

$ 24,856 $ 24,717

The change in other intangibles, net compared with 2003 primarily relates to amortization. The gross carrying amount and accumulated amortization were also adjusted to eliminate fully amortized intangible assets. Intangible amortization for the years ended 2004, 2003 and 2002 was $1,817, $2,548 and $2,529, respectively. For the years ended 2005, 2006, 2007, 2008 and 2009, amortization of existing intangibles is anticipated to be $1,549, $702, $702, $602 and $302, respectively.
7. SUPPLEMENTAL BALANCE SHEET DETAIL

December 31, 2004 2003

Components of Property and Equipment

Land and improvements
$ 21,879 $ 21,860

Buildings and improvements
52,626 52,776

Plant and field equipment
156,576 149,075

Total property and equipment
231,081 223,711

Accumulated depreciation
(111,607 ) (99,206 )

Net property and equipment
$ 119,474 $ 124,505

Components of Accrued Liabilities

Payroll, vacation, bonuses and profit-sharing
$ 26,978 $ 34,692

Self-insurance/retention reserves
14,740 11,387

Interest payable
2,670 2,622

Postretirement benefit obligations
2,103 5,286

Pension obligations
369 2,210

Contract cost and other accruals
42,244 39,040

Accrued liabilities
$ 89,104 $ 95,237

Components of Other Non-Current Liabilities

Postretirement benefit obligations
$ 27,550 $ 32,598

Self-insurance/retention reserves
16,022 13,150

Pension obligations
16,294 9,556

Income tax reserve
15,892 13,055

Other
21,397 16,679

Other non-current liabilities
$ 97,155 $ 85,038

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8. DEBT
The following summarizes our outstanding debt at December 31:

2004 2003

Current:

Notes payable
$ 9,704 $ 1,901

Current maturity of long-term debt
25,000 —

Current debt
$ 34,704 $ 1,901

Long-Term:

Notes:

7.34% Senior Notes maturing July 2007. Principal due in equal annual installments of $25,000 from 2005 through 2007. Interest payable semi-annually
$ 50,000 $ 75,000

Revolving credit facility:

$233,333 three-year revolver expiring August 2006. Interest at prime plus a margin or the British Bankers Association settlement rate plus a margin as described below
— —

Long-term debt
$ 50,000 $ 75,000

Notes payable as of December 31, 2004 consisted of $9,704 of short-term borrowings under commercial credit facilities. Notes payable as of December 31, 2003 consisted of $1,900 of remaining payments due in connection with our 2003 acquisition of Petrofac, which were paid in monthly installments through the second quarter of 2004, and $1 of short-term borrowings under commercial credit facilities. The borrowings had a weighted average interest rate of 4.68% and 0% at December 31, 2004 and 2003, respectively.
As of December 31, 2004, no direct borrowings existed under our committed and unsecured three-year $233,333 revolving credit facility (terminates August 2006), but we had issued $83,316 of letters of credit against the facility. As of December 31, 2004, we had $150,017 of available capacity under the facility for future operating or investing needs. The facility contains certain restrictive covenants including minimum levels of net worth, fixed charge and leverage ratios, among other restrictions. The facility also places restrictions on us with regard to subsidiary indebtedness, sales of assets, liens, investments, type of business conducted, and mergers and acquisitions, among other restrictions. In addition to interest on debt borrowings, we are assessed quarterly commitment fees on the unutilized portion of the credit facilities as well as letter of credit fees on outstanding instruments. The interest, letter of credit fee and commitment fee percentages are based upon our quarterly leverage ratio.
We also have available a $116,667 letter of credit facility (terminates August 2008), which is subject to the same restrictions as the $233,333 revolving credit facility. Additionally, we have available various other short-term, non-U.S. uncommitted revolving credit facilities of approximately $371,106. These facilities are generally used to provide letters of credit or bank guarantees to customers in the ordinary course of business to support advance payments, as performance guarantees or in lieu of retention on our contracts. At December 31, 2004, we had available capacity of $141,854 under these facilities. We were in compliance with all covenants at December 31, 2004.
Our $75,000 of senior notes also contain a number of restrictive covenants, including minimum levels of net worth and debt and fixed charge ratios, among other restrictions. The notes also place restrictions on us with regard to investments, other debt, subsidiary indebtedness, sales of assets, liens, nature of business conducted and mergers, among other restrictions. We were in compliance with all covenants at December 31, 2004.
Capitalized interest was insignificant in 2004, 2003 and 2002.
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9. FINANCIAL INSTRUMENTS
Forward Contracts—At December 31, 2004, our forward contracts to hedge intercompany loans and certain operating exposures are summarized as follows:

Contract Weighted Average

Currency Sold Currency Purchased Amount ⁽¹⁾ Contract Rate

Forward contracts to hedge intercompany loans:⁽²⁾

U.S. Dollar
Australian Dollar $ 16,274 1.29

U.S. Dollar
British Pound $ 15,656 0.52

U.S. Dollar
Canadian Dollar $ 15,267 1.20

Euro
U.S. Dollar $ 11,786 0.75

South African Rand
U.S. Dollar $ 2,096 5.79

Forward contracts to hedge certain operating exposures:⁽³⁾

British Pound
U.S. Dollar $ 19,046 0.56

U.S. Dollar
Euro $ 8,546 0.83

U.S. Dollar
South African Rand $ 4,663 6.69

U.S. Dollar
Japanese Yen $ 484 103.23

British Pound
Euro £ 78,059 1.38

⁽¹⁾ Represents notional U.S. dollar equivalent at inception of contract, with the exception of forward contracts to sell 78,059 British Pounds for 107,778 Euros. These contracts are denominated in British Pounds and equate to approximately $149,855 at December 31, 2004.

⁽²⁾ Contracts generally mature within seven days of year-end.
⁽³⁾ Contracts which hedge firm commitments, mature within three years of year-end and were designated as “cash flow hedges” under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” At December 31, 2004, the notional amount exceeded the fair value of these contracts by $2,782. Of this amount, $3,123 was recorded in other current assets, $2,052 was recorded in accrued liabilities and $3,853 was recorded in other non-current liabilities on our consolidated balance sheets. Any hedge ineffectiveness was not significant.
Fair Value—The carrying value of our cash and cash equivalents, accounts receivable, accounts payable and notes payable approximates their fair values because of the short term nature of these instruments. At December 31, 2004 and 2003, the fair value of our long-term debt was $53,091 and $82,041, respectively, based on current market rates for debt with similar credit risk and maturities.
10. RETIREMENT BENEFITS
Defined Contribution Plans—We sponsor two contributory defined contribution plans for eligible employees which consist of a voluntary pre-tax salary deferral feature, a matching contribution, and a profit-sharing contribution in the form of cash or our common stock to be determined annually. For the years ended December 31, 2004, 2003 and 2002, we expensed $9,880, $11,340 and $10,989, respectively, for these plans.
In addition, we sponsor several other defined contribution plans that cover salaried and hourly employees for which we do not provide matching contributions. The cost of these plans to us was not significant in 2004, 2003 and 2002.
Defined Benefit and Other Postretirement Plans—We currently sponsor various defined benefit pension plans covering certain employees of our North America and EAME segments. In connection with the John Brown acquisition, we assumed certain pension obligations related to its employees.
We also provide certain health care and life insurance benefits for our retired employees through three health care and life insurance benefit programs. In connection with the John Brown and Petrofac acquisitions in 2003, we assumed certain postretirement benefit obligations related to their employees. Retiree health care benefits are provided under an established formula, which limits costs based on prior years of service of retired employees. These plans may be changed or terminated by us at any time.
We use a December 31 measurement date for the majority of our plans. During 2005, we expect to contribute $5,166 and $2,103 to our defined benefit and other postretirement plans, respectively.
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The following tables provide combined information for our defined benefit and other postretirement plans:

Defined Benefit Plans Other Postretirement Plans

2004 2003 2002 2004 2003 2002

Components of Net Periodic Benefit Cost

Service cost
$ 5,633 $ 2,898 $ 180 $ 1,265 $ 1,679 $ 999

Interest cost
4,854 1,150 973 1,965 1,871 1,453

Expected return on plan assets
(5,587 ) (1,429 ) (1,354 ) — — —

Amortization of prior service costs
18 9 8 (269 ) (101 ) (101 )

Recognized net actuarial loss
289 411 102 260 94 1

Net periodic benefit expense (income)
$ 5,207 $ 3,039 $ (91 ) $ 3,221 $ 3,543 $ 2,352

2004 2003 2004 2003

Change in Benefit Obligation

Benefit obligation at beginning of year
$ 25,300 $ 15,579 $ 31,701 $ 23,607

Acquisition ⁽¹⁾
57,892 3,857 — 7,009

Service cost
5,633 2,898 1,265 1,679

Interest cost
4,854 1,150 1,965 1,871

Actuarial loss
6,730 607 5,075 1,897

Effect of plan change
— — — (2,014 )

Plan participants’ contributions
760 412 1,014 893

Benefits paid
(1,961 ) (1,404 ) (3,681 ) (3,507 )

Currency translation
4,738 2,201 425 266

Benefit obligation at end of year
$ 103,946 $ 25,300 $ 37,764 $ 31,701

2004 2003 2004 2003

Change in Plan Assets

Fair value at beginning of year
$ 25,952 $ 15,221 $ — $ —

Acquisition ⁽¹⁾
46,272 3,555 — —

Actual return on plan assets
11,766 3,064 — —

Benefits paid
(1,961 ) (1,404 ) (3,681 ) (3,507 )

Employer contribution
4,204 2,153 2,667 2,614

Plan participants’ contributions
760 412 1,014 893

Currency translation
4,508 2,951 — —

Fair value at end of year
$ 91,501 $ 25,952 $ — $ —

Funded status
$ (12,445 ) $ 652 $ (37,764 ) $ (31,701 )

Unrecognized net prior service costs
242 106 (2,420 ) (2,689 )

Unrecognized net actuarial loss
5,985 4,045 10,531 5,588

Net amount recognized
$ (6,218 ) $ 4,803 $ (29,653 ) $ (28,802 )

Amounts recognized in the balance sheet consist of:

Prepaid benefit cost
$ 8,476 $ 8,151 $ — $ —

Intangible asset
139 — — —

Accrued benefit cost
(16,663 ) (4,525 ) (29,653 ) (28,802 )

Accumulated other comprehensive loss, before taxes
1,830 1,177 — —

Net amount recognized
$ (6,218 ) $ 4,803 $ (29,653 ) $ (28,802 )

⁽¹⁾ The 2004 acquisition amounts above reflect final asset and liability valuations associated with our 2003 acquisition of John Brown.

The accumulated benefit obligation for all defined benefit plans was $91,900 and $23,821 at December 31, 2004 and 2003, respectively.
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The following table reflects information for defined benefit plans with an accumulated benefit obligation in excess of plan assets:

December 31,

2004 2003

Projected benefit obligation
$ 95,069 $ 8,902

Accumulated benefit obligation
$ 83,024 $ 8,851

Fair value of plan assets
$ 76,407 $ 5,440

Defined Benefit Plans Other Postretirement Plans

2004 2003 2004 2003

Additional Information

Increase/(decrease) in minimum liability included in other comprehensive income
$ 653 $ (399 ) n/a n/a

Weighted-average assumptions used to determine benefit obligations at December 31,

Discount rate
5.50 % 5.80 % 5.70 % 6.16 %

Rate of compensation increase⁽¹⁾
4.65 % 4.45 % n/a n/a

Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31,

Discount rate
5.54 % 5.69 % 6.18 % 6.21 %

Expected long-term return on plan assets⁽²⁾
7.36 % 7.26 % n/a n/a

Rate of compensation increase⁽¹⁾
3.81 % 4.45 % n/a n/a

⁽¹⁾ The rate of compensation increase in the table relates solely to one defined benefit plan. The rate of compensation increase for our other plans is not applicable as benefits under certain plans are based upon years of service, while the remaining plans primarily cover retirees, whereby future compensation is not a factor.

⁽²⁾ The expected long-term rate of return on the defined benefit plan assets was derived using historical returns by asset category and expectations for future capital market performance.

The following table includes the plans’ expected benefit payments for the next ten years:

Year Defined Benefit Plans Other Postretirement Plans

2005
$ 2,322 $ 5,199

2006
$ 3,091 $ 5,990

2007
$ 3,504 $ 6,832

2008
$ 4,076 $ 7,923

2009
$ 4,451 $ 9,029

2010-2014
$ 31,608 $ 66,458

Defined Benefit Plans—The defined benefit plans’ assets consist primarily of short-term fixed income funds and long-term investments, including equity and fixed-income securities. The following table provides weighted-average asset allocations at December 31, 2004 and 2003, by asset category:

Plan Assets

Target at December 31,

Asset Category Allocations 2004 2003

Equity securities
70-80 % 74 % 73 %

Debt securities
20-30 % 22 % 23 %

Real estate
0-5 % 1 % 2 %

Other
0-10 % 3 % 2 %

Total
100 % 100 % 100 %

Our investment strategy for benefit plan assets is to maintain a diverse portfolio to maximize a return over the long-term, subject to an appropriate level of risk. Our defined benefit plans’ assets are managed by external investment managers with oversight by our internal investment committee.
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Other Postretirement Plans—The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) was signed into law on December 8, 2003. We are currently reviewing the Act and the potential impact on our U.S. postretirement medical plans. Preliminary discussions with our consulting actuaries indicate that the impact from the Act would not have a significant impact on our financial results. Accordingly, the accumulated postretirement benefit obligation and net periodic benefit costs related to this plan do not reflect the effects of the Act.
The medical plan for retirees, other than those covered by the Howe-Baker and John Brown programs, offers a defined dollar benefit; therefore, a one percentage point increase or decrease in the assumed rate of medical inflation would not affect the accumulated postretirement benefit obligation, service cost or interest cost. Under the Howe-Baker programs, health care cost trend rates are projected at annual rates ranging from 8.5% in 2005 down to 5.0% in 2011. Under the John Brown program, the assumed rate of health care cost inflation is a level 8.5% per annum. Increasing/(decreasing) the assumed health care cost trends by one percentage point for the Howe-Baker and John Brown programs is estimated to increase/(decrease) the accumulated postretirement benefit obligation at December 31, 2004 and the total of the service and interest cost components of net postretirement health care cost for the year then ended as follows:

1-Percentage- 1-Percentage-

Point Increase Point Decrease

Effect on total of service and interest cost
$ 48 $ (44 )

Effect on postretirement benefit obligation
$ 923 $ (793 )

Multi-employer Pension Plans—We made contributions to certain union sponsored multi-employer pension plans of $10,372, $6,417 and $4,689 in 2004, 2003 and 2002, respectively. Benefits under these defined benefit plans are generally based on years of service and compensation levels. Under U.S. legislation regarding such pension plans, a company is required to continue funding its proportionate share of a plan’s unfunded vested benefits in the event of withdrawal (as defined by the legislation) from a plan or plan termination. We participate in a number of these pension plans, and the potential obligation as a participant in these plans may be significant. The information required to determine the total amount of this contingent obligation, as well as the total amount of accumulated benefits and net assets of such plans, is not readily available.
Obligations to Former Parent—In connection with the 1997 reorganization and initial public offering, we agreed to make fixed payments to our former parent to fund certain defined benefit and postretirement benefit obligations. The remaining obligations were $7,241 and $9,082 at December 31, 2003, for defined benefit and postretirement benefit obligations, respectively. We settled these previously accrued obligations during the fourth quarter of 2004 with cash payments of $7,736 and $9,695 for the defined benefit and postretirement benefit obligations, respectively. Interest expense, which was accruing at a contractual rate of 7.5% per year associated with the defined benefit obligations totaled $495, $639 and $747 for 2004, 2003 and 2002, respectively, and the postretirement benefit obligation, which was also accruing interest at 7.5% totaled $613, $791 and $925 for 2004, 2003 and 2002, respectively.
11. COMMITMENTS AND CONTINGENCIES
Leases—Certain facilities and equipment, including project-related field equipment, are rented under operating leases that expire at various dates through 2021. Rent expense on operating leases totaled $34,785, $20,242 and $17,617 in 2004, 2003 and 2002, respectively.
Future minimum payments under non-cancelable operating leases having initial terms of one year or more are as follows:

Amount

2005
$ 24,368

2006
14,285

2007
12,184

2008
10,560

2009
10,318

Thereafter
54,949

Total
$ 126,664

In the normal course of business, we enter into lease agreements with cancellation provisions as well as agreements with initial terms of less than one year. The costs related to these leases have been reflected in rent expense but have been appropriately excluded from the future minimum payments presented above. Amounts related to assets under capital leases were immaterial for the periods presented.
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Antitrust Proceedings — In October 2001, the U.S. Federal Trade Commission (the “FTC” or the “Commission”) filed an administrative complaint (the “Complaint”) challenging our February 2001 acquisition of certain assets of the Engineered Construction Division of Pitt-Des Moines, Inc. (“PDM”) that we acquired together with certain assets of the Water Division of PDM (The Engineered Construction and Water Divisions of PDM are hereafter sometimes referred to as the “PDM Divisions”). The Complaint alleged that the acquisition violated Federal antitrust laws by threatening to substantially lessen competition in four specific markets in which both CB&I and PDM had competed in the United States: liquefied nitrogen, liquefied oxygen and liquefied argon (LIN/LOX/LAR) storage tanks; liquefied petroleum gas (LPG) storage tanks; liquefied natural gas (LNG) storage tanks and associated facilities; and field erected thermal vacuum chambers (used for the testing of satellites).
On June 12, 2003, an FTC Administrative Law Judge ruled that our acquisition of PDM assets threatened to substantially lessen competition in the four markets identified above in which both CB&I and PDM participated and ordered us to divest within 180 days of a final order all physical assets, intellectual property and any uncompleted construction contracts of the PDM Divisions that we acquired from PDM to a purchaser approved by the FTC that is able to utilize those assets as a viable competitor.
We appealed the ruling to the full Federal Trade Commission. In addition, the FTC Staff appealed the sufficiency of the remedies contained in the ruling to the full Federal Trade Commission. On January 6, 2005, the Commission issued its Opinion and Final Order. According to the FTC’s Opinion, we would be required to divide our industrial division, including employees, into two separate operating divisions, CB&I and New PDM, and to divest New PDM to a purchaser approved by the FTC within 180 days of the Order becoming final.
We believe that the FTC’s Order and Opinion are inconsistent with the law and the facts presented at trial and in the appeal to the Commission. Therefore, we have filed with the FTC a petition to reconsider the FTC Order and Opinion. If our petition is unsuccessful, we intend to file a notice of appeal of the FTC Order and Opinion with the United States Court of Appeals. We are not required to divest any assets until we have exhausted all appeal processes available to us, including the United States Supreme Court. Because the remedies described in the Order and Opinion are neither consistent nor clear, we have not been able to quantify the potential effect on our financial statements. However, the remedies contained in the Order, depending on how and to the extent they are implemented, could have an adverse effect on us, including an expense relating to a potential write-down of the net book value of divested assets.
In addition, we were served with a subpoena for documents on July 23, 2003 by the Philadelphia office of the U.S. Department of Justice, Antitrust Division, seeking documents that are in part related to matters that were the subject of testimony in the FTC proceeding, as well as documents relating to our Water Division. In addition to the requested documents, certain of our current and former employees have testified before the investigative grand jury. We are cooperating fully with the investigation. We cannot assure you that proceedings will not result from this investigation.
Environmental Matters—Our operations are subject to extensive and changing U.S. federal, state and local laws and regulations and laws outside the U.S. establishing health and environmental quality standards, including those governing discharges and pollutants into the air and water and the management and disposal of hazardous substances and wastes. This exposes us to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such substances or wastes.
In connection with the historical operation of our facilities, substances which currently are or might be considered hazardous were used or disposed of at some sites that will or may require us to make expenditures for remediation. In addition, we have agreed to indemnify parties to whom we have sold facilities for certain environmental liabilities arising from acts occurring before the dates those facilities were transferred. We are not aware of any manifestation by a potential claimant of its awareness of a possible claim or assessment with respect to any such facility.
We believe that we are currently in compliance, in all material respects, with all environmental laws and regulations. We do not anticipate that we will incur material capital expenditures for environmental controls or for investigation or remediation of environmental conditions during 2005 or 2006.
Other—We are a defendant in a number of lawsuits arising in the normal course of business, including among others, lawsuits wherein plaintiffs allege exposure to asbestos due to work we may have performed at various locations. We have never been a manufacturer, distributor or supplier of asbestos products, and we have in place appropriate insurance coverage for the type of work that we have performed. During 2004, we were named as a defendant in additional asbestos-related lawsuits. To date, the claims which have been resolved have been dismissed or settled without a material impact on our operating results or financial position and we do not currently believe that unresolved asserted claims will have a material adverse effect on our future results of operations or financial position. As a matter of standard policy, we continually review our litigation accrual and as further information is known on pending cases, increases or decreases, as appropriate, may be recorded in accordance with SFAS No. 5, “Accounting for Contingencies.”
Letters of Credit/Bank Guarantees/Surety Bonds
Ordinary Course Commitments—In the ordinary course of business, we may obtain surety bonds and letters of credit, which we provide to our customers to secure advance payment, our performance under the contracts or in lieu of retention being withheld on our contracts. In the event of our non-performance under a contract and an advance being made by a bank pursuant to a draw on a letter of credit, the advance would become a borrowing under a credit facility and thus our direct obligation. Where a surety incurs such a loss, an indemnity agreement between the parties and us may require payment from our excess cash or a borrowing under our revolving credit facilities. When a contract is completed, the contingent obligation terminates and the bonds or letters of credit are returned. At December 31, 2004, we had provided $725,331 of surety bonds and letters of credit to support our contracting activities in the ordinary course of business. This amount fluctuates based on the mix and level of contracting activity.
Insurance—We have elected to retain portions of losses, if any, through the use of deductibles and self-insured retentions for our exposures related to third-party liability and workers’ compensation. Liabilities in excess of these amounts are the responsibilities of an insurance carrier. To the extent we are self-insured for these exposures, reserves (Note 7) have been provided based on management’s
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best estimates with input from our legal and insurance advisors. Changes in assumptions, as well as changes in actual experience, could cause these estimates to change in the near term. Our management believes that the reasonably possible losses, if any, for these matters, to the extent not otherwise disclosed and net of recorded reserves, will not be material to our financial position or results of operations. At December 31, 2004, we had outstanding surety bonds and letters of credit of $20,604 relating to our insurance program.
Income Taxes—Under the guidance of SFAS No. 5, we provide for income taxes in situations where we have and have not received tax assessments. Taxes are provided in those instances where we consider it probable that additional taxes will be due in excess of amounts reflected in income tax returns filed worldwide. As a matter of standard policy, we continually review our exposure to additional income taxes due and as further information is known, increases or decreases, as appropriate, may be recorded in accordance with SFAS No. 5.
12. SHAREHOLDERS’ EQUITY
Stock Split—On February 25, 2005, we declared a two-for-one stock split effective in the form of a stock dividend payable March 31, 2005 to stockholders of record at the close of business on March 21, 2005. The pro-forma effect of the stock split on our earnings per share has been presented in the Consolidated Statements of Income for all periods presented.
Stock Held in Trust—During 1999, we established a Trust to hold 1,411,120 unvested restricted stock units (valued at $9.00 per share) for two executive officers. The restricted stock units, which vested in March 2000, entitle the participants to receive one common share for each stock unit on the earlier of (i) the first business day after termination of employment, or (ii) a change of control. These shares are considered outstanding for basic and diluted EPS computations. The total value of the shares initially placed in the Trust was $12,735.
From time to time, we grant restricted shares to key employees under our Long-Term Incentive Plans. The restricted shares are transferred to the trust and held until the vesting restrictions lapse, at which time the shares are released from the Trust and distributed to the employees.
Treasury Stock—Under Dutch law and our Articles of Association, we may hold no more than 10% of our issued share capital at any time. In order to allow implementation of proposed repurchases of our share capital authorized by the shareholders which might be in excess of 10% (and up to 30%), we must dispose of or cancel shares which have been repurchased. From time to time, we request authority from our shareholders at the Annual General Meeting of Shareholders to cancel up to 20% of the current issued share capital in multiple tranches, with no tranche to exceed 10%. We did not cancel shares in 2004, 2003 or 2002.
Accumulated Other Comprehensive Income (Loss)—The components of accumulated other comprehensive income (loss) are as follows:

Currency Unrealized Minimum Unrealized Fair Accumulated Other

Translation Loss on Debt Pension Liability Value of Cash Comprehensive

Adjustment Securities ⁽¹⁾ Adjustment Flow Hedges ⁽²⁾ Income (Loss)

Balance at January 1, 2002
$ (12,475 ) $ (473 ) $ (120 ) $ — $ (13,068 )

Change in 2002 [net of tax of $1,620, ($56), $487 and $0]
(3,008 ) 105 (904 ) — (3,807 )

Balance at December 31, 2002
(15,483 ) (368 ) (1,024 ) — (16,875 )

Change in 2003 [net of tax of ($2,996), ($56), ($140) and ($709)]
5,564 105 259 1,317 7,245

Balance at December 31, 2003
(9,919 ) (263 ) (765 ) 1,317 (9,630 )

Change in 2004 [net of tax of $725, ($55), $225 and $1,659]
(1,377 ) 105 (428 ) (3,139 ) (4,839 )

Balance at December 31, 2004
$ (11,296 ) $ (158 ) $ (1,193 ) $ (1,822 ) $ (14,469 )

⁽¹⁾ The unrealized loss on debt securities resulted from a mark-to-market loss on a cash flow hedge for our $75,000 private placement debt issuance in 2001.

⁽²⁾ The unrealized fair value of cash flow hedges will be reclassified into earnings upon settlement of the underlying purchase obligations, which are anticipated to be settled within the next 36 months. See Note 9 for additional discussion relative to our financial instruments.

13. STOCK PLANS
Employee Stock Purchase Plan—During 2001, the shareholders adopted an employee stock purchase plan under which sale of 1,000,000 shares of our common stock has been authorized. Employees may purchase shares at a discount on a quarterly basis through regular payroll deductions of up to 8% of their compensation. The shares are purchased at 85% of the closing price per share on the first trading day following the end of the calendar quarter. As of December 31, 2004, 549,272 shares remain available for purchase.
Long-Term Incentive Plans—Under our 1997 and 1999 Long-Term Incentive Plans, as amended (the “Incentive Plans”), we can issue shares in the form of stock options, performance shares or restricted shares. Total compensation expense of $2,662, $3,962 and
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$756, was recognized for the Incentive Plans in 2004, 2003 and 2002, respectively. Of the 8,363,510 shares authorized for grant under the Incentive Plans, 1,402,835 shares remain available for grant at December 31, 2004.
Stock Options—Stock options are generally granted at the fair market value on the date of grant and expire after 10 years. Options granted to executive officers and other key employees typically vest over a three- to four-year period, while options granted to Supervisory Directors vest over a one-year period. The following table summarizes the changes in stock options for the years ended December 31, 2004, 2003 and 2002:

Weighted Average

Stock Options Exercise Price Per Share Exercise Price Per Share

Outstanding at January 1, 2002
3,929,320 $ 4.60 — $ 17.05 $ 8.45

Granted
944,672 $ 12.50 — $ 16.07 $ 14.05

Forfeited
(18,866 ) $ 6.75 — $ 16.93 $ 11.67

Exercised
(215,788 ) $ 6.57 — $ 9.00 $ 8.25

Outstanding at December 31, 2002
4,639,338 $ 4.60 — $ 17.05 $ 9.59

Granted
399,053 $ 14.56 — $ 23.13 $ 15.40

Forfeited
(54,344 ) $ 8.34 — $ 23.13 $ 8.76

Exercised
(1,402,478 ) $ 4.60 — $ 16.93 $ 8.15

Outstanding at December 31, 2003
3,581,569 $ 5.50 — $ 23.13 $ 10.82

Granted
64,109 $ 26.55 — $ 28.96 $ 28.03

Forfeited
(34,517 ) $ 12.97 — $ 28.96 $ 15.02

Exercised
(1,456,769 ) $ 6.56 — $ 16.93 $ 9.16

Outstanding at December 31, 2004
2,154,392 $ 5.50 — $ 28.96 $ 12.38

The weighted average fair value of options granted during 2004, 2003 and 2002 was $13.10, $6.99 and $6.20, respectively. The number of outstanding fixed stock options exercisable at December 31, 2003 and 2002 was 2,326,180 and 2,247,546, respectively. These options had a weighted average exercise price of $9.14 and $8.23 at December 31, 2003 and 2002, respectively.
The following summarizes information about stock options outstanding at December 31, 2004:

Options Outstanding Options Exercisable

Weighted Average

Range of Number Remaining Weighted Average Number Weighted Average

Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price

$5.50 - $8.34
648,238 5.6 $ 8.00 627,984 $ 8.00

$9.00 - $14.85
1,232,954 6.6 $ 13.11 605,376 $ 12.25

$15.00 - $28.96
273,200 7.9 $ 19.53 90,945 $ 16.06

2,154,392 6.4 $ 12.38 1,324,305 $ 10.50

Restricted Shares—Restricted shares granted to employees generally vest over four years, while restricted shares granted to directors vest over one year. The following table shows the changes in restricted shares:

2004 2003 2002

Shares subject to restriction at beginning of year
240,742 326,018 476,814

Restricted share grants
102,950 44,499 43,840

Restricted share distributions
(68,689 ) (129,775 ) (193,796 )

Restricted share forfeitures
(1,040 ) — (840 )

Shares subject to restriction at end of year
273,963 240,742 326,018

Performance Shares—Performance shares generally vest over three years, subject to achievement of specific Company performance goals. During 2004, 215,410 performance shares were granted with a weighted-average grant-date fair value of $27.19. During 2003, 193,513 performance shares were granted with a weighted-average grant-date fair value of $14.80. No performance shares were granted during 2002.
33

14. INCOME TAXES

Years Ended December 31, 2004 2003 2002

Sources of Income Before Income Taxes and Minority Interest

U.S.
$ 44,741 $ 45,612 $ 32,896

Non-U.S.
51,339 52,450 39,298

Total
$ 96,080 $ 98,062 $ 72,194

Income Tax Expense

Current income taxes

U.S. — Federal ⁽¹⁾
$ (15,756 ) $ (6,750 ) $ —

U.S. — State
(1,208 ) (1,177 ) (736 )

Non-U.S.
(16,529 ) (10,579 ) (6,512 )

Total current income taxes
(33,493 ) (18,506 ) (7,248 )

Deferred income taxes

U.S. — Federal ⁽²⁾
(4,274 ) (7,552 ) (11,153 )

U.S. — State
329 (262 ) (461 )

Non-U.S.
6,154 (3,393 ) (1,371 )

Total deferred income taxes
2,209 (11,207 ) (12,985 )

Total income tax expense
$ (31,284 ) $ (29,713 ) $ (20,233 )

Effective tax rate
32.6 % 30.3 % 28.0 %

⁽¹⁾Tax benefits of $9.3 million, $7.2 million and $0.1 million associated with the exercise of employee stock options were allocated to equity and recorded in additional paid-in capital in the years ended December 31, 2004, 2003 and 2002, respectively.

⁽²⁾During 2004 we added $2,425 of deferred tax asset related to U.S. net operating losses. During 2003 and 2002, we utilized $3,338 and $6,612 of deferred tax asset, respectively, related to U.S. net operating loss carryforwards (“NOLs”).

Reconciliation of Income Taxes at The Netherlands’ Statutory Rate and Income Tax (Expense) Benefit

Tax expense at statutory rate
$ (33,147 ) $ (33,831 ) $ (24,907 )

State income taxes
(1,009 ) (765 ) (479 )

Other country statutory tax rate differential
1,846 3,906 6,908

Extraterritorial income exclusion
2,669 2,477 —

Other, net
(1,643 ) (1,500 ) (1,755 )

Income tax expense
$ (31,284 ) $ (29,713 ) $ (20,233 )

Our statutory rate was The Netherlands’ rate of 34.5% in 2004, 2003 and 2002.
The principal temporary differences included in deferred income taxes reported on the December 31, 2004 and 2003 balance sheets were:
34

December 31, 2004 2003

Current Deferred Taxes

Tax benefit of U.S. Federal operating losses and credits
$ 10,663 $ 5,804

Contract revenue and costs
10,117 9,459

Employee compensation and benefit plan reserves
1,387 3,522

Voluntary resignation offer
495 695

Other
4,132 4,029

Current deferred tax asset
$ 26,794 $ 23,509

Non-Current Deferred Taxes

Tax benefit of U.S. Federal operating losses and credits
$ — $ 2,242

Tax benefit of U.S. State operating losses and credits
3,127 —

Tax benefit of non-U.S. operating losses and credits
15,228 13,383

Employee compensation and benefit plan reserves
— 3,268

Non-U.S. activity
8,723 7,492

Insurance reserves
7,165 6,210

Other
4,046 1,744

Non-current deferred tax asset
38,289 34,339

Less: valuation allowance
(7,701 ) (13,363 )

30,588 20,976

Depreciation and amortization
(26,834 ) (18,100 )

Employee compensation and benefit plan reserves
(461 ) —

Non-current deferred tax liability
(27,295 ) (18,100 )

Net non-current deferred tax asset
$ 3,293 $ 2,876

Net deferred tax asset
$ 30,087 $ 26,385

As of December 31, 2004, neither Netherlands income taxes nor Canadian, U.S., or other withholding taxes have been accrued on the estimated $90,768 of undistributed earnings of our Canadian, U.S., and subsidiary companies thereof, because it is our intention not to remit these earnings. We intend to permanently reinvest the undistributed earnings of our Canadian subsidiary and our U.S. companies and their subsidiaries in their businesses and, therefore, have not provided for deferred taxes on such unremitted foreign earnings. We did not record any Netherlands deferred income taxes on undistributed earnings of our other subsidiaries and affiliates at December 31, 2004. If any such undistributed earnings were distributed, the Netherlands participation exemption should become available under current law to significantly reduce or eliminate any resulting Netherlands income tax liability.
As of December 31, 2004, we had United States NOLs of approximately $30,464, of which $6,406 is subject to limitation under Internal Revenue Code Section 382. The United States NOLs will expire in 2019 to 2024. As of December 31, 2004, we had non-U.S. NOLs totaling $40,658. We believe that it is more likely than not that $30,312 of the non-U.S. NOLs will not be utilized. Therefore, a valuation allowance has been placed against $30,312 of non-U.S. NOLs.
In 2004, we settled outstanding Dutch tax issues covering years 1997-2001, resulting in no additional taxes due.
15. SEGMENT INFORMATION
We manage our operations by four geographic segments: North America; Europe, Africa, Middle East; Asia Pacific; and Central and South America. Each geographic segment offers similar services.
The Chief Executive Officer evaluates the performance of these four segments based on revenue and income from operations excluding exit costs/special charges. Each segment’s performance reflects the allocation of corporate costs, which were based primarily on revenue. No customer accounted for more than 10% of revenue. Intersegment revenue is not material.
The following table presents revenue by geographic segment:

Years Ended December 31, 2004 2003 2002

Revenue

North America
$ 1,130,096 $ 970,851 $ 801,624

Europe, Africa, Middle East
508,735 329,947 132,853

Asia Pacific
175,883 218,201 95,935

Central and South America
82,468 93,278 118,066

Total revenue
$ 1,897,182 $ 1,612,277 $ 1,148,478

35

The following table indicates revenue for individual countries in excess of 10% of consolidated revenue during any of the three years ended December 31, 2004, based on where we performed the work:

Years Ended December 31, 2004 2003 2002

United States
$ 1,051,257 $ 901,871 $ 750,935

Australia
$ 112,217 $ 175,180 $ 66,962

The following tables present income from operations, assets and capital expenditures by geographic segment:

Years Ended December 31, 2004 2003 2002

Income From Operations

North America
$ 73,709 $ 67,762 $ 49,413

Europe, Africa, Middle East
12,625 17,384 3,032

Asia Pacific
4,445 6,000 1,950

Central and South America
11,300 12,195 23,318

Total income from operations
$ 102,079 $ 103,341 $ 77,713

December 31,

Assets

North America
$ 832,669 $ 725,836 $ 589,836

Europe, Africa, Middle East
198,728 140,917 86,041

Asia Pacific
36,660 38,336 33,940

Central and South America
34,661 27,273 44,797

Total assets
$ 1,102,718 $ 932,362 $ 754,613

Our revenue earned and assets attributable to operations in The Netherlands were not significant in any of the three years ended December 31, 2004. Our long-lived assets are considered to be net property and equipment. Approximately 79% of these assets were located in the United States at December 31, 2004, while the other 21% were strategically located throughout the world.

Years Ended December 31, 2004 2003 2002

Capital Expenditures

North America
$ 6,375 $ 23,991 $ 20,123

Europe, Africa, Middle East
10,698 6,926 2,718

Asia Pacific
318 212 1,037

Central and South America
39 157 49

Total capital expenditures
$ 17,430 $ 31,286 $ 23,927

Although we manage our operations by the four geographic segments, revenue by project type is shown below:

Years Ended December 31, 2004 2003 2002

Revenue

Process and Technology
$ 665,607 $ 582,712 $ 331,200

Standard Tanks
418,684 368,946 430,954

Low Temperature/Cryogenic Tanks and Systems
456,449 285,334 109,312

Repairs and Turnarounds
135,071 167,994 113,633

Specialty and Other Structures
153,841 116,059 101,603

Pressure Vessels
67,530 91,232 61,776

Total revenue
$ 1,897,182 $ 1,612,277 $ 1,148,478

36

16. QUARTERLY OPERATING RESULTS AND COMMON STOCK DIVIDENDS (UNAUDITED)
Quarterly Operating Results—The following table sets forth our selected unaudited consolidated income statement information on a quarterly basis for the two years ended December 31, 2004:

Quarter Ended 2004 March 31 June 30 ⁽¹⁾ Sept. 30 Dec. 31

Revenue
$ 443,553 $ 415,373 $ 465,539 $ 572,717

Gross profit
$ 46,763 $ 29,565 $ 59,670 $ 66,313

Net income
$ 14,604 $ 4,944 $ 21,620 $ 24,752

Net income per share — basic
$ 0.31 $ 0.10 $ 0.45 $ 0.51

Net income per share — diluted
$ 0.30 $ 0.10 $ 0.44 $ 0.50

Common dividends per share
$ 0.04 $ 0.04 $ 0.04 $ 0.04

Quarter Ended 2003 March 31 June 30 Sept. 30 Dec. 31

Revenue
$ 322,309 $ 389,309 $ 429,123 $ 471,536

Gross profit
$ 39,661 $ 49,355 $ 51,513 $ 56,033

Net income
$ 12,764 $ 16,464 $ 18,028 $ 18,698

Net income per share — basic
$ 0.29 $ 0.37 $ 0.39 $ 0.40

Net income per share — diluted
$ 0.28 $ 0.35 $ 0.37 $ 0.39

Common dividends per share
$ 0.04 $ 0.04 $ 0.04 $ 0.04

⁽¹⁾         Included in our 2004 results of operations were significant losses associated with the recognition of potentially unrecoverable costs on two projects, one in our EAME segment’s Saudi Arabia region and the other in our North America segment, as fully described in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Shareholder Information—Our Common Stock is traded on the New York Stock Exchange. As of March 1, 2005, we had approximately 16,000 shareholders. The following table presents the range of Common Stock prices on the New York Stock Exchange for the years ended December 31, 2004 and 2003:
Range of Common Stock Prices

Quarter Ended 2004 March 31 June 30 Sept. 30 Dec. 31

High
$ 32.50 $ 30.35 $ 30.45 $ 41.12

Low
$ 24.50 $ 21.60 $ 26.50 $ 28.98

Close
$ 27.83 $ 27.85 $ 29.99 $ 40.00

Quarter Ended 2003 March 31 June 30 Sept. 30 Dec. 31

High
$ 17.65 $ 25.00 $ 28.50 $ 30.00

Low
$ 14.25 $ 16.16 $ 22.09 $ 24.00

Close
$ 16.24 $ 22.68 $ 27.16 $ 28.90

We submitted a Section 12(a) CEO certification to the New York Stock Exchange in 2004. Also during 2004, we filed with the Securities and Exchange Commission certifications, pursuant to Rule 13A-14 of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as Exhibits 31.1 and 31.2 of our 2003 Form 10-K.
37
EX-21 6 h23159exv21.txt LIST OF SIGNIFICANT SUBSIDIARIES Exhibit 21 LIST OF SIGNIFICANT SUBSIDIARIES Jurisdiction in which Subsidiary or Affiliate Incorporated or Organized Chicago Bridge & Iron Company B.V. The Netherlands Arabian CBI Ltd. Saudi Arabia Arabian CBI Tank Manufacturing Company Limited Saudi Arabia Arabian Gulf Material Supply Company Ltd. Cayman Islands CBI Construcciones S.A. Argentina CBI Constructors Pty. Ltd. Australia CBI Constructors Pty. Ltd. (PNG) New Guinea CBI Constructors S.A. (Proprietary) Limited South Africa CB&I Finance Company Limited Ireland CBI Holdings (U.K.) Limited United Kingdom CBI Constructors Limited United Kingdom CB&I John Brown Limited United Kingdom CB&I London Limited United Kingdom CBI (Malaysia) Sdn. Bhd. Malaysia CB&I Nigeria, Limited Nigeria CBI (Philippines) Inc. Philippines CBI Venezolana, S.A. Venezuela Chicago Bridge & Iron Company (Egypt) LLC Egypt CMP Holdings B.V. The Netherlands CB&I Europe B.V. The Netherlands Horton CBI, Limited Canada Horton Services, Inc. Canada Southern Tropic Material Supply Company, Ltd. Cayman Islands P.T. Chicago Bridge & Iron (1) Indonesia Chicago Bridge & Iron (Antilles) N.V. Netherland Antilles CBI Eastern Anstalt Liechtenstein Oasis Supply Company Anstalt Liechtenstein CB&I Hungary Holding LLC (CBI Hungary Kft) Hungary CBI Overseas, LLC Delaware Chicago Bridge & Iron Company Delaware CB&I Constructors, Inc. Texas CB&I Tyler Company Delaware CB&I Paddington Limited United Kingdom CB&I Woodlands L.L.C. Delaware Howe-Baker International, L.L.C. Delaware Howe-Baker Holdings, L.L.C. Delaware Howe-Baker Engineers, Ltd. Texas HBI Holdings, L.L.C. Delaware Matrix Engineering, Ltd. Texas Callidus Technologies, L.L.C. Oklahoma CBI Services, Inc. Delaware Morse Construction Group, Inc. Washington Chicago Bridge & Iron Company Illinois Asia Pacific Supply Co. Delaware CBI Caribe, Limited Delaware CBI Company Ltd. Delaware Constructora C.B.I. Limitada Chile Central Trading Company, Ltd. Delaware Chicago Bridge & Iron Company (Delaware) Delaware Lealand Finance Company B.V. The Netherlands (1) Unconsolidated affiliate In addition, Chicago Bridge & Iron Company N.V. has multiple other consolidated subsidiaries providing similar contracting services outside the United States, the number of which changes from time to time depending upon business opportunities and work locations. EX-23 7 h23159exv23.txt CONSENT AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM EXHIBIT 23 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Supervisory Board of Chicago Bridge & Iron Company N. V. We have audited the consolidated financial statements of Chicago Bridge & Iron Company N.V. (the "Company") as of December 31, 2004 and 2003, and for each of the three years in the period ended December 31, 2004, and have issued our report thereon dated March 11, 2005; such financial statements and report are included in your 2004 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedule of the Company, listed in Item 15. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ DELOITTE & TOUCHE LLP Houston, Texas March 11, 2005 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Supervisory Board of Chicago Bridge & Iron Company N. V. We consent to the incorporation by reference in Registration Statement No. 333-111714 on Form S-3 of our reports dated March 11, 2005, relating to the consolidated financial statements and financial statement schedule of Chicago Bridge & Iron Company N. V. (the "Company") and management's report on the effectiveness of internal control over financial reporting, appearing in and incorporated by reference in this Annual Report on Form 10-K of the Company for the year ended December 31, 2004. /s/ DELOITTE & TOUCHE LLP Houston, Texas March 11, 2005 EX-31.1 8 h23159exv31w1.txt CERTIFICATION PURSUANT TO SECTION 302 EXHIBIT 31.1 CERTIFICATION PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Gerald M. Glenn, certify that: 1. I have reviewed this annual report on Form 10-K of Chicago Bridge & Iron Company N.V.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ GERALD M. GLENN ----------------------- Gerald M. Glenn Chief Executive Officer Date: March 11, 2005 EX-31.2 9 h23159exv31w2.txt CERTIFICATION PURSUANT TO SECTION 302 EXHIBIT 31.2 CERTIFICATION PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Richard E. Goodrich, certify that: 1. I have reviewed this annual report on Form 10-K of Chicago Bridge & Iron Company N.V.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ RICHARD E. GOODRICH ------------------------ Richard E. Goodrich Chief Financial Officer Date: March 11, 2005 EX-32.1 10 h23159exv32w1.txt CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Chicago Bridge & Iron Company N.V. (the "Company") on Form 10-K for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gerald M. Glenn, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ GERALD M. GLENN - ----------------------- Gerald M. Glenn Chief Executive Officer March 11, 2005 EX-32.2 11 h23159exv32w2.txt CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Chicago Bridge & Iron Company N.V. (the "Company") on Form 10-K for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard E. Goodrich, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ RICHARD E. GOODRICH - ----------------------- Richard E. Goodrich Chief Financial Officer March 11, 2005 ~~-----END PRIVACY-ENHANCED MESSAGE-----~~

	•	large U.S., multinational and state-owned oil companies, such as Shell, ExxonMobil, Marathon, Valero Refining Company, Premcor, BP, ConocoPhillips, Saudi Aramco and PDVSA;

	•	leading EPC companies, such as Chiyoda, Bechtel, KBR and Technip;

	•	LNG and natural gas producers and distributors, such as Dominion, Yankee Gas and Woodside Energy; and

	•	municipal and private water companies.

	•	current and projected oil and gas prices;

	•	exploration, extraction, production and transportation costs;

	•	the discovery rate of new oil and gas reserves;

	•	the sale and expiration dates of leases and concessions;

	•	local and international political and economic conditions, including war or conflict;

	•	technological advances; and

	•	the ability of oil and gas companies to generate capital.

	•	unanticipated technical problems with the structures or systems being supplied by us, which may require that we spend our own money to remedy the problem;

	•	changes in the costs of components, materials or labor;

	•	difficulties in obtaining required governmental permits or approvals;

	•	changes in local laws and regulations;

	•	changes in local labor conditions;

	•	project modifications creating unanticipated costs;

	•	delays caused by local weather conditions; and

	•	our suppliers’ or subcontractors’ failure to perform.

	•	difficulties in the integration of operations and systems;

	•	the key personnel and customers of the acquired company may terminate their relationships with the acquired company;

	•	we may experience additional financial and accounting challenges and complexities in areas such as tax planning, treasury management and financial reporting;

	•	we may assume or be held liable for risks and liabilities (including for environmental-related costs) as a result of our acquisitions, some of which we may not discover during our due diligence;

	•	our ongoing business may be disrupted or receive insufficient management attention; and

	•	we may not be able to realize the cost savings or other financial benefits we anticipated.

	•	emissions into the air;

	•	discharge into waterways;

	•	generation, storage, handling, treatment and disposal of waste materials; and

	•	health and safety.

	•	unstable economic conditions in the non-U.S. countries in which we make capital investments, operate and sell products and services;

	•	the lack of well-developed legal systems in some countries in which we operate, which could make it difficult for us to enforce our contracts;

	•	expropriation of property;

	•	restriction on the right to convert or repatriate currency; and

	•	political upheaval and international hostilities, including risks of loss due to civil strife, acts of war, guerrilla activities, insurrections and acts of terrorism.

	•	our ability to realize cost savings from our expected execution performance of contracts;

	•	the uncertain timing and the funding of new contract awards, and project cancellations and operating risks;

	•	cost overruns on fixed price, target price or similar contracts;

	•	risks associated with percentage of completion accounting;

	•	our ability to settle or negotiate unapproved change orders and claims;

	•	changes in the costs or availability of or delivery schedule for components and materials and labor;

	•	increased competition;

	•	fluctuating revenue resulting from a number of factors, including the cyclical nature of the individual markets in which our customers operate;

	•	lower than expected activity in the hydrocarbon industry, demand from which is the largest component of our revenue;

	•	lower than expected growth in our primary end markets, including but not limited to LNG and clean fuels;

	•	risks inherent in our acquisition strategy and our ability to obtain financing for proposed acquisitions;

	•	our ability to integrate and successfully operate acquired businesses and the risks associated with those businesses;

	•	adverse outcomes of pending claims or litigation or the possibility of new claims or litigation;

	•	the ultimate outcome or effect of the pending FTC order and DOJ investigation on our business, financial condition and results of operations;

	•	lack of necessary liquidity to finance expenditures prior to the receipt of payment for the performance of contracts and to provide bid and performance bonds and letters of credit securing our obligations under our bids and contracts;

	•	proposed and actual revisions to U.S. and non-U.S. tax laws, and interpretation of said laws, and U.S. tax treaties with non-U.S. countries (including The Netherlands), that seek to increase income taxes payable;

	•	political and economic conditions including, but not limited to, war, conflict or civil or economic unrest in countries in which we operate; and

	•	a downturn or disruption in the economy in general.


Years Ended December 31,	2004⁽⁷⁾			2003			2002 ⁽⁶⁾			2001			2000

Income Statement Data

Revenue	$	1,897,182		$	1,612,277		$	1,148,478		$	1,081,824		$	611,691
Cost of revenue		1,694,871			1,415,715			992,927			945,048			570,921

Gross profit		202,311			196,562			155,551			136,776			40,770
Selling and administrative expenses		98,503			93,506			73,155			67,519			41,913
Intangibles amortization		1,817			2,548			2,529			5,819			599
Other operating income, net ⁽¹⁾		(88	)		(2,833	)		(1,818	)		(691	)		(2,401	)
Exit costs / special charges ⁽²⁾		—			—			3,972			9,686			27,464

Income (loss) from operations		102,079			103,341			77,713			54,443			(26,805	)
Interest expense		(8,232	)		(6,579	)		(7,114	)		(8,392	)		(5,187	)
Interest income		2,233			1,300			1,595			1,854			430

Income (loss) before taxes and minority interest		96,080			98,062			72,194			47,905			(31,562	)
Income tax (expense) benefit		(31,284	)		(29,713	)		(20,233	)		(13,480	)		4,859

Income (loss) before minority interest		64,796			68,349			51,961			34,425			(26,703	)
Minority interest in loss (income)		1,124			(2,395	)		(1,812	)		(2,503	)		(1,341	)

Income (loss) from continuing operations		65,920			65,954			50,149			31,922			(28,044	)

Discontinued operations: ⁽³⁾
Loss from discontinued operations, net of taxes		—			—			—			(2,321	)		(5,731	)
Loss on disposal of discontinued operations, net of taxes		—			—			—			(9,898	)		—

Net income (loss)	$	65,920		$	65,954		$	50,149		$	19,703		$	(33,775	)


Per Share Data ^{(2) (5)}

Net income (loss)—basic
Income (loss) from continuing operations	$	1.38		$	1.46		$	1.16		$	0.74		$	(1.49	)
Loss from discontinued operations		—			—			—			(0.28	)		(0.31	)

Net income (loss)	$	1.38		$	1.46		$	1.16		$	0.46		$	(1.80	)

Net income (loss)—diluted
Income (loss) from continuing operations	$	1.33		$	1.39		$	1.12		$	0.71		$	(1.49	)
Loss from discontinued operations		—			—			—			(0.27	)		(0.31	)

Net income (loss)	$	1.33		$	1.39		$	1.12		$	0.44		$	(1.80	)

Dividends	$	0.16		$	0.16		$	0.12		$	0.12		$	0.12


Balance Sheet Data

Goodwill	$	233,386		$	219,033		$	157,903		$	138,444		$	132,426
Total assets	$	1,102,718		$	932,362		$	754,613		$	665,975		$	553,156
Long-term debt	$	50,000		$	75,000		$	75,000		$	75,000		$	101,800
Total shareholders’ equity	$	469,238		$	389,164		$	282,147		$	212,223		$	155,747


Cash Flow Data

Cash flows from operating activities	$	132,769		$	90,366		$	72,030		$	105,796		$	4,085
Cash flows from investing activities	$	(26,051	)	$	(102,030	)	$	(36,957	)	$	(35,775	)	$	(65,567	)
Cash flows from financing activities	$	16,754		$	22,046		$	16,985		$	(27,034	)	$	50,618


Other Financial Data

Gross profit percentage		10.7	%		12.2	%		13.5	%		12.6	%		11.3	%
Depreciation and amortization	$	22,498		$	21,431		$	19,661		$	25,105		$	16,838
Capital expenditures	$	17,430		$	31,286		$	23,927		$	8,917		$	6,353


Other Data

New business taken ⁽⁴⁾	$	2,614,549		$	1,708,210		$	1,641,128		$	1,160,374		$	680,776
Backlog ⁽⁴⁾	$	2,339,114		$	1,590,381		$	1,310,987		$	835,255		$	597,350
Number of employees:
Salaried		3,204			2,895			2,152			2,054			1,676
Hourly and craft		7,824			7,337			4,770			5,204			3,618


(In thousands)
Years Ended December 31,	2004		2003		2002

New Business Taken ⁽¹⁾

North America	$	1,448,055	$	1,105,369	$	1,014,375
Europe, Africa, Middle East		962,299		380,493		375,897
Asia Pacific		135,226		147,238		139,907
Central and South America		68,969		75,110		110,949

Total new business taken	$	2,614,549	$	1,708,210	$	1,641,128


Revenue
North America	$	1,130,096	$	970,851	$	801,624
Europe, Africa, Middle East		508,735		329,947		132,853
Asia Pacific		175,883		218,201		95,935
Central and South America		82,468		93,278		118,066

Total revenue	$	1,897,182	$	1,612,277	$	1,148,478


Income From Operations
North America	$	73,709	$	67,762	$	49,413
Europe, Africa, Middle East		12,625		17,384		3,032
Asia Pacific		4,445		6,000		1,950
Central and South America		11,300		12,195		23,318

Total income from operations	$	102,079	$	103,341	$	77,713


Commitments	Amounts by Expiration Period
(In thousands)	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years

Letters of credit/bank guarantees	$	384,548	$	193,687	$	112,008	$	78,853	$	—
Surety bonds		361,387		318,564		42,767		56		—

Total commitments	$	745,935	$	512,251	$	154,775	$	78,909	$	—


Contractual Obligations	Payments Due by Period
(In thousands)	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years

Senior notes ^{( 1 )}	$	86,010	$	30,505	$	55,505	$	—	$	—
Operating leases		126,664		24,368		26,469		20,878		54,949
Purchase obligations ⁽²⁾		—		—		—		—		—
Self-insurance obligations ^{( 3 )}		14,740		14,740
Pension funding obligations ^{( 4 )}		5,166		5,166		—		—		—
Postretirement benefit funding obligations ^{( 4 )}		2,103		2,103		—		—		—

Total contractual obligations	$	234,683	$	76,882	$	81,974	$	20,878	$	54,949



/s/ Gerald M. Glenn				/s/ Richard E. Goodrich

Gerald M. Glenn Chairman, President and				Richard E. Goodrich Executive Vice President and
Chief Executive Officer				Chief Financial Officer


December 31,	2004			2003

Assets

Cash and cash equivalents	$	236,390		$	112,918
Accounts receivable, net of allowance for doubtful accounts of $726 in 2004 and $1,178 in 2003		252,377			200,521
Contracts in progress with costs and estimated earnings exceeding related progress billings (Note 5)		135,902			142,235
Deferred income taxes (Note 14)		26,794			23,509
Other current assets		33,816			33,244

Total current assets		685,279			512,427

Property and equipment, net (Note 7)		119,474			124,505
Non-current contract retentions		5,635			11,254
Deferred income taxes (Note 14)		3,293			2,876
Goodwill (Note 6)		233,386			219,033
Other intangibles, net of accumulated amortization of $6,088 in 2004 and $7,494 in 2003 (Note 6)		29,346			30,949
Other non-current assets		26,305			31,318

Total assets	$	1,102,718		$	932,362


Liabilities

Notes payable (Note 8)	$	9,704		$	1,901
Current maturity of long-term debt (Note 8)		25,000			—
Accounts payable		180,362			143,258
Accrued liabilities (Note 7)		89,104			95,237
Contracts in progress with progress billings exceeding related costs and estimated earnings (Note 5)		169,470			130,497
Income taxes payable		7,550			5,359

Total current liabilities		481,190			376,252

Long-term debt (Note 8)		50,000			75,000
Other non-current liabilities (Note 7)		97,155			85,038
Minority interest in subsidiaries		5,135			6,908

Total liabilities		633,480			543,198


Commitments and contingencies (Note 11)		—			—

Shareholders’ Equity

Common stock, Euro .01 par value; shares authorized: 125,000,000 in 2004 and 80,000,000 in 2003; shares issued: 48,464,584 in 2004 and 46,697,732 in 2003; shares outstanding: 48,415,653 in 2004 and 46,694,415 in 2003		497			475
Additional paid-in capital		313,337			283,625
Retained earnings		184,793			126,521
Stock held in Trust (Note 12)		(13,425	)		(11,719	)
Treasury stock, at cost		(1,495	)		(108	)
Accumulated other comprehensive loss (Note 12)		(14,469	)		(9,630	)

Total shareholders’ equity		469,238			389,164

Total liabilities and shareholders’ equity	$	1,102,718		$	932,362


																								Accumulated
	Common Stock					Additional						Stock Held in Trust						Treasury Stock						Other			Total
	Number of					Paid-In			Retained			Number of						Number of						Comprehensive			Shareholders’
	Shares			Amount		Capital			Earnings			Shares			Amount			Shares			Amount			Income (Loss)			Equity

Balance at January 1, 2002		41,960		$	210	$	241,559		$	23,102			1,601		$	(14,301	)		2,605		$	(25,279	)	$	(13,068	)	$	212,223
Comprehensive income (loss)		—			—		—			50,149			—			—			—			—			(3,807	)		46,342
Dividends to common shareholders		—			—		—			(5,187	)		—			—			—			—			—			(5,187	)
Long-Term Incentive Plan amortization		—			—		756			—			—			—			—			—			—			756
Issuance of treasury stock to Trust		43			—		88			—			43			(641	)		(43	)		553			—			—
Release of Trust shares		—			—		(2,610	)		—			(194	)		2,610			—			—			—			—
Purchase of treasury stock		(50	)		—		—			—			—			—			50			(668	)		—			(668	)
Issuance of treasury stock		2,373			—		6,123			—			—			—			(2,373	)		22,558			—			28,681

Balance at December 31, 2002		44,326			210		245,916			68,064			1,450			(12,332	)		239			(2,836	)		(16,875	)		282,147
Comprehensive income		—			—		—			65,954			—			—			—			—			7,245			73,199
Stock dividends to common shareholders		—			240		—			(240	)		—			—			—			—			—			—
Dividends to common shareholders		—			—		—			(7,257	)		—			—			—			—			—			(7,257	)
Long-Term Incentive Plan amortization		—			—		3,962			—			—			—			—			—			—			3,962
Issuance of treasury stock to Trust		5			—		18			—			5			(70	)		(5	)		52			—			—
Issuance of common stock to Trust		40			1		869			—			40			(870	)		—			—			—			—
Release of Trust shares		—			—		(1,553	)		—			(130	)		1,553			—			—			—			—
Purchase of treasury stock		(192	)		—		—			—			—			—			192			(4,152	)		—			(4,152	)
Issuance of treasury stock		423			—		(2,567	)		—			—			—			(423	)		6,828			—			4,261
Issuance of common stock		2,092			24		36,980			—			—			—			—			—			—			37,004

Balance at December 31, 2003		46,694			475		283,625			126,521			1,365			(11,719	)		3			(108	)		(9,630	)		389,164
Comprehensive income (loss)		—			—		—			65,920			—			—			—			—			(4,839	)		61,081
Dividends to common shareholders		—			—		—			(7,648	)		—			—			—			—			—			(7,648	)
Long-Term Incentive Plan amortization		—			—		2,662			—			—			—			—			—			—			2,662
Issuance of common stock to Trust		84			1		2,555			—			84			(2,556	)		—			—			—			—
Release of Trust shares		—			—		(850	)		—			(69	)		850			—			—			—			—
Purchase of treasury stock		(46	)		—		1			—			—			—			46			(1,387	)		—			(1,386	)
Issuance of common stock		1,684			21		25,344			—			—			—			—			—			—			25,365

Balance at December 31, 2004		48,416		$	497	$	313,337		$	184,793			1,380		$	(13,425	)		49		$	(1,495	)	$	(14,469	)	$	469,238


Purchase Price Allocation	2003

Current assets	$	28,032
Property, plant and equipment		4,306
Goodwill		52,760
Current liabilities		14,332
Non-current liabilities		14,519

Total Consideration	$	56,247


	Personnel			Facilities
	Costs			and Other			Integration			Total

Balance at January 1, 2002	$	4,811		$	1,284		$	—		$	6,095
Special charges		3,428			18	⁽¹⁾		526			3,972
Cash payments		(4,618	)		(810	)		(526	)		(5,954	)

Balance at December 31, 2002		3,621			492			—			4,113
Cash payments		(1,511	)		—			—			(1,511	)

Balance at December 31, 2003		2,110			492			—			2,602
Cash payments		(1,503	)		—			—			(1,503	)

Balance at December 31, 2004	$	607		$	492		$	—		$	1,099


	North America		EAME		Total

Balance at December 31, 2002	$	157,903	$	—	$	157,903
Acquisitions, foreign currency translation and contingent earnout obligations		41,307		19,823		61,130

Balance at December 31, 2003		199,210		19,823		219,033
Resolution of pre-acquisition contingencies, foreign currency translation and contingent earnout obligations		5,242		9,111		14,353

Balance at December 31, 2004	$	204,452	$	28,934	$	233,386


	2004					2003
	Gross Carrying		Accumulated			Gross Carrying		Accumulated
	Amount		Amortization			Amount		Amortization
Amortized intangible assets
Technology (5 to 10 years)	$	4,914	$	(3,261	)	$	6,221	$	(3,795	)
Non-compete agreements (8 years)		3,100		(1,600	)		4,810		(2,648	)
Strategic alliances, customer contracts, patents (5 to 11 years)		2,564		(1,227	)		2,695		(1,051	)

Total	$	10,578	$	(6,088	)	$	13,726	$	(7,494	)


Unamortized intangible assets
Tradenames	$	24,717				$	24,717
Minimum pension liability adjustment		139					—

	$	24,856				$	24,717


	2004		2003

Current:
Notes payable	$	9,704	$	1,901
Current maturity of long-term debt		25,000		—

Current debt	$	34,704	$	1,901

Long-Term:
Notes:
7.34% Senior Notes maturing July 2007. Principal due in equal annual installments of $25,000 from 2005 through 2007. Interest payable semi-annually	$	50,000	$	75,000
Revolving credit facility:
$233,333 three-year revolver expiring August 2006. Interest at prime plus a margin or the British Bankers Association settlement rate plus a margin as described below		—		—

Long-term debt	$	50,000	$	75,000


		Contract		Weighted Average
Currency Sold	Currency Purchased	Amount ⁽¹⁾		Contract Rate

Forward contracts to hedge intercompany loans:⁽²⁾
U.S. Dollar	Australian Dollar	$	16,274		1.29
U.S. Dollar	British Pound	$	15,656		0.52
U.S. Dollar	Canadian Dollar	$	15,267		1.20
Euro	U.S. Dollar	$	11,786		0.75
South African Rand	U.S. Dollar	$	2,096		5.79

Forward contracts to hedge certain operating exposures:⁽³⁾
British Pound	U.S. Dollar	$	19,046		0.56
U.S. Dollar	Euro	$	8,546		0.83
U.S. Dollar	South African Rand	$	4,663		6.69
U.S. Dollar	Japanese Yen	$	484		103.23
British Pound	Euro	£	78,059		1.38



	Defined Benefit Plans									Other Postretirement Plans
	2004			2003			2002			2004			2003			2002

Components of Net Periodic Benefit Cost

Service cost	$	5,633		$	2,898		$	180		$	1,265		$	1,679		$	999
Interest cost		4,854			1,150			973			1,965			1,871			1,453
Expected return on plan assets		(5,587	)		(1,429	)		(1,354	)		—			—			—
Amortization of prior service costs		18			9			8			(269	)		(101	)		(101	)
Recognized net actuarial loss		289			411			102			260			94			1

Net periodic benefit expense (income)	$	5,207		$	3,039		$	(91	)	$	3,221		$	3,543		$	2,352


Year	Defined Benefit Plans		Other Postretirement Plans
2005	$	2,322	$	5,199
2006	$	3,091	$	5,990
2007	$	3,504	$	6,832
2008	$	4,076	$	7,923
2009	$	4,451	$	9,029
2010-2014	$	31,608	$	66,458


				Plan Assets
	Target			at December 31,
Asset Category	Allocations			2004			2003
Equity securities		70-80	%		74	%		73	%
Debt securities		20-30	%		22	%		23	%
Real estate		0-5	%		1	%		2	%
Other		0-10	%		3	%		2	%

Total		100	%		100	%		100	%


	1-Percentage-		1-Percentage-
	Point Increase		Point Decrease
Effect on total of service and interest cost	$	48	$	(44	)
Effect on postretirement benefit obligation	$	923	$	(793	)


	Amount

2005	$	24,368
2006		14,285
2007		12,184
2008		10,560
2009		10,318
Thereafter		54,949

Total	$	126,664


	Currency			Unrealized			Minimum			Unrealized Fair			Accumulated Other
	Translation			Loss on Debt			Pension Liability			Value of Cash			Comprehensive
	Adjustment			Securities ⁽¹⁾			Adjustment			Flow Hedges ⁽²⁾			Income (Loss)

Balance at January 1, 2002	$	(12,475	)	$	(473	)	$	(120	)	$	—		$	(13,068	)
Change in 2002 [net of tax of $1,620, ($56), $487 and $0]		(3,008	)		105			(904	)		—			(3,807	)

Balance at December 31, 2002		(15,483	)		(368	)		(1,024	)		—			(16,875	)
Change in 2003 [net of tax of ($2,996), ($56), ($140) and ($709)]		5,564			105			259			1,317			7,245

Balance at December 31, 2003		(9,919	)		(263	)		(765	)		1,317			(9,630	)
Change in 2004 [net of tax of $725, ($55), $225 and $1,659]		(1,377	)		105			(428	)		(3,139	)		(4,839	)

Balance at December 31, 2004	$	(11,296	)	$	(158	)	$	(1,193	)	$	(1,822	)	$	(14,469	)


									Weighted Average
	Stock Options			Exercise Price Per Share					Exercise Price Per Share

Outstanding at January 1, 2002		3,929,320		$	4.60	—	$	17.05	$	8.45
Granted		944,672		$	12.50	—	$	16.07	$	14.05
Forfeited		(18,866	)	$	6.75	—	$	16.93	$	11.67
Exercised		(215,788	)	$	6.57	—	$	9.00	$	8.25

Outstanding at December 31, 2002		4,639,338		$	4.60	—	$	17.05	$	9.59
Granted		399,053		$	14.56	—	$	23.13	$	15.40
Forfeited		(54,344	)	$	8.34	—	$	23.13	$	8.76
Exercised		(1,402,478	)	$	4.60	—	$	16.93	$	8.15

Outstanding at December 31, 2003		3,581,569		$	5.50	—	$	23.13	$	10.82
Granted		64,109		$	26.55	—	$	28.96	$	28.03
Forfeited		(34,517	)	$	12.97	—	$	28.96	$	15.02
Exercised		(1,456,769	)	$	6.56	—	$	16.93	$	9.16

Outstanding at December 31, 2004		2,154,392		$	5.50	—	$	28.96	$	12.38



			Options Outstanding				Options Exercisable
			Weighted Average
Range of	Number		Remaining		Weighted Average		Number		Weighted Average
Exercise Prices	Outstanding		Contractual Life		Exercise Price		Exercisable		Exercise Price
$5.50 - $8.34		648,238		5.6	$	8.00		627,984	$	8.00
$9.00 - $14.85		1,232,954		6.6	$	13.11		605,376	$	12.25
$15.00 - $28.96		273,200		7.9	$	19.53		90,945	$	16.06
		2,154,392		6.4	$	12.38		1,324,305	$	10.50


Reconciliation of Income Taxes at The Netherlands’ Statutory Rate and Income Tax (Expense) Benefit

Tax expense at statutory rate	$	(33,147	)	$	(33,831	)	$	(24,907	)
State income taxes		(1,009	)		(765	)		(479	)
Other country statutory tax rate differential		1,846			3,906			6,908
Extraterritorial income exclusion		2,669			2,477			—
Other, net		(1,643	)		(1,500	)		(1,755	)

Income tax expense	$	(31,284	)	$	(29,713	)	$	(20,233	)