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Item
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment
of
Certain Officers; Compensatory Arrangements of Certain
Officers.
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Employment
Arrangements – President and Chief Operating
Officer
On
February 22, 2008, Foster Wheeler Ltd. (the “Company” or “we”), our Italian
subsidiary, Foster Wheeler Continental Europe S.r.L. (“FWCE”), and Umberto della
Sala, our President and Chief Operating Officer, agreed to terminate Mr. della
Sala’s existing employment agreement with FWCE, effective March 1, 2008, and
enter into the revised employment arrangements as described below.
Fixed
Term Employment Agreement with FWCE
Mr.
della
Sala’s revised arrangements with FWCE, which we and Mr. della Sala expect to
execute on or about April 1, 2008 and which will be effective as of April 1,
2008, will be governed by a new Fixed Term Employment Agreement (the “Fixed Term
Agreement”). The official version of the Fixed Term Agreement will
be in the Italian language and will be governed by Italian law. An
unofficial English translation of the Fixed Term Agreement to be entered into
by
FWCE and Mr. della Sala is attached hereto as Exhibit 10.1, and the foregoing
agreement is incorporated into this Item 5.02 by reference. The following
summary is qualified in its entirety by reference to the attached Fixed Term
Agreement.
The
Fixed
Term Agreement will provide that Mr. della Sala serves as a “Manager” under
Italian Law. His base salary with FWCE is €195,000 and the Fixed Term Agreement
will expire by its own terms on December 31, 2011. Substantially all terms
of
Mr. della Sala’s employment with FWCE will remain mandated by Italian law and
the national collective bargaining agreement that covers him, which we refer
to
as the National Contract and which is not specific to the Company.
Under
the
Fixed Term Agreement, Mr. della Sala will agree to keep confidential all
non-public information regarding us that he receives during the term of his
employment. He will also agree that, upon expiration of the Fixed Term Agreement
or his termination for any reason, he will not, directly or indirectly, provide
services to certain of our competitors which are the same or similar to services
he provided to us for one year after such expiration or termination. He will
also agree that, until the second anniversary of the expiration of the Fixed
Term Agreement or his termination, he will not solicit any of our employees
or
customers. In consideration of the non-competition and non-solicitation
provisions in the Fixed Term Agreement, and as necessary to satisfy Italian
law,
Mr. della Sala will be paid 30% of his FWCE base salary following his date
of
termination of employment and 10% of his FWCE base salary on the first
anniversary date of such payment.
If
the
Fixed Term Agreement expires by its own terms on December 31, 2011, Mr.
della Sala is entitled to only the mandatory severance indemnity compensation
provided for under the National Contract and/or Italian law.
Employment
Agreement with Foster Wheeler Ltd.
Mr.
della
Sala’s new Employment Agreement with Foster Wheeler Ltd., effective as of March
1, 2008 (the “Employment Agreement”), is attached hereto as Exhibit 10.2 and is
incorporated into this Item 5.02 by reference. The following summary is
qualified in its entirety by reference to the attached Employment
Agreement.
The
Employment Agreement terminates upon the earlier of December 31, 2011 or the
occurrence of Mr. della Sala’s death, physical or mental disability, notice of
termination for cause, resignation for good reason, termination without cause,
or voluntary resignation. Under the Employment Agreement, Mr. della Sala serves
as our President and Chief Operating Officer. Mr. della Sala is entitled to
a
base salary of €346,000, to be increased to €391,000 on January 1, 2009 and to
thereafter be reviewed by us on each January 1 or another appropriate date
when
the salaries of executives at the executive’s level are normally reviewed.
Mr.
della
Sala’s Employment Agreement provides for an annual short-term incentive
compensation target of 120% of base salary up to a maximum of 240% of base
salary based upon targeted business objectives as established by our Board
of
Directors or Compensation Committee. Mr. della Sala is entitled to a grant
of
restricted stock units with a value on the grant date of €2,972,000 and stock
options with a value on the grant date of €2,972,000, with the grants to be made
during the first open trading window for our executive officers subsequent
to
the effectiveness of the Employment Agreement. The number of units and options
will be determined pursuant to a methodology approved by our Compensation
Committee. One-fourth of the units and options will vest on each of December
31,
2008, December 31, 2009, December 31, 2010, and December 31, 2011, provided
that
Mr. della Sala is still employed by us on such dates. The options will have
a
term of five years. Mr. della Sala will receive a €44,000 “make whole” payment
relating to the period between January 1, 2008 and the effective dates of his
new FWCE and Foster Wheeler Ltd. agreements.
Mr.
della
Sala has agreed to keep confidential all information regarding us that he
receives during the term of his employment. He also agreed that, upon expiration
of the Employment Agreement or his termination for any reason, he will not,
directly or indirectly, provide services to certain of our competitors which
are
the same or similar to services he provided to us for one year after such
expiration or termination. He has also agreed that, until the second anniversary
of the expiration of the Employment Agreement or his termination, he will not
solicit any of our employees or customers.
In
the
event of any termination of Mr. della Sala’s employment, he will be entitled to
receive the following amounts: (i) annual base salary earned through the date
of
termination, (ii) the balance of any awarded but as yet unpaid annual short-term
incentive compensation, (iii) accrued but unpaid vacation pay, (iv) any vested
but not forfeited benefits to the date of termination under our employee benefit
plans, and (v) continuation of certain employee benefits pursuant to the terms
of our employee benefit plans.
In
the
event of termination of employment by us without cause, or by Mr. della Sala
for
good reason, we will provide to Mr. della Sala, in addition to the payments
specified in the preceding paragraph, (i) a lump sum payment in an amount
representing 24 months of his base salary at the rate in effect on the date
of
termination, (ii) a lump sum payment in an amount equal to 200% of his annual
short-term incentive compensation at target, (iii) two additional years of
age
and service to be credited under any pension plan in which he participated
on
the date of termination, (iv) two years of continued health and welfare benefit
plan coverage following the date of termination in any plan in which he
participated on the date of termination, (v) monthly payments sufficient to
allow him to continue any such health and welfare benefits at the active
employee level
(excluding
any costs that would be payable by an active employee)
for
24
months, (vi) removal of all restrictions from restricted stock held by him,
except as prohibited by law, (vii) full vesting of all stock options, restricted
stock and restricted stock units held by him, and (viii) career transition
services in an amount not to exceed $8,000.
If,
within thirteen months of a “change of control,” as defined in the Employment
Agreement (the “Change of Control Period”), we terminate Mr. della Sala’s
employment other than for cause or disability, or if Mr. della Sala terminates
employment for “good reason,” as defined in the agreement (to include, among
other things, Mr. della Sala’s termination of his employment for any reason
within the thirty-day period commencing on the first anniversary of the change
of control), Mr. della Sala will be entitled to receive a lump sum cash payment
of the following amounts (collectively, the “Accrued Obligations”): (i) his base
salary through the date of termination, plus (ii) his proportionate annual
short-term incentive compensation for the year in which such termination occurs,
which will be based on the highest annual short-term incentive compensation
received by him in the three years preceding the change of control, plus (iii)
any unpaid deferred compensation and his accrued but unpaid vacation pay. Mr.
della Sala will also be entitled to receive a lump sum cash payment equal to
three times the sum of his base salary, €195,000, and the highest annual
short-term incentive compensation. The foregoing amounts would be reduced by
any
entitlements he receives under Italian law and the National Contract related
to
the contemporaneous termination of his employment with FWCE. Mr. della Sala
will
also receive monthly payments sufficient to allow him to continue his health
and
welfare benefits at the active employee level (excluding any costs that would
be
payable by an active employee) for five years and a lump sum payment equal
to
the actuarial value of the service credit under our qualified retirement plans
Mr. della Sala would have received if he had remained employed for three years
after the date of his termination. We will also provide Mr. della Sala with
outplacement services. Finally, Mr. della Sala may tender restricted stock
held
by him (whether vested or not) in exchange for a lump sum cash payment of the
value of the tendered shares.
If,
during the Change of Control Period, Mr. della Sala’s employment is terminated
because of his death or disability or Mr. della Sala terminates his employment
other than for good reason, we will pay to him or his estate or beneficiaries,
as the case may be, an amount equal to the Accrued Obligations. If, during
the
Change of Control Period, we terminate Mr. della Sala’s employment for cause, we
will pay to him his base salary through the date of termination plus any unpaid
deferred compensation.
Indemnification
Agreement
We
and
Mr. della Sala have also entered into an Indemnification Agreement, dated as
of
March 1, 2008. The Indemnification Agreement was entered into in order to
provide Mr. della Sala with specific contractual assurance that he would be
indemnified to the fullest extent permitted by law, as currently required under
the indemnity provisions of our Bye-laws and the Employment Agreement. Our
form
of Indemnification Agreement for directors and officers was filed with the
Securities and Exchange Commission as Exhibit 99.1 to the Company's Current
Report on Form 8-K filed on November 8, 2004, and the Indemnification Agreement
between the Company and Mr. della Sala is substantially on the terms and
conditions set forth in such form agreement.
Bonus
Awarded to Chief Executive Officer
On
February 22, 2008, the Board of Directors (the “Board”) of the Company awarded a
one-time, discretionary bonus in the amount of $500,000 (the “Bonus”) to Raymond
J. Milchovich, the Company’s Chairman and Chief Executive Officer, in
recognition of Mr. Milchovich’s contributions to the Company’s outstanding
performance in 2007. The Board considered a number of factors in awarding the
Bonus, including the following achievements by the Company in 2007 under Mr.
Milchovich’s leadership:
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The
Company earned record net income and consolidated EBITDA for the
second
consecutive year;
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The
Company generated record scope
backlog;
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The
Company’s market capitalization increased 195% to $11.2 billion during
2007; and
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The
Company achieved consolidated adjusted net earnings significantly
in
excess of the target amount required for the maximum award under
the
Company’s STI Plan (as defined
below).
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The
Bonus
was in addition to the award of $1,984,500 (the “STI Award”) made by the Board
to Mr. Milchovich under the Foster Wheeler Annual Executive Short-Term Incentive
Plan (the “STI Plan”) for 2007. The STI Award is equal to 200% of Mr.
Milchovich’s annual base salary and is the maximum amount payable to
Mr. Milchovich for 2007 under the STI Plan and his employment agreement
with the Company.