FWLT (MM)

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FOSTER WHEELER AG

Lindenstrasse 10

6340 Baar

Switzerland

NOTICE OF AND INVITATION TO ATTEND THE EXTRAORDINARY GENERAL MEETING

OF SHAREHOLDERS TO BE HELD ON FEBRUARY 24, 2011

The Extraordinary General Meeting of Shareholders of Foster Wheeler AG, which we refer to as the Extraordinary General Meeting, will be held at our offices at 80 Rue de Lausanne, 1202 Geneva, Switzerland, on February 24, 2011, at 1:00 p.m., Central European Time.

Agenda of the Extraordinary General Meeting:

1.      Election of One Board Member for a Term Expiring at Our Annual General Meeting to be Held in 2012

The Board of Directors proposes that Umberto della Sala, our Interim Chief Executive Officer and our President and Chief Operating Officer, be elected as a Director for a term of office expiring at our annual general meeting to be held in 2012.

2.      Approval of a $335 Million Increase to Our Share Repurchase Program and Designation of the Repurchased Shares for Cancellation

The Board of Directors proposes that an increase of $335 million to our existing share repurchase program be approved, with the shares that are repurchased under this authorization to be subsequently cancelled, and the share capital to be reduced accordingly.

3.      Other Business

The Extraordinary General Meeting will address any other matters that properly come before the Extraordinary General Meeting.

On February 9, 2009, Foster Wheeler AG became the ultimate parent company of Foster Wheeler Ltd., a Bermuda company, which we refer to in the attached proxy statement as Foster Wheeler-Bermuda, and its subsidiaries as a result of a redomestication effected pursuant to a scheme of arrangement under Bermuda law.  In the redomestication, all of the previously outstanding common shares of Foster Wheeler-Bermuda were cancelled and each holder of cancelled Foster Wheeler-Bermuda common shares received registered shares of Foster Wheeler AG (or cash in lieu of any fractional shares), which we refer to in the attached proxy statement as “shares.”  Except as the context otherwise requires, we use the terms “we,” “us,” “our,” and “Foster Wheeler” in the attached proxy statement to refer to Foster Wheeler AG and its direct and indirect subsidiaries on a consolidated basis for the period beginning on February 9, 2009 and Foster Wheeler-Bermuda and its direct and indirect subsidiaries on a consolidated basis for the period prior to February 9, 2009.

Pursuant to a recommendation by our Governance and Nominating Committee, our Board of Directors has unanimously nominated Mr. della Sala for election to our Board of Directors at this Extraordinary General Meeting to fill the vacancy created by the November 9, 2010 resignation of Mr. Robert C. Flexon from the Board of Directors.  Under Swiss law and our Articles of Association, a vacancy on our Board of Directors may only be filled by our shareholders at a general meeting of shareholders.

All holders of our shares that are registered in our share register with voting rights at the close of business on December 27, 2010 are entitled to vote at the Extraordinary General Meeting and any postponements of the meeting. The attached proxy statement and the accompanying proxy card(s) are being sent to shareholders on or about December 30, 2010.  Notice of the Extraordinary General Meeting will also be published in the Swiss Official Journal of Commerce.

Please date, sign and return the enclosed proxy card(s)  in the enclosed envelope as promptly as possible or, if you hold your shares through an intermediary such as a bank or broker, vote your shares by following the voting instructions you receive from your bank or broker so that your shares may be represented at the Extraordinary General Meeting and voted in accordance with your wishes.

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Important note to shareholders:   please date, sign and return all proxy cards that have been mailed to you to ensure that all of your shares are represented at the Extraordinary General Meeting.

Admission to the Extraordinary General Meeting will be by admission ticket only.  If you are a shareholder whose shares are registered in the share register as entitled to vote and plan to attend the meeting, please check the appropriate box on the proxy card.   In all cases, retain the bottom portion of the proxy card as your admission ticket to the Extraordinary General Meeting.  If you are a shareholder whose shares are held through an intermediary, such as a bank or broker, please follow the instructions in the attached proxy statement to obtain an admission ticket.

YOUR VOTE IS IMPORTANT.  WHETHER OR NOT YOU EXPECT TO ATTEND THE EXTRAORDINARY GENERAL MEETING, PLEASE PROMPTLY RETURN YOUR SIGNED PROXY CARD IN THE ENCLOSED ENVELOPE.  IF YOU HOLD SHARES THROUGH AN INTERMEDIARY SUCH AS A BANK OR BROKER, PROMPTLY DIRECT THE VOTING OF YOUR SHARES BY TELEPHONE OR INTERNET OR ANY OTHER METHOD DESCRIBED IN THE INSTRUCTIONS YOU RECEIVE FROM YOUR BROKER.

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FOSTER WHEELER AG

Lindenstrasse 10

6340 Baar

Switzerland

PROXY STATEMENT

For the Extraordinary General Meeting of Shareholders

to be held on February 24, 2011

This proxy statement is being furnished to our shareholders in connection with the solicitation of proxies on behalf of the Board of Directors of Foster Wheeler AG or the independent proxy to be voted at the Extraordinary General Meeting of Shareholders to be held on February 24, 2011, and any postponements thereof, at the time and place and for the purposes set forth in the accompanying Notice of and Invitation to Attend the Extraordinary General Meeting of Shareholders.  This proxy statement and the accompanying proxy card are being sent to shareholders on or about December 30, 2010.  If you own registered shares, please date, sign and return all proxy cards to ensure that all of your shares are represented at the Extraordinary General Meeting.

Shares represented by valid proxies will be voted in accordance with the instructions provided by the proxies or, in the absence of specific instructions, in accordance with the recommendations of our Board of Directors.  You may revoke your proxy by signing another proxy card with a later date and returning it to us prior to the Extraordinary General Meeting or attending the meeting in person and casting a ballot.

A copy of our Annual Report on Form 10-K, including our audited consolidated financial statements for the fiscal year ended December 31, 2009 and the other information required under the rules and regulations of the Securities and Exchange Commission, which we refer to as the SEC, was enclosed with the proxy statement for our annual general meeting of shareholders held on May 5, 2010.  Our Annual Report on Form 10-K also is available publicly on our web site at www.fwc.com.

Our Board of Directors has fixed the close of business on December 27, 2010 as the record date for determination of shareholders entitled to vote at the Extraordinary General Meeting and any postponements thereof.  There were 124,397,627 shares registered with voting rights outstanding as of December 27, 2010.

Admission to the Extraordinary General Meeting will be by admission ticket only.   For shareholders of record entitled to vote, the bottom portion of the enclosed proxy card is your admission ticket. Beneficial owners with shares held through an intermediary, such as a bank or broker, should request admission tickets by writing to the Office of the Corporate Secretary, Foster Wheeler AG, c/o Foster Wheeler Inc., Perryville Corporate Park, Clinton, New Jersey, 08809-4000, and include proof of share ownership, such as a copy of a bank or brokerage firm account statement or a letter from the broker, trustee, bank or nominee holding your shares, confirming your beneficial ownership of such shares as of the record date of December 27, 2010.

Important Notice Regarding the Availability of Proxy Materials for the Extraordinary General Meeting of Shareholders to Be Held on February 24, 2011.  This proxy statement and our annual report to shareholders are available at www.fwc.com/2011 EMmaterials.

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PART I

THE EXTRAORDINARY GENERAL MEETING

Time, Date and Place

The Extraordinary General Meeting will be held at 1:00 p.m. Central European Time on Thursday, February 24, 2011, at our offices at 80 Rue de Lausanne, 1202 Geneva, Switzerland.

Who Can Vote

Only shareholders who are registered as shareholders with voting rights at the close of business on December 27, 2010, as shown in our share register, will be entitled to vote, or to grant proxies to vote, at the Extraordinary General Meeting.  If you acquire shares after the record date you will not be entitled to vote these shares.

Under our Articles of Association, only shareholders who are shareholders registered with voting rights in our share register are entitled to vote.  If you hold your shares in street name, your shares are registered in the name of CEDE & Co. with voting rights and you can direct your bank, broker or other shareholder of record how to vote your shares as described below.  If you are a shareholder of record and received your shares in connection with our redomestication to Switzerland, your shares are registered in your name with voting rights.  If you are a shareholder of record and acquired your shares after our redomestication to Switzerland on February 9, 2009, your shares are registered in your name with voting rights unless you have not delivered a completed application for registration as a shareholder with voting rights to our transfer agent, BNY Mellon, or you received a notice from our transfer agent that the registration of your shares with voting rights has been denied.

Shareholders of Record a nd Beneficial Owners

If your shares are registered directly in our share register administered by BNY Mellon in your name, you are considered to be the “shareholder of record” for those shares. The Notice of and Invitation to Attend the Extraordinary General Meeting of Shareholders, Proxy Statement and proxy card documents have been sent directly to you by us.

If your shares are held in street name in a stock brokerage account or by a bank or other shareholder of record, you are considered the “beneficial owner” of shares held in street name. The Notice of and Invitation to Attend the Extraordinary General Meeting of Shareholders, proxy statement and proxy card documents have been forwarded to you by your bank, broker or other shareholder of record.  As the beneficial owner, you have the right to direct your bank, broker or other holder of record on how to vote your shares by using the voting instruction card included in the mailing or by following their instructions for voting.

Quorum

Our Articles of Association require the presence of a quorum for the Extraordinary General Meeting.  The presence at the Extraordinary General Meeting, in person or by proxy, of shareholders holding in excess of 50% of our shares registered with voting rights will constitute a quorum.  Abstentions and broker non-votes will be counted as present for purposes of determining the presence or absence of a quorum at the Extraordinary General Meeting.

Proxies

A proxy card is being sent to each of our shareholders of record entitled to vote who held shares as of the record date. Shareholders of record who are entitled to vote can grant a proxy to vote on the proposals presented by completing a proxy card and returning it by mail as explained in the next section entitled “How You Can Vote.”  If you hold shares in street name through an intermediary, such as a bank, broker, or other nominee, you will receive voting instructions from that firm.  Your bank or broker may allow you to direct the voting of your shares by methods other than by mail, including by Internet or telephone. Please check the voting instruction form(s) provided to you by such person to see if they offer Internet or telephone voting.  Shareholders of record without voting rights have received this proxy statement but no proxy card.  If you believe you are a shareholder of record with voting

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rights and have not received a proxy card, you may request a proxy card by contacting BNY Mellon at 1-800-358-2314 (within the United States) or 1-201-680-6578 (outside the United States).

On your proxy card, you can appoint as your proxy either:

·       The members of management of Foster Wheeler as named on the proxy card; or

·       Mr. Sandro Tobler, Reichlin & Hess, Rechtsanwälte, Hofstrasse 1a, 6300 Zug, Switzerland, acting as independent proxy as specified in article 689c of the Swiss Code of Obligations (with right of substitution to a third person in the case of compelling circumstances) as required under Swiss law.

If you have timely submitted your properly executed proxy card(s) and clearly indicated your votes, your shares will be voted as indicated.  If you have timely submitted your properly executed proxy card(s) but have not clearly indicated your vote on any of the proposals, your shares will be voted in accordance with the recommendations of our Board of Directors.

The members of our management that have been appointed as proxy agents of our Board of Directors intend to vote for each proposal in this proxy statement as recommended by the Board of Directors, unless explicitly instructed otherwise by you on the proxy card.  If any other matters are properly presented at the Extraordinary General Meeting for consideration, the members of our management named in the proxy card will vote on these matters in accordance with the recommendations of our Board of Directors.  Mr. Tobler, the independent proxy, will not be entitled to vote on any such matter without specific instruction.  We are not aware of any matters that are expected to come before the Extraordinary General Meeting other than those described in the Notice of and Invitation to Attend the Extraordinary General Meeting of Shareholders and this proxy statement.

How You Can Vote

Each outstanding share registered in our share register as a share with voting rights is entitled to one vote at the Extraordinary General Meeting.  Pursuant to rules of the SEC, boxes and a designated blank space are provided on the proxy card for shareholders to mark if they wish to vote ‘‘for,’’ ‘‘against’’ or ‘‘abstain’’ on a proposal.

If your shares are registered in Foster Wheeler’s share register in your name, you may vote by written proxy or in person (including through a legal representative authorized by a written power of attorney) at the Extraordinary General Meeting.

Please mark your proxy card, date and sign it, and return it in the enclosed envelope.  If you misplaced your business reply envelope, you should mail your proxy card to BNY Mellon, Proxy Processing, P.O. Box 3550, South Hackensack, New Jersey 07606-9250. If you plan to attend the Extraordinary General Meeting in person, please retain the bottom portion of the proxy card as your admission ticket.  Please date, sign and return all proxy cards that have been mailed to you to ensure that all of your shares are represented at the Extraordinary General Meeting.

If you hold shares through an intermediary such as a bank, broker or nominee, which we refer to collectively as a broker, the broker may generally vote the shares it holds in accordance with instructions received from you.  Therefore, please follow the instructions provided by your broker when directing the voting of your shares.  If you do not give instructions to your broker, your broker can vote the shares it holds with respect to “discretionary” or routine proposals if your broker is subject to Rule 452 of the Listed Company Manual of the New York Stock Exchange, which we refer to as NYSE Rule 452.  However, under NYSE Rule 452, your broker cannot vote shares with respect to non-discretionary proposals for which a shareholder has not given instruction. Proposal 1 relating to the election of a director is a non-discretionary proposal and, therefore, may not be voted upon by your broker if you do not instruct your broker and your broker is subject to NYSE Rule 452.  Proposal 2 relating to the share repurchase program is considered a discretionary proposal and, therefore, may be voted upon by your broker even if you do not instruct your broker and your broker is subject to NYSE Rule 452.

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Revocation of Proxy

If you appoint a proxy, you may revoke that proxy at any time before it is voted at the Extraordinary General Meeting.  You may do this by signing another proxy card with a later date and returning it to BNY Mellon prior to the meeting or attending the meeting in person and casting a ballot or by appointing a representative to cast a ballot at the meeting. If you hold your shares in the name of a bank, broker or other nominee, please follow the instructions provided by your bank, broker or nominee in revoking any previously granted proxy.

Solicitation of Proxies

We will bear the expense of preparing, printing and mailing this proxy statement and the accompanying material. Solicitation of individual shareholders may be made by mail, personal interviews, telephone, facsimile, electronic delivery or other telecommunications by our officers and regular employees who will receive no additional compensation for such activities. In addition, we have retained Morrow & Co., LLC to solicit proxies at a cost of $7,500, plus reimbursement for out-of-pocket expenses.  We will reimburse brokers and other nominees for their expenses in forwarding solicitation material to beneficial owners.

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PART II

PROPOSALS

PROPOSAL 1 — ELECTION OF ONE DIRECTOR FOR A TERM EXPIRING AT OUR ANNUAL
GENERAL MEETING TO BE HELD IN 2012

In accordance with our Articles of Association, our Board of Directors is divided into three classes, with one class of directors to be selected for election each year for a three-year term. Each of the members of Foster Wheeler AG’s Board of Directors was elected by Foster Wheeler-Bermuda as sole shareholder on January 15, 2009, except for Clayton C. Daley, Jr., who was elected at an extraordinary meeting of shareholders on November 4, 2009. As part of our redomestication to Switzerland, all members of the Board of Directors of Foster Wheeler-Bermuda were elected to the Board of Directors of Foster Wheeler AG for the same term to which each director had been elected on Foster Wheeler-Bermuda’s Board of Directors. Service as a member of our Board described below includes time served as a director of Foster Wheeler-Bermuda prior to the redomestication.

At our Annual General Meeting of Shareholders held on May 5, 2010, Messrs. Atkinson and Demetriou and Ms. Hanbury-Brown were re-elected as Directors for a three-year term of office expiring at our annual general meeting to be held in 2013.  In addition, Mr. Flexon was elected for a two-year term of office that began on June 1,  2010, the date that he became Chief Executive Officer, and was to expire at our annual general meeting to be held in 2012. However, effective October 22, 2010, Mr. Flexon was separated from the Company and on November 9, 2010, resigned as a Director.

Effective October 22, 2010, Mr. della Sala, our President and Chief Operating Officer, was named Interim Chief Executive Officer.  Pursuant to a recommendation by our Governance and Nominating Committee, our Board of Directors has unanimously nominated Mr. della Sala for election to our Board of Directors at this Extraordinary General Meeting to fill the vacancy created by the resignation of Mr. Flexon from the Board of Directors. If elected, the term of Mr. della Sala will expire at our annual general meeting to be held in 2012.

Under Swiss law and our Articles of Association, a vacancy on our Board of Directors may only be filled by our shareholders at a general meeting of shareholders.

The members of our management that have been appointed as proxy agents of our Board of Directors intend to vote for the proposal in this proxy statement as recommended by the Board of Directors, unless otherwise instructed. If the nominee becomes unable to accept nomination or election, the Board of Directors will either select a substitute nominee after identifying a suitable candidate or determine not to select a substitute nominee. If the Board of Directors selects a substitute nominee, proxies will be voted for the substitute nominee. Our Articles of Association provide that our Board of Directors shall consist of not less than three and not more than twenty directors.

Following is the name, principal occupation, age, and certain other information for Mr. della Sala, the nominee for director, and for the other continuing directors, including the specific experience, qualifications, attributes and skills of the director nominee and each continuing director in relation to the criteria for director candidates described under “Director Nominations — Other Criteria; Nomination Method .”

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Nominee for Election at this Extraordinary General Meeting

Umberto della Sala

Mr. della Sala, 62 years old, our President and Chief Operating Officer since January 30, 2007, was named Interim Chief Executive Officer effective October 22, 2010.  He has been employed by us for 37 years, serving for us and for our subsidiaries in various positions of increasing responsibility in Europe and in the United States.  Mr. della Sala will remain our President and Chief Operating Officer while serving as Interim Chief Executive Officer.  Prior to being elected President and Chief Operating Officer, Mr. della Sala served and continues to serve as Chief Executive Officer of our Global Engineering and Construction Business Group (which we refer to as our Global E&C Group) since June 2005, and also served as the President and Chief Executive Officer of Foster Wheeler Continental Europe S.r.l from 2001 until the merger of that subsidiary into Foster Wheeler Italiana S.r.l. on January 1, 2010.  He has also held other senior positions with us, including Vice President of Foster Wheeler USA Corporation, from 1997 to 2000.

Mr. della Sala has 37 years of experience in our industry and our businesses as a result of his many years of service to us and our subsidiaries in various capacities throughout his career, including as our Interim Chief Executive Officer effective October 22, 2010 and as our President and Chief Operating Officer since January 30, 2007.

Requisite Vote

Election of the nominee for director requires the affirmative vote of a majority of the votes cast at the Extraordinary General Meeting, assuming there is a quorum at the meeting.  Abstentions will be treated as present at the Extraordinary General Meeting for purposes of determining the presence of a quorum, but will have no effect in determining whether the proposal is approved.

Our Board of Directors recommends a vote “FOR” the election of the nominee for director.

Similar Information on Continuing Directors

Clayton C. Daley, Jr.

Mr. Daley was the Vice Chairman of The Procter & Gamble Company, a consumer products company, from January 2009 until his retirement in September 2009. Mr. Daley was the Vice Chairman and Chief Financial Officer of The Procter & Gamble Company from July 2007 to January 2009 and its Chief Financial Officer from 1999 until July 2007.  Mr. Daley currently serves on the Board of Directors and is Chairman of the Audit Committee and a member of the Compensation and Executive Development and Governance and Nominating Committees of Nucor Corporation, a manufacturer of steel and steel products, and is a director and Chairman of the Audit Committee and a member of the Compensation and Option Committee of Starwood Hotels & Resorts Worldwide, Inc., a hotel and leisure company, each of whose shares are publicly traded on the NYSE.  Mr. Daley also serves as a Senior Advisor to TPG Capital.  Mr. Daley, who is 59 years old, became a member of our Board of Directors in November 2009. His term will expire at our annual general meeting in 2011.

Mr. Daley has significant experience in corporate financial management and financial expertise in a large, global business as a result of his service as the Vice Chairman and Chief Financial Officer of Procter & Gamble.  He also has significant experience in corporate governance as a director of two public companies, Nucor and Starwood Hotels & Resorts, and serves as an advisor to a private equity firm.  Our Board of Directors has determined that Mr. Daley is an “Audit Committee Financial Expert,” as defined under the rules promulgated by the SEC.

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Edward G. Galante

Mr. Galante served as a Senior Vice President and member of the Management Committee of Exxon Mobil Corporation, the largest publicly traded petroleum and petrochemical enterprise in the world, from August 2001 until his retirement in 2006.  From 1999 to August 2001, Mr. Galante was Executive Vice President of ExxonMobil Chemical Company and, from 1997 to 1999, Mr. Galante was Chairman and Managing Director of Esso (Thailand) Public Company Limited.  Since 1972, Mr. Galante served in increasingly responsible management positions with Exxon Mobil Corporation.  Mr. Galante is also a director and a member of the Compensation and Management Development and Governance and Nominating Committees of Praxair, Inc., one of the world’s largest industrial gases companies and whose shares are publicly traded on the NYSE.  He is also a director and member of the Governance and Nominating Committee of Clean Harbors, Inc., whose shares are publicly traded on the NYSE.  Mr. Galante, who is 60 years old, became a member of our Board of Directors in 2008.  His term will expire at our annual general meeting in 2011.

Mr. Galante has substantial experience in the oil, gas, refining and chemical sectors of the energy industry as a result of his 34-year career at Exxon Mobil, including as Senior Vice President.  As a result of his experience at Exxon Mobil, Mr. Galante also has significant experience in the operations and management of a large, global business and as a client of engineering and construction firms.  In addition, he has experience as a director of a public company as a result of his service as a member of the board of directors of Praxair and Clean Harbors, Inc.

Raymond J. Milchovich

Mr. Milchovich was our Chairman and Chief Executive Officer from October 2001 to May 2010.  Pursuant to our previously announced senior leadership succession plan, effective June 1, 2010, Mr. Milchovich relinquished his duties as Chief Executive Officer of the Company and became non-executive Chairman of the Board of Directors.  He continues to act as a consultant to the Company.  From October 2001 until January 2007, Mr. Milchovich also served as our President.  From January 2000 until October 2001, Mr. Milchovich served as the Chairman, President and Chief Executive Officer of Kaiser Aluminum Corporation and its subsidiary, Kaiser Aluminum & Chemical Corporation, a leading producer and marketer of aluminum and aluminum fabricated products.  In February 2002, Kaiser Aluminum Corporation commenced a voluntary petition under Chapter 11 of the United States Bankruptcy Code.  From September 2002 through September 2007, Mr. Milchovich served as a director and a member of the Audit, Compensation and Executive Development and Governance and Nominating Committees of Nucor Corporation, a NYSE-listed manufacturer of steel and steel products.  From December 2005 until October 2009, he was a director and a member of the Compensation and Executive Development Committee of Delphi Corporation, a company specializing in mobile electronics and transportation components and systems technology.  Mr. Milchovich, who is 61 years old, became a member of our Board of Directors in 2001.  His term will expire at our annual general meeting in 2011.

Mr. Milchovich has significant experience in our industry and our businesses as a result of his service as our Chairman and Chief Executive Officer from October 2001 to May 2010, and as a consultant to the Company since June 2010. Mr. Milchovich has additional experience as a chairman and chief executive officer as a result of his previous role as the Chairman, President and Chief Executive Officer of Kaiser Aluminum Corporation.  Mr. Milchovich also has significant experience in corporate governance as a result of his prior service on the board of directors of two public companies, Nucor and Delphi.

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Maureen B. Tart-Bezer

Ms. Tart-Bezer served as the Executive Vice President and Chief Financial Officer of Virgin Mobile USA, a wireless mobile virtual network operator, from January 2002 through June 2006.  From January 2000 through December 2001, she was the Executive Vice President and General Manager of the American Express Company, U.S. Consumer Charge Group and from 1977 to January 2000 served in various senior financial positions with AT&T Corporation including Senior Vice President and Corporate Controller as well as Senior Vice President and Chief Financial Officer for the Consumer Services Group.  Ms. Tart-Bezer currently serves on the Board of Directors and is the Chairperson of the Audit Committee and a member of the Finance and Governance Committees of The Great Atlantic & Pacific Tea Company, Inc., a company whose shares are publicly traded on the NYSE.  She also serves as a member of the Board of Directors of Sun Products Corp, a privately held company, and is the Chairperson of the Audit Committee.  Ms. Tart-Bezer also served as a director of Playtex Products, Inc., whose shares were traded on the NYSE until the company was acquired in October 2007. Ms. Tart-Bezer, who is 55 years old, became a member of our Board of Directors in 2008.  Her term will expire at our annual general meeting in 2012.

Ms. Tart-Bezer has substantial corporate financial management, reporting and risk management expertise as a result of her service in a number of senior financial leadership roles, including as the former Executive Vice President and Chief Financial Officer of Virgin Mobile USA.  In addition, Ms. Tart-Bezer has experience as a director of other publicly traded companies, such as The Great Atlantic & Pacific Tea Company and Playtex Products. Our Board of Directors has determined that Ms. Tart-Bezer is an “Audit Committee Financial Expert,” as defined under the rules promulgated by the SEC.

James D. Woods

Mr. Woods has been the Chairman Emeritus and retired Chief Executive Officer of Baker Hughes Incorporated, a provider of products and services to the worldwide oil and gas industry, since January 1997.  From April 1987 until January 1997, Mr. Woods served as Chief Executive Officer of Baker Hughes, and, from January 1989 until January 1997, he served as Chairman of Baker Hughes.  He is a director of ESCO Technologies, a NYSE-listed supplier of engineered filtration products to the process, healthcare and transportation markets, and is Chairman of the Human Resources and Compensation Committee.  Mr. Woods is also a director of Complete Production Services, Inc., a NYSE-listed oil field services provider, and is a member of its Audit, Nominating and Corporate Governance and Compensation Committees.  From 1998 until 2007, Mr. Woods served as lead director of OMI Corporation, a tanker transportation company, whose shares were previously traded on the NYSE. From 2001 until 2006, he also served as director and Chairman of the Audit Committee of USEC, Inc., a supplier of enriched uranium, and director and Chairman of the Compensation Committee of National Oilwell Varco, Inc., an oilfield services provider, both NYSE-listed companies.  Mr. Woods, who is 79 years old, became a member of our Board of Directors in 2002.  His term will expire at our annual general meeting in 2012.

Mr. Woods has over 50 years of experience in the global energy industry, including as the retired Chairman and Chief Executive Officer of Baker Hughes.  He has extensive and diverse experience as a director at several other public companies, including ESCO Technologies, Complete Production Services, OMI Corporation, USEC and National Oilwell Varco.

Eugene D. Atkinson

Mr. Atkinson is the founder and has been the Managing Partner of Atkinson Capital, LLC, an investor in hedge funds, since June 2005. From May 2000 until May 2005, Mr. Atkinson was a Managing Partner with RHJ Industrial Partners, a private equity firm.  From 1984 until 1990, Mr. Atkinson was a Limited Partner with The Goldman Sachs Group Inc., a leading global investment banking, securities and investment management firm, and from 1990 until 1999 he served as Chairman of Goldman Sachs (International).  Mr. Atkinson, who is 66 years old, became a member of our Board of Directors in 1995.  His term will expire at our annual general meeting in 2013.

Mr. Atkinson brings extensive financial services and corporate finance experience to our Board of Directors as a result of his senior leadership roles at Atkinson Capital, RHJ Industrial Partners and Goldman Sachs, including as Chairman of Goldman Sachs (International).  He also brings regional expertise, as during his tenure at Goldman Sachs, Mr. Atkinson spent approximately ten years in Asia, an area of significant growth opportunities for us.  Our

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Board of Directors has determined that Mr. Atkinson is an “Audit Committee Financial Expert,” as defined under the rules promulgated by the SEC.

Steven J. Demetriou

Mr. Demetriou has been the Chairman and Chief Executive Officer of Aleris International, Inc., a producer of aluminum rolled products whose shares were publicly traded on the NYSE from December 2004 to December 2006, since December 2004.  In February 2009, Aleris International, Inc. filed a petition for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code and emerged from reorganization under Chapter 11 in June 2010.  From June 2004 to December 2004, Mr. Demetriou served as President, Chief Executive Officer and Director of Commonwealth Industries, Inc., a manufacturer of aluminum sheet and flexible aluminum conduit, and from 2001 until June 2004, Mr. Demetriou served as President and Chief Executive Officer of Noveon, Inc., a specialty chemical company.  Mr. Demetriou has also held various management and leadership positions with IMC Global Inc., Cytec Industries Inc., and Exxon Mobil Corporation. Mr. Demetriou is a director, Chairman of the Compensation Committee and a member of the Nominating and Governance Committee of OM Group, Inc., a diversified, global developer, producer and marketer of value-added, metal-based specialty chemicals and advanced materials and whose shares are publicly traded on the NYSE.  He is a director and member of the Governance and Nominating Committee of Kraton Performance Polymers, Inc., a specialty chemicals company whose shares are publicly traded on the NYSE.  Mr. Demetriou was previously a director and a member of the Compensation Committee of ElkCorp, a manufacturer of premium roofing and composite building products, whose shares were previously publicly traded on the NYSE.  Mr. Demetriou, who is 52 years old, became a member of our Board of Directors in 2008.  His term will expire at our annual general meeting in 2013.

Mr. Demetriou has significant experience in the chemicals industry as a result of his service as an executive officer or director of several global specialty chemical companies.  In addition, Mr. Demetriou has experience in the global energy industry as a result of his leadership positions at Exxon Mobil.  He has served as chief executive officer of several companies, including in his current role as Chief Executive Officer at Aleris International, where he also serves as Chairman. He has significant experience in corporate governance as a result of his senior leadership roles and his service as a director of OM Group, Kraton Performance Polymers and ElkCorp.

Stephanie Hanbury-Brown

Ms. Hanbury-Brown has been the Managing Director of Golden Seeds LLC, which provides investment capital to early stage, high growth companies, since its founding in 2004.  Prior to that, she spent 20 years working in the financial services industry in Sydney, London and New York.  The majority of her career was with J.P. Morgan, where she headed several global businesses including Global Head of Futures and Options, Head of International Private Banking, Chief Operating Officer of Global Equities and Head of eCommerce.  Ms. Hanbury-Brown also served as a director and a member of the Audit and Compensation and Human Resources Committees of RiskMetrics Group, Inc., a provider of risk management and corporate governance products and services whose shares were traded on the NYSE until the sale of the company in June 2010.  Ms. Hanbury-Brown, who is 54 years old, became a member of our Board of Directors in 2004.  Her term will expire at our annual general meeting in 2013.

Ms. Hanbury-Brown has more than 20 years of experience in the financial services industry, in senior leadership positions at Golden Seeds and J.P. Morgan.  She also has significant international and regional experience, having managed several global businesses at J.P. Morgan and having worked in Sydney and London. As a venture capitalist at Golden Seeds, Ms. Hanbury-Brown has significant experience in corporate financial management and financial expertise as a result of her oversight of Golden Seeds’ portfolio companies.  Ms. Hanbury-Brown also has experience in risk management and corporate governance best practices as a result of her prior service as a director of RiskMetrics Group, a provider of risk management and corporate governance products and services whose shares were publicly traded on the NYSE until the sale of the company in June 2010.  Our Board of Directors has determined that Ms. Hanbury-Brown is an “Audit Committee Financial Expert,” as defined under the rules promulgated by the SEC.

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Other Directors that Served in 2010 and 2009

Robert C. Flexon was a member of our Board of Directors from 2006 until his resignation as a member of our Board of Directors in connection with his appointment as President and Chief Executive Officer of Foster Wheeler USA Corporation in November 2009.  He was again elected a member of our Board of Directors as of June 1, 2010, and served until his resignation on November 9, 2010.  Mr. Flexon served as our Chief Executive Officer from June 1, 2010 to October 22, 2010.

From January 31, 2008 until his resignation on February 10, 2009, Jack A. Fusco served on our Board of Directors.  Mr. Fusco also served on our Audit Committee and our Compensation Committee.

PROPOSAL 2— APPROVAL OF A $335 MILLION INCREASE TO OUR SHARE REPURCHASE PROGRAM AND DESIGNATION OF THE REPURCHASED SHARES FOR CANCELLATION

In September 2008, Foster Wheeler-Bermuda established a share repurchase program for the repurchase of up to $750.0 million of our outstanding shares.  In connection with the redomestication, Foster Wheeler-Bermuda, as the sole shareholder of Foster Wheeler AG, approved the repurchase of shares for cancellation in an amount not to exceed approximately $264.8 million, which represented the remaining capacity for share repurchase under the September 2008 authorization.

As of September 30, 2010, we had purchased 22,411,229 shares for approximately $584.4 million and therefore approximately $165.6 million remained under our existing share repurchase authorization. On November 4, 2010, our Board of Directors proposed an increase to our share repurchase program of $335.0 million. When combined with the remaining capacity under our existing authorization of approximately $165.6 million and assuming no further repurchases of shares between September 30, 2010 and the Extraordinary General Meeting, we would have a total authorization of approximately $500.6 million if this proposal is approved by our shareholders at the Extraordinary General Meeting.

Under Swiss law, a company limited by shares can generally purchase up to 10% of its own shares for any purpose and without shareholder approval.  However, this limitation does not apply if the shareholders approve the repurchase of shares for cancellation.  Prior to shareholder approval of the proposed increase in the share repurchase program, we may only repurchase (i) shares in the amount of approximately $165.6 million under the existing share repurchase authorization plus (ii) an amount of shares equal to 10% of our share capital, or approximately 12.7 million shares.  Upon shareholder approval of the $335.0 million increase in the share repurchase program, shares we repurchase under such increase will not be subject to the 10% of share capital limitation and we may repurchase shares for cancellation up to the full amount of the $335.0 million share repurchase program increase in addition to approximately $165.6 million under the existing share repurchase authorization.

The Board of Directors proposes that the increase of $335.0 million to our share repurchase program be approved, and that the shares that are repurchased under this authorization are designated for cancellation, with our share capital to be reduced accordingly.

At a future general meeting we will seek specific shareholder approval to cancel the shares repurchased and amend our Articles of Association to reduce our share capital.  This two-step procedure, with the shareholders voting on the share repurchase authorization at this Extraordinary General Meeting and approving the definitive cancellation of the shares at a future general meeting, has the advantage that, by obtaining shareholders’ approval for the future cancellation of a maximum number of shares, these shares no longer fall within the statutory limit of Swiss Company Law which prohibits companies from holding more than 10% of their own shares.

Requisite Vote

Proposal 2 requires the affirmative vote of a majority of the votes cast at the Extraordinary General Meeting, assuming there is a quorum at the meeting.  Abstentions will be treated as present at the Extraordinary General Meeting for purposes of determining the presence of a quorum, but will have no effect in determining whether the proposal is approved.

Our Board of Directors recommends a vote “FOR” the approval of a $335.0 million increase to our share repurchase program and designation of the repurchased shares for cancellation.

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PART III

OTHER MATTERS

Ownership of Shares by Directors, Director Nominees and Executive Officers

The following table sets forth, as of December 3, 2010, beneficial ownership of our shares by each director or director nominee, by each executive officer named in the Summary Compensation Table in this proxy statement and by all directors and executive officers as a group. As of December 3, 2010, there were 124,052,152 shares outstanding.

Amount and Nature of Beneficial Ownership of Shares

(1)        The number of shares indicated as being held by each person listed in this table (including each person comprising the group of all of our directors and executive officers) includes shares that are individually or jointly owned, as well as shares over which such person has either sole or shared investment or voting authority.

(2)        Represents shares that may be acquired currently or within 60 days after December 3, 2010 through the exercise of stock options to purchase our shares.

(3)        Represents restricted share units issued under the Foster Wheeler AG Omnibus Incentive Plan, which we refer to as the LTI Plan, which may be acquired or converted into shares currently or within 60 days after December 3, 2010 due to vesting rights.  Also, includes 259 share units for Mr. Atkinson and 160 share units for Mr. Woods issued under the Foster Wheeler Inc. Directors Deferred Compensation and Stock Award Plan, a legacy plan for non-employee directors.  Share units do not have any voting or dividend rights.

(4)        The percentages for each person and the group are calculated based on (A)(i) the number of shares held by such person or group, as the case may be, plus (ii) the number of shares that may be acquired currently or within 60 days after December 3, 2010 by such person or group, as the case may be, divided by (B)(i) the number of our outstanding shares as of December 3, 2010, plus (ii) the number of shares that may be acquired currently or within 60 days after December 3, 2010 by such person or group, as the case may be.

*          Less than 1%.

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Other Beneficial Owner

Based upon our review of Schedule 13G or Schedule 13D filings with the SEC through December 3, 2010 and other publicly available information, the following entity is known to our management to be a beneficial owner of more than five percent of our outstanding shares, as indicated.

(1)        T. Rowe Price Associates, Inc. (“Price Associates”) reported on Schedule 13G, filed with the SEC on February 11, 2010, that it held 7,114,082 registered shares as of December 31, 2009.

Price Associates reported on the Schedule 13G filed February 11, 2010 that 1,732,860 shares were subject to sole voting power, 7,114,082 shares were subject to sole dispositive power, and 7,114,082 shares represented their aggregate total holdings.  Price Associates has informed us that these securities are owned by various individual and institutional investors for which Price Associates serves as an investment advisor with power to direct investments and/or sole power to vote the securities.  Price Associates has further informed us that for purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to be the beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities.

Price Associates subsequently disclosed in a Form 13F filing that it held 5,960,032 registered shares, or 4.8% of our outstanding shares, as of September 30, 2010.

Executive Officers

Information regarding Mr. della Sala, our Interim Chief Executive Officer, President and Chief Operating Officer, is provided under Proposal 1 of this proxy statement, under the caption “Nominee for Election at this Extraordinary General Meeting”.

Franco Baseotto

Mr. Baseotto, who is 52 years old, has been employed by us for 20 years, serving us and our subsidiaries in various positions of increasing responsibility in Europe and the United States.  Mr. Baseotto has served as our Executive Vice President and Chief Financial Officer since August 13, 2007.  Mr. Baseotto was also elected our Treasurer on January 31, 2008. From July 2005 to August 2007, Mr. Baseotto served as the Financial Leader of our Global E&C Group and, from October 2003 to August 2007, as the Chief Financial Officer of Foster Wheeler Continental Europe S.r.l., an indirect, wholly-owned subsidiary within our Global E&C Group.  From March 2003 to July 2003, Mr. Baseotto served as Director of Finance of Foster Wheeler Inc., an indirect, wholly-owned subsidiary domiciled in the United States. From June 1998 to February 2003, Mr. Baseotto served as Director of Finance of Foster Wheeler Continental Europe S.r.l.

Michelle K. Davies

Ms. Davies, who is 50 years old, was elected our Acting General Counsel, effective January 1, 2010.  From October 2008, Ms. Davies served as General Counsel for Foster Wheeler Energy Limited, our largest indirect, wholly-owned subsidiary.  Prior to joining us, Ms. Davies was the Group Legal Director and Company Secretary and Member of the Executive Committee of English Welsh & Scottish Railway Limited from July 2001 until July 2008.  From April 1997 to April 2001 she served as Head of Legal and Regulatory Affairs and Company Secretary for NIREX Limited. Ms. Davies has more than 25 years of experience in complex corporate legal matters.

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Thierry Desmaris

Mr. Desmaris, who is 52 years old, was elected our Vice President of Corporate Development on February 27, 2007.  Mr. Desmaris has been employed by us for 24 years. Prior to his current position, Mr. Desmaris served as our Vice President and Treasurer since January 2004.  From November 2003 until January 2004, Mr. Desmaris served as our Vice President, Finance.  From January 2003 to October 2003, Mr. Desmaris served as the Chief Financial Officer of Foster Wheeler Continental Europe S.r.l., and from January 2002 until December 2002, he served as Assistant Controller and Director of Project Finance of Foster Wheeler Inc.

Rakesh K. Jindal

Mr. Jindal, who is 51 years old, was elected our Vice President of Tax on January 25, 2005.  From June 2000 until January 2005, Mr. Jindal served as Corporate Tax Director of Foster Wheeler Inc., and, from December 1996 until June 2000, he served as Assistant Director of Tax of Foster Wheeler Inc.

Michael S. Liebelson

Mr. Liebelson, who is 55 years old, was elected our Executive Vice President and Chief Development Officer on June 1, 2010. From 2008 to December 2009, Mr. Liebelson was employed as Chief Development Officer, Low-Carbon Technologies for NRG Energy, Inc., and, from 2007 to 2008, he was a consultant to NRG Energy, Inc.  From 2002 to 2005, Mr. Liebelson was CEO of Zolaris Biosciences LLC, a company formed to commercialize peptide stabilization technology.  From 1990 to 1998, Mr. Liebelson co-managed and held a 50% ownership interest in LS Power Corporation, and since 1998, Mr. Liebelson has been affiliated with LS Power as a limited partner.

Gary T. Nedelka

Mr. Nedelka, who is 56 years old, has been employed by us for 30 years, serving us and our subsidiaries in various positions of increasing responsibility in commercial operations and engineering management.  Mr. Nedelka was promoted to the position of Chief Executive Officer and President of our Global Power Group, effective January 1, 2009.  Prior to his current position, Mr. Nedelka served as President and Chief Executive Officer of Foster Wheeler North America Corp., an indirect, wholly-owned subsidiary within our Global Power Group, since 2006.  From 2000 to 2006, Mr. Nedelka served as President and General Manager of our operating companies in China.

Troy Roder

Mr. Roder, who is 44 years old, has been employed by us for 21 years. Mr. Roder was promoted to the position of Chairman and Chief Executive Officer of Foster Wheeler Energy Limited, on January 1, 2010.  From March 2006 until December 2009, Mr. Roder served as President and Chief Executive Officer and was Senior Vice President from January 2004 until March 2006 of Foster Wheeler USA Corporation, another indirect.  Since joining us in 1989, Mr. Roder has held various management and project execution positions of increasing responsibility in the chemical, petrochemical, oil & gas, refining, and power industries.

Peter D. Rose

Mr. Rose, who is 64 years old, was elected our Vice President and Chief Corporate Compliance Officer on January 31, 2008. From May 2007 to January 2008, Mr. Rose was our Vice President and Treasurer.  Mr. Rose has been employed by us for 32 years. From March 2004 until May 2007, Mr. Rose served as Vice President, Internal Audit and Chief Corporate Compliance Officer of Foster Wheeler Inc. and Foster Wheeler International Holdings, Inc., an indirect, wholly-owned subsidiary.  From May 1987 until March 2004, he served as Assistant Treasurer of Foster Wheeler Inc. and Foster Wheeler International Holdings, Inc., and as Vice President of Foster Wheeler Capital & Finance Corporation, an indirect, wholly-owned subsidiary.

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Beth B. Sexton

Ms. Sexton, who is 54 years old, was elected our Executive Vice President of Human Resources on April 7, 2008.  Prior to joining us, Ms. Sexton was Senior Vice President of Human Resources for IKON Office Solutions from March 1998 to February 2008 and Vice President of Human Resources for IKON Office Solutions from March 1996 to February 1998.  Ms. Sexton also previously held a series of positions in human resource management with increasing responsibilities at CH2M Hill from April 1987 to March 1996.

David Wardlaw

Mr. Wardlaw, who is 55 years old, was elected our Vice President, Project Risk Management Group on July 1, 2004.  Mr. Wardlaw has been employed by us for 33 years.  Mr. Wardlaw has been a director of Foster Wheeler Energy Limited since July 1996 and has served in various executive positions with that company, including as Director of Pharmaceuticals from July 2003 until July 2004, Director of Engineering from January 1998 until July 2003, and Director of Commercial Operations from July 1996 until January 1998.

Lisa Z. Wood

Ms. Wood, who is 44 years old, was elected our Vice President and Controller on June 21, 2007.  Ms. Wood has been employed by us for 13 years.  From March 2003 until June 2007, Ms. Wood served as Chief Accounting Officer of Foster Wheeler Inc., and from August 1997 until March 2003, she served in various financial positions of Foster Wheeler Inc.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, requires our directors and executive officers and any persons who own more than 10% of our outstanding shares to file reports of holdings and transactions in our shares with the SEC. Based on our records and other information, including our review of Forms 3 and 4 filed with the SEC, we believe all filings required under Section 16(a) of the Exchange Act for our directors and executive officers with respect to our shares were timely filed in fiscal 2009.

Board of Director Meetings and Committees of Our Board of Directors

During fiscal 2009, our Board of Directors held nine meetings.  Each director attended at least 75% of the aggregate number of meetings of our Board of Directors and each committee on which he or she served.  Our Board of Directors has established standing committees to consider various matters and to make recommendations to the full Board of Directors for proposed courses of action by our Board of Directors.  We have established the following committees: the Audit Committee, the Compensation Committee and the Governance and Nominating Committee.  Each member of these committees is “independent” as that concept is defined in the NASDAQ listing standards.  Committee charters have been established for each of these committees and are publicly available on our website at www.fwc.com/corpgov.  The charters may also be obtained upon request by writing to the Office of the Corporate Secretary, Foster Wheeler AG, Perryville Corporate Park, Clinton, New Jersey 08809-4000.

Based on the recommendation of our Governance and Nominating Committee, our Board of Directors designates members and chairpersons of each of the committees of our Board of Directors and the Deputy Chairperson of executive sessions of our non-employee directors.

Audit Committee

The members of our Audit Committee are currently Mr. Daley, Chairperson, Mr. Atkinson, Mr. Galante, Ms. Hanbury-Brown and Ms. Tart-Bezer.  From January 31, 2008 until February 10, 2009, Mr. Fusco served on the Audit Committee.  From January 1, 2009 to October 21, 2009, Mr. Flexon served as Chairperson of the Audit Committee.  During fiscal 2009, this committee held four meetings.

Our Audit Committee assists our Board of Directors in the oversight of (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) the independence and qualifications of our independent registered public accounting firm and (4) the performance of our internal audit function and our independent registered public accounting firm.

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Our Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm and proposes to the Board of Directors “a publicly supervised auditor” (as the term is defined in Art. 727b of the Swiss Code of Obligations and in the Federal Law on the admission and supervision of audit firms) for election as our Swiss independent auditor by our shareholders.  The functions of this committee include reviewing compliance with our policies; annually reviewing the status of any significant litigation; reviewing with our independent registered public accounting firm and management the results of the audit, our financial statements and our system of internal accounting control; pre-approving fees of the independent registered public accounting firm; reviewing with management and our independent registered public accounting firm our annual and quarterly financial statements and any material changes in accounting principles or practices used in preparing our financial statements prior to their inclusion in the filing of a report on Form 10-K or 10-Q with the SEC, including a review of the items required by Statement on Auditing Standards No. 61, as amended, as in effect at that time in the case of the quarterly reports; receiving from the independent registered public accounting firm the written disclosures and letter regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence required by the rules of the Public Company Accounting Oversight Board as in effect at that time and discussing with the independent registered public accounting firm such firm’s independence; reviewing with management and the Swiss independent auditors the annual financial statements required under Swiss law and the report of the Swiss independent auditors thereon, and the additional financial statement disclosures and commentary required by Swiss law; `and annually reviewing and assessing the Audit Committee charter.  Our Audit Committee members meet separately from the full Board of Directors with representatives of our independent registered public accounting firm at each Audit Committee meeting.

Compensation Committee

The members of our Compensation Committee are currently Mr. Demetriou, Chairperson, Ms. Hanbury-Brown, Ms. Tart-Bezer and Mr. Woods.  From January 1, 2009 until February 10, 2009, Mr. Fusco served on the Compensation Committee.  During fiscal 2009, this Committee held nine meetings.  The functions of this committee are to discharge our Board of Directors’ responsibilities relating to compensation of our directors, the CEO and other senior executives including, but not limited to, approving salary rates and, as applicable, short-term incentive compensation, the award of stock options, restricted shares or other equity rights for executive officers, as further described in “Compensation Discussion and Analysis” below.  In addition, the Compensation Committee has the authority to terminate or materially amend the Foster Wheeler Inc. Salaried Employees Pension Plan or the Foster Wheeler Inc. 401(k) Plan.

Governance and Nominating Committee

The members of our Governance and Nominating Committee are currently Mr. Atkinson, Chairperson, Mr. Demetriou, Mr. Galante and Mr. Woods.  During fiscal 2009, this committee held five meetings.  The functions of this committee include recommending to our Board of Directors the appropriate structure and function of our Board of Directors and its committees; recommending to our Board of Directors the nominees for election as directors and corporate officers; reviewing the performance of incumbent directors and corporate officers to determine whether to nominate them for re-election; overseeing the annual performance review of our Board of Directors and each of the committees; and considering other matters of corporate governance.

Board Leadership Structure and Risk Oversight

Board Leadership Structure

Our Corporate Governance Guidelines provide the Board of Directors with the flexibility to fill the chairman of the board and chief executive officer roles with either one or two individuals based on the best interests of our Company at any given point in time.  Accordingly, the Board of Directors evaluates whether the roles should be combined or separated on a case-by-case basis.  As described below, since June 1, 2010, the roles of chairman of the board and chief executive officer have been separated.

When Raymond J. Milchovich was appointed Chairman of the Board of Directors and Chief Executive Officer in October 2001, the roles of chairman of the board and chief executive officer were already combined.  At that time, our Company faced many challenges, including significant operating losses, a significant amount of debt

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and increasing asbestos liabilities.  Mr. Milchovich brought significant experience in “turnaround” and restructuring environments and corporate governance and board leadership, most recently as the Chairman of the Board of Directors and Chief Executive Officer of Kaiser Aluminum Corporation.  In light of his experience and the challenges we faced, it was critical that he serve as both chairman of the board and chief executive officer in order to provide unified leadership for the Board of Directors and our Company through the restructuring we effected over the next several years. Under Mr. Milchovich’s leadership, we returned to profitability and reported record net income and consolidated EBITDA in each of fiscal 2006, 2007 and 2008.

In connection with the senior leadership succession plan we announced in December 2009, effective June 1, 2010, Mr. Milchovich relinquished his duties as our Chief Executive Officer and Robert C. Flexon was elected our Chief Executive Officer.  Mr. Milchovich became non-executive Chairman of the Board of Directors and began his service as a consultant to the Company, which will continue until November 3, 2011.  Subsequently, effective October 22, 2010, Mr. Flexon was separated from the Company and Mr. della Sala was appointed Interim Chief Executive Officer. We are conducting an external search to find a permanent chief executive officer.

In light of these changes and the external search that is underway for a permanent chief executive officer, the Board of Directors believes that it is appropriate to separate the role of chairman of the board of directors and chief executive officer in order to provide for continued leadership in the role of chairman of the board, to support the interim chief executive officer and to assist in an effective and efficient transition to a permanent chief executive officer. Mr. Milchovich’s responsibilities are to lead the Board of Directors as non-executive Chairman of the Board of Directors, support Mr. della Sala in his role as Interim Chief Executive Officer and assist in a smooth transition once a permanent chief executive officer is elected.

As discussed below, Eugene D. Atkinson serves as our Deputy Chairperson and Lead Director with primary responsibility to chair the Executive Sessions of the Board of Directors.  Although Mr. Milchovich serves as our Chairman of the Board, Mr. Atkinson continues to chair the Executive Sessions as Deputy Chairperson, as the NASDAQ listing standards require that an independent director preside over the Executive Sessions and Mr. Milchovich is not an independent director due to his status as the former chief executive officer of the Company.

The Role of the Board in the Oversight of Risk Management

The Audit Committee’s charter provides that the Audit Committee has the responsibility to discuss guidelines and policies with respect to risk assessment and risk management and discuss with management our major financial risk exposures and the steps management has taken to monitor and control such exposures.  The Audit Committee reports regularly to the full Board of Directors, which also considers our risk profile.  The Audit Committee and the Board of Directors focus on the most significant risks that we face and our general risk management strategy, and also ensure that risks undertaken by us are consistent with the view of the Board of Directors as to the appropriate level of risk in light of general business conditions.  While the Board of Directors and the Audit Committee oversee the Company’s risk management, our management is responsible for day-to-day risk management processes. Management assists the Audit Committee and the Board of Directors in the discharge of their responsibilities with respect to risk management oversight, as described below.

We faced significant challenges when Mr. Milchovich joined us in 2001.  In response, Mr. Milchovich implemented a risk management process whereby senior management, including Mr. Milchovich, took a direct and active approach to managing the risks facing our business.  In particular, management was focused on restructuring the significant amount of our debt, improving our operating performance and managing risks associated with our asbestos liabilities and certain legacy contracts. Senior management took an active role in managing these risks and reported regularly to the Board of Directors on our progress as part of our efforts to ensure our continued viability.

For example, in response to the inadequate risk management in contract bidding and execution that was a factor in our poor performance prior to Mr. Milchovich’s arrival, Mr. Milchovich established the Project Risk Management Group, or PRMG, shortly after joining our Company. The Vice President of PRMG reports directly to the chief executive officer and the group is responsible for:

·       Setting risk management policy for proposal and contract operations in order to protect us from losses related to contracting operations;

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·       Establishing risk management policies and reviewing risk management procedures at our operating units; and

·       Providing and encouraging industry best practices in operational risk management.

The PRMG must approve all bids exceeding certain risk thresholds and any departures from our contracting policy.  In addition, departures from certain key contractual protections also require the approval of senior management. The chief executive officer reports to the Audit Committee and/or the Board of Directors on significant risks identified through the PRMG process as they arise.

In addition, after the departure of the chief executive officer of our Global Power Group in May 2006, Mr. Milchovich assumed that role in addition to his responsibilities as Chairman of the Board of Directors and Chief Executive Officer in order to ensure appropriate oversight of business operations and management of key risks for the Global Power Group.  Mr. Milchovich held that position until the appointment of Gary T. Nedelka as Chief Executive Officer and President of the Global Power Group, effective January 1, 2009.

Our senior management team, including our chief executive officer, chief financial officer and chief operating officer, is directly and actively involved in management of risks to our business and has also assumed primary responsibility for reporting to the Audit Committee and/or the Board of Directors on a regular basis regarding material risks and our response to managing those risks.  The Board of Directors has approved, based upon the recommendation of management, an enterprise risk management oversight program consisting of the following elements:

·       Risk management systems design - the Board reviews the adequacy of the overall design of our risk management system on an annual basis and receives quarterly updates on the adoption of new corporate policies or material revisions to such policies;

·       Capabilities and adequacy of resources dedicated to risk management — in addition to reviewing the capabilities and adequacy of internal audit resources and resources dedicated to compliance with Section 404 of the Sarbanes-Oxley Act of 2002 on a quarterly basis, the Audit Committee reviews the capabilities and adequacy of resources dedicated to risk management, including the PRMG, on a quarterly basis;

·       Compliance with the risk management system — the Audit Committee receives quarterly reports on internal audit activities and compliance matters; and

·       Review of specific risks — the Board and Audit Committee receive reports on certain specified risks on a quarterly or annual basis. In addition, to senior management also presents a comprehensive risk assessment to the Audit Committee on an annual basis and provides the Audit Committee with an update on key risks and mitigation actions taken in response to those risks on a quarterly basis.

Director Nominations

Our Governance and Nominating Committee identifies and recommends to our Board of Directors individuals to be nominated by our Board of Directors for election as directors.  In addition, shareholders may nominate candidates for election as directors.

Independence Standards

Our Corporate Governance Guidelines provide that a majority of our Board of Directors shall consist of independent directors, who are directors that (1) are neither officers nor employees of us or our subsidiaries; (2) have no relationship which, in the opinion of our Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director; and (3) are otherwise “independent” as that concept is defined in the applicable NASDAQ listing standards.

Our Board of Directors uses the following standards to assist it in determining director independence.  A director will not be considered independent if, within the preceding three years: (1) such person was employed by us

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or by any of our subsidiaries, or had an immediate family member who was an executive officer of us or any of our subsidiaries; (2) such person, or an immediate family member, was a partner in or employed by our independent registered public accounting firm and worked on the audit of our consolidated financial statements or is currently a partner of our independent registered public accounting firm; (3) such person, or an immediate family member, was employed as an executive officer of another company where any of our present executive officers served on that company’s compensation committee; (4) such person is an executive officer or employee, or has an immediate family member who is an executive officer or controlling shareholder of, or a partner in, a company that made payments to, or received payments from, us in an annual amount exceeding the greater of (a) 5% of the recipient’s consolidated gross revenues for that year or (b) $200,000 other than payments arising solely from investments in our securities or payments under non-discretionary charitable contributions matching programs; or (5) such person, or an immediate family member, received compensation in excess of $120,000 during any period of twelve consecutive months from us, other than director and committee fees, pension or other forms of deferred compensation or compensation to an immediate family member who is a non-executive officer or employee of ours.

Our Board of Directors also annually reviews the relationships between directors and charitable organizations and determines whether any such relationships would create a conflict of interest that would interfere with a director’s independence, even though such relationships are not restricted by the foregoing standards.  In making such a determination, the following relationships will not be considered by our Board of Directors as material relationships that would impair a director’s independence: the director, or an immediate family member, serves as an executive officer of a charitable organization and our discretionary charitable contributions to the organization during any of the past three fiscal years do not exceed the greater of (1) 5% of the charity’s revenues or (2) $200,000.

Based on these standards, our Board of Directors has determined that the following directors are independent: Messrs. Atkinson, Demetriou, Daley, Galante and Woods and Mses. Hanbury-Brown and Tart-Bezer.

Other Criteria; Nomination Method

With respect to identifying and evaluating director candidates, we believe that our Board of Directors should be comprised of persons with the most beneficial mix of qualifications in areas that are important and relevant to our businesses.  Each director should have in-depth experience in at least one area of importance to us, as described below. We also evaluate the skills and experience of a candidate for director in the context of evaluating the skills and experience of the incumbent board members, individually and as a group, with the objective of enhancing the skills, experience and effectiveness of our Board of Directors as a whole.

Our Governance and Nominating Committee has established a list of qualifications that the Committee will consider when evaluating director nominees.  The qualifications consist principally of personal characteristics, such as intelligence, integrity and an ability to work collaboratively, and qualifications based on experience and knowledge.  The experience and knowledge characteristics are:

·       A general understanding of energy related businesses, and specifically experience and/or an understanding of the oil, gas, and chemical sectors

·       A general understanding of professional service businesses and specifically the engineering, procurement, and construction industry

·       Regional expertise in areas of the world which are important to us

·       Financial services and/or all aspects of corporate finance experience

·       Specific legal experience and knowledge with a publicly traded company engaging in global business

·       Global government/public policy, communications and public affairs experience

In addition, the Governance and Nominating Committee considers the following experiences highly desirable and additive to the characteristics described above:

·       Currently active or former Chairman or Chief Executive Officer or other relevant senior leadership experience

·       Currently active or former Chief Financial Officer or other relevant corporate financial management experience

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·       Experience in energy related businesses

·       Currently active or retired from serving on other publicly traded corporate boards

·       Experience and understanding of corporate governance best practices

We do not maintain a formal diversity policy with regard to director nominations or a definition of diversity, however, as provided in our Corporate Governance Guidelines, the Board of Directors “evaluates each director candidate in the context of the Board of Directors as a whole, with the objective of assembling a group that can best perpetuate the success of the business and represent shareholder interests through the exercise of sound judgment using its diversity of experience, skills and perspectives in these various areas.”  Consistent with the Corporate Governance Guidelines, when considering director nominations, the Board of Directors considers (i) the diversity of the experiences, skills and backgrounds of the members of the Board of Directors in the aggregate, and (ii) how the nominee will contribute to the aggregate experiences and skills of the Board of Directors.  In addition, the Board of Directors is cognizant of ensuring that a diversity of perspectives is represented on the Board of Directors when considering director nominations.

Pursuant to a recommendation by our Governance and Nominating Committee, our Board of Directors has proposed the election of Mr. della Sala at this Extraordinary General Meeting.

As a result of a referral from Mr. Milchovich, our Chairman and former Chief Executive Officer, the Governance and Nominating Committee recommended, and the Board of Directors proposed, the election of Mr. Daley at the extraordinary general meeting of shareholders held on November 4, 2009.

Shareholders entitled to vote for the election of directors at an annual general meeting may nominate individuals for election to our Board of Directors.  A shareholder’s notice to nominate an individual for election as a director must be received by the Corporate Secretary at our principal executive offices not less than 45 calendar days in advance of the anniversary of the date that we commenced the mailing of our proxy statement for the previous year’s annual general meeting.  The shareholder’s notice must provide information about the nominee and other information required by our Articles of Association, which are filed as an exhibit to our Annual Report on Form 10-K.  Alternatively, a copy of our Articles of Association can be obtained by writing to the Office of the Corporate Secretary, Foster Wheeler AG, c/o Foster Wheeler Inc., Perryville Corporate Park, Clinton, New Jersey 08809-4000. Our Governance and Nominating Committee will evaluate any director candidate nominated by shareholders according to the criteria discussed above and, based on the results of that evaluation, will determine whether to recommend the candidate in the proxy statement.

In August 2010, the SEC adopted new rules relating to the ability of certain shareholders to nominate directors for election, often referred to as proxy access.  These rules are not applicable to this Extraordinary General Meeting and are not expected to be applicable to our 2011 annual general meeting, but may provide shareholders with additional procedures for nominating directors commencing with the 2012 annual general meeting.

Executive Sessions of the Non-Employee Directors

The non-employee members of our Board of Directors meet in Executive Session after each meeting of our Board of Directors. The Executive Sessions, in which only non-employee directors participate, are chaired by the Deputy Chairperson of our Board of Directors, who serves as the Executive Session Presiding Director and our Lead Director.  Mr. Woods served as Deputy Chairperson of our Board of Directors until February 2009.  In February 2009, Mr. Atkinson was appointed Deputy Chairperson of our Board of Directors by the non-employee directors of our Board of Directors.

Attendance of Board Members at the Annual General Meeting of Shareholders

We have not adopted a policy regarding attendance of Board of Director members at the annual general meeting of shareholders. All of the then current members of our Board of Directors were in attendance at the annual general meeting held on May 5, 2010.  All of the then current members of our Board of Directors were in attendance at the annual general meeting held on May 6, 2009.

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Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers and employees, including the Chief Executive Officer, Chief Financial Officer and other senior finance organization employees.  Any waiver of this Code of Business Conduct and Ethics for executive officers or directors may be made only by our Board of Directors or a committee of our Board of Directors and will be promptly disclosed to our shareholders.  If we make any substantive amendments to this Code of Business Conduct and Ethics or grant any waiver, including an implicit waiver, from a provision of the Code of Business Conduct and Ethics to the Chief Executive Officer, Chief Financial Officer, Controller or any person performing similar functions, we will disclose the nature of such amendment or waiver on our website, or in a report on Form 8-K, as required by the rules promulgated by the SEC and the applicable NASDAQ listing standards.  In fiscal 2009, our Board of Directors did not grant any waiver of our Code of Business Conduct and Ethics.

Our Code of Business Conduct and Ethics is publicly available on our website at www.fwc.com/corpgov.  A copy of our Code of Business Conduct and Ethics may also be obtained upon request, without charge, by writing to the Office of the Corporate Secretary, Foster Wheeler AG, Perryville Corporate Park, Clinton, New Jersey 08809-4000.

Communicating with Directors

Shareholders and interested parties may communicate directly with Mr. Atkinson, the Deputy Chairperson of our Board of Directors, or the non-employee directors as a group by mailing such communications to Deputy Chairperson, c/o Office of the Corporate Secretary, Foster Wheeler AG, c/o Foster Wheeler Inc., Perryville Corporate Park, Clinton, New Jersey 08809-4000. Stakeholders may also contact our Board of Directors via the Internet at www.fw-stakeholder.com.  Such communications may be confidential and/or anonymous.

Director Compensation for Fiscal 2009

General.   Our directors play a critical role in guiding our strategic direction and overseeing management. Recent developments in corporate governance and financial reporting have resulted in an increased demand for qualified public company directors. The many responsibilities and risks and the substantial time commitment of being a director of a public company require that we provide adequate incentives for our directors’ continued performance by paying compensation commensurate with our directors’ workload.

The Board establishes non-employee director compensation.  The Compensation Committee, with the assistance of its compensation consultant, periodically reviews the amount and composition of non-employee director compensation and makes recommendations to the Board as needed with respect to changes in compensation form or amount.  Employees who serve as directors do not receive additional compensation for their services as directors.    We do not provide any perquisites to our non-employee directors.

Review of Compensation for Fiscal 2009.  In April 2009, Hewitt Associates, then the Compensation Committee’s compensation consultant, prepared a study of director compensation practices at the Compensation Committee’s request.  The study included director compensation amounts for 2008 at the average, median and 25 th  and 75th percentile levels for the 28 companies included in the customized peer group described below under “Compensation Discussion and Analysis — Role of Compensation Consultant and Compensation Data”  and the public companies in Hewitt’s database with revenues between $5 billion and $10 billion.  Total compensation for non-employee directors under our director compensation program was below the median and average for both the customized peer group and general director compensation data, primarily due to (i) the fact that we do not pay meeting fees to our non-employee directors and (ii) lower committee fees under our program.  In light of this fact, the Compensation Committee recommended, and the Board of Directors approved, the payment of meeting fees described below, with all other elements of our non-employee director compensation program remaining the same as in 2008.   Accordingly, non-employee director compensation for fiscal 2009 was as follows:

·        total compensation for service on the board was $160,000, with the form split between cash and equity, resulting in an annual retainer paid in cash of $80,000 and annual equity awards with an economic value of $80,000, 50% in the form of stock options and 50% in the form of restricted share units, or RSUs, typically granted in November of each year;

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·        effective May 6, 2009, a cash meeting fee of $2,500 for each meeting of the Board of Directors in Switzerland attended in person by a director;

·        additional committee chairperson fees of $15,000 in cash for the Audit Committee and $10,000 in cash for each of the Compensation Committee and Governance and Nominating Committee; and

·        an additional fee of $20,000 in cash for the Deputy Chairman.

The compensation for non-employee directors was prorated based on the number of months in which they served in fiscal 2009 on the board or a committee.

Equity Grants for Fiscal 2009.   In November 2009, the non-employee directors were granted equity awards with an economic value of $80,000, 50% in the form of stock options and 50% in the form of RSUs, as compensation for their services to be provided in fiscal 2010. In November 2009, Mr. Daley received an additional equity award with an economic value of $12,712, 50% in the form of stock options and 50% in the form of RSUs, as compensation for his services to be provided from the date of his election on November 4, 2009 until December 31, 2009.  See “Compensation Discussion and Analysis” below for a description of the economic value of an equity award and how it differed from the grant date fair value of an equity award as determined in accordance with accounting principles generally accepted in the United States.

Fiscal 2009 Compensation.   The table below sets forth the non-employee director compensation for the year ended December 31, 2009.

(1)        Represents all fees earned and paid during the year ended December 31, 2009.

(2)        Represents the grant date fair values of restricted share unit awards for the Stock Awards column and stock option awards for the Option Awards column for awards granted in fiscal 2009.  Such awards have been valued in this table in accordance with accounting principles generally accepted in the United States.  The grant date fair value shown for restricted share units is based on the closing price of our shares on the date of grant, and the grant date fair value shown for stock option awards is determined using the Black-Scholes option-pricing model on the date of grant.  For more information on our valuation methodology, refer to the following parts of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009: Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Application of Critical Accounting Estimates,” and Note 1, “Summary of Significant Accounting Policies—Share-Based Compensation Plans,” and Note 11, “Share-Based Compensation Plans” to our Consolidated Financial Statements included within Item 8, “Financial Statements and Supplementary Data.”  These values do not include any discount for possible forfeitures, pursuant to SEC rules.

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(3)        On November 12, 2009, each of Messrs. Atkinson, Demetriou, Galante and Woods and Mses. Hanbury-Brown and Tart-Bezer were awarded 1,251 restricted share units and 2,949 stock options under the LTI Plan, which had grant date fair values of $39,982 and $46,408, respectively.  Such awards have been valued in accordance with accounting principles generally accepted in the United States.  The awards vest on December 31, 2010; however, the awards vest proportionately over the vesting period if the directors are terminated other than for cause.  The stock options have an exercise price equal to the closing price of our stock on the grant date. As of December 31, 2009, each of Messrs. Atkinson, Demetriou, Galante and Woods and Mses. Hanbury-Brown and Tart-Bezer had an aggregate of 1,251 restricted share unit awards outstanding.  As of December 31, 2009, Messrs. Atkinson, Demetriou, Galante and Woods and Mses. Hanbury-Brown and Tart-Bezer had an aggregate of 14,778, 9,750, 9,750, 16,770, 16,470 and 9,065 stock option awards outstanding, respectively.

(4)        Mr. Daley was elected to the Board of Directors on November 4, 2009.  On November 12, 2009, Mr. Daley was awarded 206 restricted share units and 617 stock options under the LTI Plan, which had grant date fair values of $6,584 and $9,090, respectively, in recognition of his service as a director from the date of his election on November 4, 2009 until December 31, 2009.  Such awards have been valued in accordance with accounting principles generally accepted in the United States.  The awards vested on December 31, 2009.  The stock options have an exercise price equal to the closing price of our stock on the grant date.  On November 12, 2009, Mr. Daley was awarded 1,251 restricted share units and 2,949 stock options under the LTI Plan, which had grant date fair values of $39,982 and $46,408, respectively, in recognition of his service as a director in fiscal 2010.  Such awards have been valued in accordance with accounting principles generally accepted in the United States.  The awards vest on December 31, 2010; however, the awards vest proportionately over the vesting period if Mr. Daley is terminated other than for cause.  The stock options have an exercise price equal to the closing price of our stock on the grant date. As of December 31, 2009, Mr. Daley had an aggregate of 1,251 restricted share unit awards outstanding and 3,566 stock option awards outstanding.  In addition, during fiscal 2009 but prior to his election to our Board of Directors, Mr. Daley provided consulting services to us for aggregate fees of $100,000.

(5)        Mr. Flexon resigned from the Board of Directors and was named President and Chief Executive Officer of Foster Wheeler USA Corporation on November 16, 2009. Compensation received by Mr. Flexon as an executive officer for the period from November 16, 2009 until December 31, 2009 is reflected in the “Summary Compensation Table” below.

(6)        Mr. Fusco resigned from the Board of Directors on February 10, 2009.

Indemnification of Directors and Executive Officers

Effective October 15, 2009, we renewed insurance policies for a term of one year in respect of indemnification of directors and executive officers.  The scope of these policies is similar to coverage under the prior policies held by us.

In addition, we have entered into Indemnification Agreements with our directors and officers in order to provide them with specific contractual assurance that they will be indemnified to the fullest extent permitted by law.  Our form of Indemnification Agreement was filed with the SEC as Exhibit 10.10 to our Current Report on Form 8-K filed on February 9, 2009.

Compensation Committee Interlocks and Insider Participation

The members of our Compensation Committee are currently Mr. Demetriou, Chairperson, Ms. Hanbury-Brown, Ms. Tart-Bezer and Mr. Woods.  From January 31, 2008 until February 10, 2009, Mr. Fusco served on the Compensation Committee.  None of the members of our Compensation Committee during fiscal 2009 are former or current officers or employees of us or any of our subsidiaries.

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Compensation Discussion and Analysis

This Compensation Discussion and Analysis describes the compensation philosophy applied by us with respect to our named executive officers, which we refer to as NEOs, for fiscal 2009, and the compensation decisions made by the Compensation Committee and the Board. For fiscal 2009, we had the following five named executive officers:

·        Raymond J. Milchovich, our Chairman and Chief Executive Officer during fiscal 2009;

·        Franco Baseotto, our Executive Vice President, Chief Financial Officer and Treasurer; and

·        Our three other most highly compensated executive officers for fiscal 2009:

·       Umberto della Sala, our President and Chief Operating Officer, who was also appointed our Interim Chief Executive Officer in October 2010,

·       Robert C. Flexon, who served as our President and Chief Executive Officer of Foster Wheeler USA Corporation during fiscal 2009, and

·       Peter J. Ganz, our former Executive Vice President, General Counsel and Secretary.

During fiscal 2010, subsequent to the filing of our proxy statement for our Annual General Meeting held on May 5, 2010, there were changes in the roles of certain of the named executive officers. Mr. Milchovich retired as our Chief Executive Officer effective May 31, 2010.  Mr. Flexon served as Chief Executive Officer from June 1, 2010 until his separation from the Company effective October 22, 2010.  Mr. della Sala was appointed our Interim Chief Executive Officer effective October 22, 2010.  However, in accordance with the rules of the SEC, the focus of this Compensation Discussion and Analysis is the compensation decisions made for fiscal 2009. Throughout this section, we refer to the positions that were held by these individuals during fiscal 2009 and the arrangements that were in place for fiscal 2009.

Executive Summary

The following provides a brief overview of the more detailed disclosure set forth in this Compensation Discussion and Analysis.

·       The objective of our compensation program is to align the interests of our executives with those of our shareholders, to pay for performance and to recruit, retain and motivate talented executives.

·       All compensation decisions regarding our chief executive officer are made by the Board after the Board first considers the recommendation of the Compensation Committee. All compensation decisions for our other named executive officers are made by the Compensation Committee.

·       The Compensation Committee engages compensation consultants as it deems necessary to provide analysis on general compensation survey data and market trends and to assist the Compensation Committee in the development of a peer group for compensation purposes.  Management also engages compensation consultants as necessary to provide competitive compensation data and advice on compensation structure so that it can provide compensation recommendations to the Compensation Committee for the named executive officers. From January 1, 2009 until September 2009, Hewitt was directly engaged as the Compensation Committee’s compensation consultant.  In September 2009, after a competitive evaluation process in which several firms were considered, the Compensation Committee directly engaged Mercer as its compensation consultant.

·       We provide our executive officers with the following types of compensation: base salary, cash-based short-term incentives, equity-based long-term incentives and post-employment benefits.  We provide limited perquisites to our executive officers.

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·                    The Compensation Committee targets annual base salary, short-term incentive target award opportunity and long-term incentive compensation for our named executive officers in the range of the 50 th  to 75 th  percentile of the applicable peer group data, as provided by its compensation consultant. The Compensation Committee also considers other factors, including the individual performance of the executive, contractual obligations to the executive pursuant to the executive’s employment agreement and compensation data in the 50 th  to 75 th  percentile according to general compensation survey data.

·                    We encourage a pay for performance environment by linking cash-based short-term incentive compensation to the achievement of measurable business performance goals. Our performance goals are established at the beginning of each year by the Compensation Committee.  For fiscal 2009, the performance goals for our NEOs were based upon consolidated adjusted net earnings (which accounted for 70% of the total award amount) and our progress with respect to certain key objectives (which accounted for 30% of the total award amount).  To the extent our achievement of these goals exceeded 100% in the aggregate, the Compensation Committee could consider our earnings per share growth rate for fiscal 2009 relative to a peer group in determining the percentage to be applied to the target award opportunities for our NEOs. Based on these factors and our performance, the Compensation Committee approved a percentage of 100%, 120%, 100%, 120% and 70% to be applied to the target award opportunities for Messrs. Milchovich, Baseotto, della Sala, Flexon and Ganz, respectively, for fiscal 2009.

·                    We use equity-based long-term compensation to directly align the interests of our executives with those of our shareholders and to help motivate and retain our executives. During fiscal 2009, we issued equity awards in the form of stock options and restricted share units, with the value of the awards equally split between the two types of awards.  Consistent with our philosophy that long-term compensation should be designed to help motivate and retain our executives, such awards generally vest, at a minimum, in one-third increments over three years.

·                    Each of our named executive officers has an employment agreement and is entitled to severance and change in control benefits.  Since January 1, 2009, we have entered into employment agreements or amendments to employment agreements with each of our NEOs, as described below in “— Employment Agreements with the NEOs.”

·                    We provide limited retirement benefits beyond a company match to our 401(k) plan. We do not provide any non-qualified deferred compensation arrangements to our executive officers.

Compensation Philosophy

We design our executive pay programs in a manner that is intended to align the interests of our executives with those of our shareholders.

We compensate our senior management through a mix of base salary, cash-based short-term incentive compensation and equity-based long-term incentive compensation, with an emphasis on performance compensation.  We believe that long-term incentive compensation is best used to highly motivate, retain and reward a relatively small group of executives with the greatest ability to positively impact our business and, therefore, shareholder value.

We design our compensation programs to be simple and easily understood and measured, with a limited number of perquisites.

We believe it is important to enter into employment arrangements that will help attract and retain high quality executives and protect our interests in the event of a separation of employment. Accordingly, we have implemented employment agreements, severance and change in control and non-compete and non-solicit arrangements with key executives.

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Compensation Committee Process

The Board determines compensation for our chief executive officer based upon recommendations from the Compensation Committee.  The Compensation Committee approves the compensation of the other named executive officers.  In making its decisions, the Compensation Committee considers the recommendations of our chief executive officer, the advice of its compensation consultant and relevant general survey and peer group data, each as described below.  In setting the compensation for each officer, the Compensation Committee reviews the nature and scope of each officer’s responsibilities as well as their effectiveness in supporting our short- and long-term goals.

Role of Executive Officers in the Compensation Process

The chief executive officer provides the Compensation Committee with his evaluations of the senior executives, including the other named executive officers.  He makes compensation recommendations for the other named executive officers with respect to base salary, cash-based short-term incentive compensation and equity-based long-term incentive compensation.  His recommendations are the basis of discussion with the Compensation Committee; however, the Compensation Committee has final decision-making authority.

Meetings of the Compensation Committee are regularly attended by the chief executive officer, the corporate secretary and the executive vice president of human resources.  The chief financial officer attends the meetings of the Compensation Committee as necessary.

Role of Compensation Consultants and Compensation Data

Hewitt

To assist us in establishing compensation for executive officers and designing our equity award structure, the Compensation Committee directly engaged Hewitt in February 2008 and prior to that time, Hewitt worked with the Compensation Committee.  Hewitt attended all meetings of the Compensation Committee at which compensation decisions related to the NEOs were made from January 1, 2009 until September 2009.

Hewitt maintains a proprietary executive compensation database that contains information on the various elements of compensation for over 300 public companies across a broad range of industries. In fiscal 2008, Hewitt provided compensation survey data for a group of our employees that included our most senior management.  The survey, which we refer to as the Hewitt general compensation survey, included the approximately 300 companies in Hewitt’s database.  For this survey, Hewitt was asked to provide information on base salary, short-term incentive awards and long-term incentive awards for each position or level.  Hewitt generally provided data at various levels for each position or level.  In November 2008, Hewitt advised the Compensation Committee in the development of a customized peer group consisting of 28 companies whose compensation data has been used, together with general compensation survey data described above, to assist the Compensation Committee in making compensation decisions.    The Hewitt general compensation survey and peer group data was used in February 2009 by the Compensation Committee to make decisions regarding 2009 base salaries, 2009 short-term incentive target award opportunities and 2008 short-term incentive awards.

The companies included in the Hewitt peer group are:

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The selection of companies for inclusion in the peer group was based on a variety of factors, including:

·                   whether the company competes with us for executive talent, customers or investors;

·                   the company’s revenues relative to ours;

·                   the company’s scope of operations and reach on a global basis; and

·                   the company’s organizational structure.

Mercer

In September 2009, after a competitive evaluation process in which several firms were considered, the Compensation Committee directly engaged Mercer as its compensation consultant.  Mercer attended all meetings of the Compensation Committee at which decisions related to the NEOs were made from the date of its engagement in September 2009 until December 31, 2009.

In November 2009, in order to assist us in making compensation decisions regarding the NEOs, Mercer provided the Compensation Committee with compensation survey data or advised the Compensation Committee with respect to the development of compensation data as applicable, for our NEOs and other senior managers related to the following elements of compensation:

·                   base salary;

·                   short-term incentive targets;

·                   long-term incentive;

·                   total cash compensation, defined as base salary plus short-term incentive at target; and

·                   total direct compensation, defined as  total cash compensation plus long-term incentive.

Mercer provided this data at the 25 th , 50 th  and 75 th  percentile based on the following sources:

·                   Published compensation surveys, using both industry-specific and general industry data:

·                   Published compensation surveys reporting base salary and incentive data for companies in the engineering and construction, manufacturing and energy industries with annual revenues approximating our revenues.  Mercer compiled this data from its own proprietary data base and that of other survey providers, and we refer to this data collectively as the Mercer industry compensation survey; and

·                   Published compensation surveys reporting base salary and annual incentive data for general industry companies with annual revenues approximating our revenue, which Mercer compiled from its own proprietary database and that of other survey providers. We refer to this as the Mercer general compensation survey;

·                   For long-term incentive data, Mercer provided information as a percent of base salary from Mercer’s proprietary database for public companies in general industry with revenues greater than $5 billion;

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·                   Compensation data for the following proxy peer group of 12 engineering and construction companies, as disclosed in their respective proxy statements.  These companies comprise our peer group for compensation purposes and we refer to this as the Mercer peer group.

The approved peer group was recommended by Mercer and was developed to reflect potential competitors for talent, capital and customers. Mercer identified engineering and construction companies with revenues that approximated one-half to two times our revenues for comparability. Of the group, 10 of the peers fall within that range. One peer was added below that range (Granite Construction, with $2.7 billion in revenue in fiscal 2008) and one peer was added with revenue above that range (KBR, which is an important competitor of ours, with $12.0 billion in revenue in fiscal 2008). The resulting group had a median 2008 revenue of $6.7 billion. The Committee used the peer group data as an additional reference for pay levels for the named executive officers, and also references that group in considering pay practices.

Use of Compensation Survey and Peer Group Data

The Compensation Committee targets annual base salary, short-term incentive target award opportunity and long-term incentive compensation for our named executive officers in the range of the 50 th  to 75 th  percentile of the peer group data, as provided by its compensation consultant, for NEOs who are established and performing well in their current positions.  The Compensation Committee also considers compensation data in the 25 th  percentile for NEOs who are either newly hired or promoted into their positions.  The Compensation Committee also considers other factors, including the individual performance of the executive, contractual obligations to the executive pursuant to the executive’s employment agreement and compensation data in the 50 th  to 75 th  percentile according to the general compensation survey data.

For fiscal 2009, our annual base salaries and short-term incentive target award opportunities were between the 50 th  and 75 th  percentile of the Hewitt peer group data and long-term incentive compensation was between the 50 th  and 75 th  percentile of the Mercer long-term incentive data for each of Messrs. Milchovich, della Sala, Baseotto and Ganz, except that the long-term incentive compensation for Mr. Ganz exceeded the 75 th  percentile of the Mercer long-term data as a result of our obligation under his employment agreement to grant him an annual long-term incentive award equal to 1.5 times his annual base salary.  Mr. Flexon’s annual base salary and short-term incentive target opportunity exceeded the 75 th  percentile of the Mercer compensation data for presidents or chief executives of similarly sized subsidiary operations.  The dollar amount of Mr. Flexon’s long-term incentive compensation exceeded the 75 th  percentile for the Mercer compensation data, but, as a percentage of base salary, his long-term incentive compensation was between the 50 th  and 75 th  percentile of the Mercer compensation data.  In approving compensation for Mr. Flexon in excess of the 75 th  percentile of the applicable compensation data, the Compensation Committee considered Mr. Flexon’s compensation as Executive Vice President and Chief Financial Officer at his then, current employer, NRG Energy, Inc., and the fact that Mr. Flexon was a potential successor for Mr. Milchovich as Chief Executive Officer of Foster Wheeler AG.

Other Duties of the Compensation Consultant

In addition to assisting with compensation data, Mercer reviewed our equity award structure in fiscal 2009 and made recommendations with respect to the use of the economic value (that is, the currency-denominated value) of equity awards in determining appropriate award levels and the type and allocation of awards between stock options and restricted share units.  Mercer also provided a methodology for converting the economic value of equity awards into an award of an absolute number of stock options and restricted share units.  Mercer provided its analysis to management and the Compensation Committee, and met with the Compensation Committee to explain its recommendations and answer any questions.  Mercer provided data to the Compensation Committee regarding the form and size of the November 2009 equity awards relative to the Mercer peer group.

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When we enter into a new or amended employment agreement with a named executive officer, Mercer generally advises the Compensation Committee with regard to the market competitiveness of the terms and conditions of the agreement.  Mercer provided this advice with respect to the new employment agreements and amendments to the employment agreements we entered into with the NEOs from November 2009 through the first quarter of fiscal 2010.

Fees Incurred for Compensation Consultants

The aggregate fees incurred in fiscal 2009 for services provided by Hewitt and Mercer, the Compensation Committee’s compensation consultants during fiscal 2009, and their respective affiliates with regard to determining or recommending the amount or form of executive and director compensation were approximately $271,000 and $442,000, respectively.  The aggregate fees incurred in fiscal 2009 for non-executive compensation consulting services provided by Hewitt and its affiliates were approximately $535,000. The aggregate fees incurred in fiscal 2009 for non-executive compensation consulting services provided by Mercer and its affiliates were approximately $3.4 million for insurance services provided by Mercer’s affiliate, Marsh, and approximately $3.5 million for other consulting services.

The decision to engage Hewitt and Mercer to provide the non-executive compensation consulting services was made by management and was not approved by the Board of Directors.

Elements of Executive Compensation

We use the following compensation elements in our executive compensation program:

·                    Base salary;

·                    Cash-based short-term incentive opportunities under the Foster Wheeler Annual Executive Short-Term Incentive Plan, which we refer to as the STI Plan;

·                    Long-term equity incentive awards under the Foster Wheeler AG Omnibus Incentive Plan, which we refer to as the LTI Plan; and

·                    Post-employment compensation, such as severance and change in control arrangements.

The compensation program includes only minimal perquisites and limited retirement benefits.  We do not provide deferred compensation arrangements or supplemental retirement benefits as part of our compensation program.  The Compensation Committee considers the fact that we offer only limited retirement benefits when making compensation decisions. Each of the elements of our executive compensation program is described in more detail below.

Employment Agreements with the NEOs

We have entered into written employment agreements with each of our named executive officers.  A number of the elements of compensation, such as initial base salary and initial target short-term award opportunity, are specified in the agreements.  For a description of these agreements, see the section entitled, “Employment Agreements,” that appears following the compensation discussion and analysis.

From January 1, 2009 through March 31, 2010, we entered into the following new or amended employment arrangements or consulting agreements with our named executive officers:

·                   Effective February 9, 2009 and in connection with the redomestication, the employment agreements between each of Messrs. Milchovich, Baseotto, della Sala and Ganz and Foster Wheeler-Bermuda were assigned to Foster Wheeler Inc., one of our subsidiaries.  The terms and conditions were unaffected by the assignment.

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·                   In November 2009, we entered into an employment agreement with Robert C. Flexon in connection with his appointment as the President and Chief Executive Officer of Foster Wheeler USA Corporation, our wholly-owned indirect subsidiary.

·                   Effective as of the close of business on December 31, 2009, Peter J. Ganz, then our Executive Vice President, General Counsel and Secretary, resigned as a result of his decision not to relocate to our new operating headquarters in Geneva, Switzerland.  We entered into a separation agreement with Mr. Ganz in connection with his resignation, which constituted a resignation for good reason under his employment agreement.

·                   In January 2010, in connection with the relocation of our operating headquarters to Geneva, Switzerland, we entered into an amended employment agreement with Franco Baseotto, our Executive Vice President, Chief Financial Officer and Treasurer, setting forth the terms and conditions applicable to Mr. Baseotto’s performance of duties in Switzerland.

·                   In February 2010, we entered into amended employment arrangements with Umberto della Sala, our President and Chief Operating Officer and, effective October 2010, our Interim Chief Executive Officer, providing for (i) an extension of those arrangements from December 31, 2011 to December 31, 2013 and (ii) the long-term incentive award described under “Long-Term Incentive Compensation-Equity Awards Granted in Fiscal 2009.”

·                   In March 2010, we entered into a consulting agreement with Raymond J. Milchovich, then our Chairman and Chief Executive Officer, pursuant to which we secured Mr. Milchovich’s services as a consultant from June 1, 2010 until November 3, 2011 in exchange for his agreement to waive his right to resign for good reason under his employment agreement as a result of the relocation of our operating headquarters to Geneva, Switzerland. Effective June 1, 2010, Mr. Milchovich became non-executive Chairman of the Board of Directors.

In addition, in May 2010 we amended the employment arrangements with Mr. Baseotto providing for the terms of his long-term assignment in Switzerland and with Mr. Flexon providing for the terms of his appointment as our Chief Executive Officer.  In November 2010, we entered into a separation agreement with Mr. Flexon and amended the employment arrangements with Mr. della Sala providing for his supplemental compensation as our Interim Chief Executive Officer.

Base Salaries

The base salaries we provide to executive officers are designed to provide a competitive level of secure cash compensation. Salaries are reviewed in January or February of each year.  In addition, we review base salaries during the course of the year if an executive assumes additional job responsibilities.  In reviewing base salaries, the Compensation Committee considers individual performance, the level of experience and the responsibility of the executive and the compensation survey data described above.

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Annual base salaries for fiscal 2009 for Messrs. Milchovich and della Sala were provided for in their respective employment agreements.  In determining Mr. Milchovich’s annual base salary for fiscal 2009 that was provided for in the agreement, the Board considered our outstanding performance over the last several years, Mr. Milchovich’s significant contributions to that performance and annual base salaries for chief executive officers in the 50 th  to 75 th  percentile as reflected in the Hewitt peer group data.  In determining the annual base salaries for Messrs. Baseotto and Ganz, in February 2009 the Compensation Committee considered the executive’s salary as compared to the 50 th  and 75 th  percentiles for both the Hewitt general compensation survey data and the Hewitt peer group data, Messrs. Baseotto’s and Ganz’s contributions to our performance and their experience in their positions.  In determining the annual base salary for Mr. Flexon upon his appointment as President and Chief Executive Officer of Foster USA Corporation in November 2009, the Compensation Committee considered Mr. Flexon’s annual base salary as Executive Vice President and Chief Financial Officer at his then current employer, NRG Energy, Inc., the fact that Mr. Flexon was a potential successor for Mr. Milchovich as Chief Executive Officer of Foster Wheeler AG and compensation survey data at the 25 th , 50 th  and 75 th  percentiles provided by Mercer for presidents or chief executive officers of similarly sized subsidiary operations.  In determining annual base salaries for Messrs. Baseotto, Ganz and Flexon, the Compensation Committee did not assign any specific weight or value to any one consideration over the others.

The Compensation Committee or in the case of Mr. Milchovich, the Board, approved base salaries as follows:

(1)                     As described under “Employment Agreement for Raymond J. Milchovich,” Foster Wheeler Ltd. entered into an amended and restated employment agreement with Mr. Milchovich, effective November 4, 2008.  This agreement provided for an increase in Mr. Milchovich’s annual base salary to $1,250,000, effective January 1, 2009 and thereafter to be reviewed by us on each anniversary of the effective date or another appropriate date as may be agreed by us and Mr. Milchovich during the term of his employment.

(2)                     As described under “Employment Agreements for Umberto della Sala,” two of our subsidiaries, Foster Wheeler Global E&C S.r.L., or FWGE&C, and Foster Wheeler Inc. are parties to employment arrangements with Mr. della Sala that provide that his annual base salary with FWGE&C is €195,000 and his annual base salary with Foster Wheeler Inc. is €391,000, effective as of January 1, 2009.

(3)                     Mr. Flexon was appointed President and Chief Executive Officer of Foster Wheeler USA Corporation on November 16, 2009. As described under “Employment Agreement for Robert C. Flexon,” Foster Wheeler USA Corporation entered into an employment agreement with Mr. Flexon, effective November 16, 2009.  This agreement provides for an annual base salary of $700,000, thereafter to be reviewed by us on each anniversary of the effective date or another appropriate date during the term of his employment when the salaries of other executives at Mr. Flexon’s level are normally reviewed.

n/a      not applicable.

Short-Term Incentive Compensation

General.  The named executive officers are eligible for short-term incentive compensation awards under the STI plan.  Other employees are also eligible for awards under the STI plan or similar plans.

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At the beginning of each year, the Compensation Committee establishes performance targets for the STI plan.  The individual target award opportunity (expressed as a percentage of salary) for each named executive officer is set in an employment agreement or by the Compensation Committee when it reviews and makes compensation decisions.  After the end of the year, the Compensation Committee evaluates performance as compared to the targets and, after considering the recommendations of the chief executive officer, determines the STI awards for each of the named executive officers.  Individual awards may be adjusted up (but not to exceed a maximum amount of two times the individual target award opportunity) or down in the discretion of the Compensation Committee.

Fiscal 2009 STI Plan Awards.  Target award opportunities for fiscal 2009 for Messrs. Milchovich, Baseotto and della Sala were set forth in their respective employment agreements.  In determining the target award opportunities for Messrs. Baseotto and Ganz, the Compensation Committee considered the executive’s salary as compared to the 50 th  and 75 th  percentiles for both the Hewitt general compensation survey data and the Hewitt peer group data, Messrs. Baseotto’s and Ganz’s contributions to our performance and their experience in their positions.  Based on this review, in February 2009, the Compensation Committee increased Mr. Ganz’s target award opportunity from 70% to 75%.  In determining the target award opportunity for Mr. Flexon upon his appointment as President and Chief Executive Officer of Foster USA Corporation in November 2009, the Compensation Committee considered Mr. Flexon’s annual base salary as Executive Vice President and Chief Financial Officer at his then current employer, NRG Energy, Inc., the fact that Mr. Flexon was a potential successor for Mr. Milchovich as Chief Executive Officer and compensation survey data at the 25 th , 50 th  and 75 th  percentiles provided by Mercer for presidents or chief executive officers of similarly sized subsidiary operations.  In determining target award opportunities, the Compensation Committee did not assign any specific weight or value to any one consideration over the others.

For fiscal 2009, target award opportunities for each named executive officer were set by the Compensation Committee or in the case of Mr. Milchovich, by the Board, as follows:

(1)                     As described under “Employment Agreement for Raymond J. Milchovich,” Mr. Milchovich’s employment agreement with Foster Wheeler Inc. provides for an annual short-term incentive compensation target for fiscal 2009 of 130% of his base salary up to a maximum of 260% of his base salary based upon targeted business objectives as established by our Compensation Committee.

(2)                     As described under “Employment Agreements for Umberto della Sala,” Mr. della Sala’s employment agreement with Foster Wheeler Inc. provides for an annual short-term incentive compensation target of 120% of his Foster Wheeler Inc. base salary up to a maximum of 240% of his Foster Wheeler Inc. base salary based upon targeted business objectives as established by our Board of Directors or Compensation Committee.  Under the terms of his employment with FWGE&C, Mr. della Sala is not entitled to short-term incentive compensation with respect to the annual base salary paid to him by FWGE&C (€195,000 in fiscal 2009) and accordingly, Mr. della Sala’s target award opportunity represents 80% of the total of his Foster Wheeler Inc. and FWGE&C base salaries.

(3)                     Mr. Flexon was appointed President and Chief Executive Officer of Foster Wheeler USA Corporation on November 16, 2009. As described under “Employment Agreement for Robert C. Flexon,” Foster Wheeler USA Corporation entered into an employment agreement with Mr. Flexon, effective November 16, 2009.  This agreement provides for an annual short-term incentive compensation target of 80% of his base salary up to a maximum of 160% of his base salary based upon targeted business objectives as established by our Compensation Committee.

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(4)                 Effective December 31, 2009, Mr. Ganz resigned as a result of his decision not to relocate to our new operating headquarters in Geneva, Switzerland.

For fiscal 2009, the performance targets for our named executive officers under the STI plan included consolidated net earnings, as adjusted for certain operating and non-operating items and exclusions (70% of award) and progress toward certain key initiatives related to the redomestication, our asbestos program, our pension plans, our merger and acquisition activities and compliance (30% of award).  To the extent our achievement of these goals exceeded 100% in the aggregate, the Compensation Committee could consider our earnings per share growth rate for fiscal 2009 compared to fiscal 2008 relative to the peer group depicted in the performance chart in Item 5 of our Annual Report on Form 10-K for fiscal 2009 in determining the percentage to be applied to the target award opportunities for our NEOs.

The consolidated adjusted net earnings performance goal for STI measurement purposes for fiscal 2009 was set at $284.7 million for the target award, or 51% of consolidated adjusted net earnings for STI measurement purposes for fiscal 2008.  To achieve the maximum award of 200% of the individual target award opportunity, the consolidated adjusted net earnings performance goal for STI measurement purposes for fiscal 2009 was set at $310.3 million, or 55% of consolidated adjusted net earnings for STI measurement purposes for fiscal 2008. The consolidated adjusted net earnings performance goal for STI measurement purposes for the maximum award of 200% of the individual target award opportunity of $310.3 million represented an 8% increase over the consolidated adjusted net earnings performance goal for STI measurement purposes for the target award of $284.7 million.  To achieve the minimum or threshold award of 70% of the target award opportunity, the consolidated adjusted net earnings performance goal for STI measurement purposes for fiscal 2008 was set at $242.0 million, or 43% of consolidated adjusted net earnings for STI measurement purposes for fiscal 2008.  The consolidated adjusted net earnings performance goal for STI measurement purposes for the minimum award of 70% of the individual target award opportunity of $242.0 million represented a 15% decrease compared to the consolidated adjusted net earnings performance goal for STI measurement purposes for the target award of $284.7 million.  The consolidated adjusted net earnings performance target for STI measurement purposes accounted for 70% of the total award amount under the STI plan for fiscal 2009.

Our actual consolidated adjusted net earnings for STI measurement purposes in fiscal 2009 were $349.1 million, which exceeded our performance goal for the award of 200% of the target award opportunity for this performance target.  As the consolidated adjusted net earnings performance target for STI measurement purposes accounted for 70% of the total award amount and we exceeded the target for a payment of 200% of the target award opportunity, our performance with regard to this target contributed an award amount of 140% of the target award opportunity to the total award amount.

When evaluating our actual results for fiscal 2009, the Compensation Committee excluded from consolidated net earnings for STI measurement purposes certain charges and gains.  The Compensation Committee believes the adjusted results better reflect our operating performance.  The adjustments for fiscal 2009 included the impact, whether positive or negative, of foreign currency fluctuations, tariff rates set by third parties, certain legacy projects and asbestos settlements and charges.  The net effect of these adjustments was to decrease our reported consolidated net earnings of $352.2 million by $3.1 million.

In addition, the Compensation Committee determined in February 2009 that 30% of the total award amount under the STI plan would be determined based on our progress with respect to certain key initiatives.  The Compensation Committee concluded that sufficient progress had been made against these key initiatives to award to warrant an award equal to 0.8 times the percentage of target award opportunity associated with this measure. Accordingly, our performance with regard to this target contributed an award amount of 24% of the target award opportunity to the total award amount resulting in a preliminary total award amount, based on the consideration of consolidated adjusted net earnings for STI measurement purposes and progress toward key initiatives, of 164% of the target award opportunity.

As the preliminary award of 164% of the target award opportunity exceeded 100%, the Compensation Committee considered our earnings per share growth rate for fiscal 2009 compared to fiscal 2008 relative to the peer group described above.  In light of our overall performance during fiscal 2009 and the fact that all of our peers achieved greater earnings per share growth than us in fiscal 2009, the Compensation Committee approved awards under our STI Plan as follows, based on a recommendation from our Chairman and Chief Executive Officer:

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·                   An award of 100% of target award opportunity for our Chairman and Chief Executive Officer;

·                   A total pool for awards for direct reports of our Chairman and Chief Executive Officer equal to 100% of the aggregate of the target award opportunities for such executives, including Messrs. Baseotto, della Sala, and Ganz; and

·                   An award of 120% of target award opportunity for all other participants in our STI Plan whose awards were based on objectives for our Corporate Center function, including Mr. Flexon.

The Compensation Committee approved awards under the STI Plan to the direct reports of our Chairman and Chief Executive Officer, including Messrs. Baseotto, della Sala and Ganz, based on the recommendation of Chairman and Chief Executive Officer as to a forced ranking of his direct reports of their performance against specific goals and objectives for each of the executives.   Based on these considerations, the Compensation Committee approved awards under the STI Plan equal to 120%, 100% and 70% of the target award opportunities for Messrs. Baseotto, della Sala and Ganz, respectively.

Long-Term Incentive Compensation

General.  All long-term incentives are equity-based and are provided under the LTI Plan, which was approved by our shareholders in fiscal 2006. The plan provides for a number of different types of equity-based awards: stock options, stock appreciation rights, restricted stock or units and performance shares or units.

In fiscal 2009, the Compensation Committee, with input from Mercer, adopted an LTI program as a general structure for making awards under the LTI Plan.  The Compensation Committee identified the following factors to consider in making equity compensation grants under the LTI Plan:

·                   key corporate goals/business strategies as presented by management and reviewed by our Board of Directors;

·                   external market trends;

·                   maintaining conceptual consistency in design from prior years where appropriate; and

·                   a bias towards simplicity and focus.

In determining which types of awards to grant as long-term incentives, the Compensation Committee determined that a combination of stock options, which generally promote performance-based goals, and restricted share units, which generally serve the purpose of retention and shareholder alignment, would provide the appropriate balance of incentives to management.  The Compensation Committee also determined to grant equity awards split evenly between stock options and RSUs, based on the total economic value (as described below) of the equity awards being granted.

The Compensation Committee generally makes annual grants in November of each year.  Additional grants are also made during the year in the Compensation Committee’s discretion in the case of a promotion, the addition of job responsibilities or the hiring of a new employee.

Equity Grant Practices. We do not backdate or re-price equity awards. We do not have any process or practice to time the grant of equity awards in advance of our release of earnings or other material non-public information in a way that would be to our executives’ advantage. Our practice is for the Compensation Committee to approve the equity awards to be granted during the next open trading window for the applicable period.  This practice ensures that equity awards are granted at the time that all material information has been disclosed.  On the grant date, the number and strike price for the option awards and the number of restricted share units are determined based on the closing price of our shares on that date on NASDAQ.

Economic Value of Equity Awards.  Our practice is for the Compensation Committee to approve the economic value (that is, currency-denominated value) of equity compensation of each award to be granted to our

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executive officers.  The economic value is then converted, on the grant date, into an award of an absolute number of stock options and restricted share units based upon the methodology suggested by Mercer and approved by the Compensation Committee.  We refer to this methodology as the compensation methodology.

In making awards during fiscal 2009:

·                     The stock option value for compensation purposes is derived using a Black-Scholes formula based upon, among other input assumptions, an expected term computed using the average period between a three-year cliff vesting award and the full contractual term of the option and expected volatility based on the daily change in share price over the 36 months preceding the grant date, capped at 50%.  The stock option value for financial reporting purposes, which may differ from this value for compensation purposes and is derived using a Black-Scholes formula based upon, among other input assumptions, an expected term less than the full contractual term of the option and expected volatility based on the daily change in share price over the period commensurate with the expected term.

·                     The restricted share unit value for compensation purposes and financial reporting purposes is derived using the closing share price on the grant date.

Commitment to Institutional Shareholder Services.  As part of the 2006 shareholder approval process for the LTI Plan, we made certain commitments to  Institutional Shareholder Services, a provider of risk management and corporate governance products.  One of these commitments was to manage the approved share pool under the LTI Plan so that the average annual burn rate (over a three-year period) of awards granted under the LTI Plan would not exceed 5.37% of the number of shares outstanding as of the end of each of the three fiscal years.  The Compensation Committee has and intends to continue to make awards under the LTI Plan consistent with this commitment.

Equity Awards Granted in Fiscal 2009

To determine the size of equity grants in November 2009, the Compensation Committee considered the total economic value of the equity grant recommended by the chief executive officer with respect to the other named executive officers, contractual obligations with regard to the size of the equity grant as may be reflected in the executive officer’s employment agreement and the size of the proposed award for each executive’s position relative to the 50 th  to 75 th  percentile for such position as reflected in the Mercer general compensation survey, Mercer industry compensation survey, Mercer long-term incentive data and Mercer peer group data.  The Compensation Committee also considered each executive’s individual performance, potential for advancement and importance to the Company’s long-term success and, in the case of the grant to Mr. Flexon of options to purchase an aggregate of 62,878 shares and 26,682 restricted share units on November 16, 2009, the Compensation Committee considered the equity Mr. Flexon forfeited by resigning from NRG Energy to join our company. After evaluating these considerations, the Compensation Committee determined the economic value of the equity grant for each named executive officer.  The value was allocated equally between stock options and restricted share units.  In accordance with our equity grant practices, grants were made during an open trading window for the applicable period based on the closing price of our shares.

No equity awards were made to Mr. Milchovich or Mr. della Sala in fiscal 2009 because they received multi-year grants in 2008 in connection with  the amendments to their employment agreements.  In connection with the extension of Mr. della Sala’s employment arrangements for an additional two years in February 2010, we granted an equity award to Mr. della Sala in March 2010 with an economic value of €2,972,000.  Mr. della Sala is not eligible for further regular cycle equity awards for the remaining term of his amended employment arrangements.

The economic value of the equity awards and corresponding number of stock options and RSUs granted to the named executive officers during fiscal 2009 are as follows:

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Fiscal 2009 Equity Awards to Messrs. Baseotto and Ganz.  In accordance with the processes described above, on November 3, 2009, the Compensation Committee approved the grant of stock options and restricted share units to Messrs. Baseotto and Ganz.  These grants were intended to be part of a regular cycle of annual grants under the LTI Plan, and to cover compensation for the 2010 fiscal year. On November 12, 2009, in accordance with this process, stock options and restricted share units were granted to these individuals.

Fiscal 2009 Equity Awards to Mr. Flexon.  On November 16, 2009, the Compensation Committee approved the grant of options to purchase an aggregate of 62,878 shares and 26,682 restricted share units to Mr. Flexon pursuant to the terms of his employment agreement and in recognition of the equity he forfeited by resigning from NRG Energy and joining our Company.  In addition and in accordance with the processes described above, on November 3, 2009, the Compensation Committee approved the grant of options to purchase an aggregate of 34,932 shares and 14,823 restricted share units to Mr. Flexon.  This grant was intended to be part of a regular cycle of annual grants under the LTI Plan, and covers compensation for the 2010 fiscal year.  On November 16, 2009, in accordance with this process, stock options and restricted share units were granted to Mr. Flexon.

For additional information about each of the grants made during fiscal 2009, including the grant date fair value of each of the awards for financial reporting purposes, see the “Grants of Plan Based Awards for Fiscal 2009” table that follows this Compensation Discussion and Analysis.

Post-Employment Benefits

We provide severance benefits and change in control benefits to our named executive officers.  For a detailed description of these benefits and a quantification of potential payments as of December 31, 2009, see “Termination and Change in Control Payments” and “Potential Post-Employment Payments Table” below. We also provide retirement benefits to certain of our named executive officers.

Severance Benefits

We believe that it is appropriate to provide reasonable severance benefits to senior management, reflecting the fact that it may be difficult for executives to find comparable employment within a short period of time.  Severance agreements also permit us to make timely decisions with respect to changes in management and disentangle us from the former employee as soon as practicable. We generally have agreed to provide our named executive officers with severance in the amount of two times base salary and short-term incentive awards, as well as continuation of health and welfare benefits for two years and immediate vesting of all outstanding equity awards.  In structuring these severance agreements, we strive for internal consistency among the members of senior management.  In addition, the employment agreements with each of our named executive officers include provisions that prohibit the executive from competing with us or soliciting our employees or customers for a specified period.

Change in Control Benefits

We believe that the interests of shareholders are best served if the interests of our senior management are aligned with them, and that the change of control arrangements for our named executive officers create incentives for our executive team to build stockholder value and to obtain the highest value possible should there be a possibility of our being acquired in the future, despite the risk that the acquisition could result in the executives losing their jobs.  The change of control arrangements are also intended to attract and retain qualified executives who otherwise might view as more attractive other employers at a lower risk of being acquired.

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The cash components of any change in control benefits are paid in a lump sum and are based upon a multiple of base salary and maximum short-term incentive compensation.  In the event of a change in control, we also continue health and other insurance benefits for three to five years and immediately vest all equity compensation.  We believe these levels of benefits are consistent with the general practice among our peers.  Because of the so called “parachute” tax imposed by Internal Revenue Code Section 280G, we have agreed to reimburse the named executive officers for any excise taxes imposed as a result of the receipt of change in control benefits.

Retirement Plans and Retiree Medical

Until May 31, 2003, we maintained a qualified defined benefit pension plan in the United States.  Since that time, no new participants were added to the U.S. plan and the benefits under the plan for participating participants were frozen. We replaced the U.S. defined benefit pension plan with enhancements to our 401(k) plan, pursuant to which we match employee contributions up to approximately $14,700 per employee.  Of the named executive officers, only Mr. Milchovich is eligible to receive benefits under the frozen U.S. defined benefit pension plan and the present value of his benefits is less than $20,000. Messrs. Baseotto, Flexon, Ganz and Milchovich participate in our 401(k) plan on the same terms as other employees. We do not offer supplemental retirement benefits.

Several of our named executive officers are (or were) based overseas and are entitled to retirement benefits under local law. Upon retirement, Messrs. della Sala and Baseotto will be entitled to receive certain retirement benefits under Italian law and the national collective bargaining agreement that covers them, which we refer to as the National Contract.

We also maintain a program to provide health benefits to certain employees who retire from active service.  Employees who were age 40 or older as of May 31, 2003 may retire with subsidized post-retirement medical benefits.  The level of the subsidy is based on a participant’s defined benefit pension plan service as of May 31, 2003, subject to an overall limit.  Of the named executive officers, only Mr. Milchovich is eligible to receive retiree health benefits.

Perquisites

The perquisites we provide are not a material part of the executives’ compensation packages.  We reimburse certain senior management for fees associated with tax preparation, financial and estate planning services, an annual physical examination, and tax gross-ups on certain of these benefits.  We also reimburse Mr. Baseotto for high school education expenses for his daughter.  Messrs. Baseotto, Flexon, Ganz and Milchovich, in lieu of receiving a company-furnished vehicle, receive a car allowance.

Health and Welfare Benefits

We maintain a number of health and welfare programs to provide life, health and disability benefits to employees of the company.  For many of these programs, employees share in the cost of the coverage.  The named executive officers participate in these plans on the same terms as other employees.

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Tax Considerations

In determining executive compensation, the Compensation Committee considers, among other factors, the possible tax consequences to the company and to our executive officers, including the potential impact of Section 162(m) of the Internal Revenue Code of 1986, as amended.  Section 162(m) disallows a tax deduction by any publicly held corporation for individual compensation exceeding $1 million in any taxable year for its chief executive officer and its other senior executive officers, other than compensation that is performance-based under a plan that is approved by the shareholders of the company and that meets certain other technical requirements. The Compensation Committee also believes that it is important for us to retain maximum flexibility in designing compensation programs that meet our stated objectives.  For these reasons, the Compensation Committee, while considering tax deductibility as one of its factors in determining compensation, will not always limit compensation to those levels or types of compensation that will be deductible.  As a result of our tax position in recent years, any lack of deductibility of compensation has not negatively impacted our tax position.  The Compensation Committee does consider alternative forms of compensation consistent with its compensation goals, which preserve deductibility.

Share Ownership Guidelines

We desire to promote the retention and motivation of our executive officers and non-employee directors and to align their interests with those of our shareholders.  Equity ownership plays a key role in aligning these interests.  As a result, the Compensation Committee has adopted share ownership guidelines for our non-employee directors and certain executive officers, including each of our named executive officers.

The following guidelines set forth the target ownership levels in our shares that are expected for certain executive officers and non-employee directors.  The target ownership levels are expressed in terms of the market value of share holdings as a multiple of the executive’s base salary (as adjusted from time to time) or the non-employee director’s annual retainer (as adjusted from time to time).  The total market value of the participant’s share holdings should equal or exceed the specified target ownership level.

Actual levels of the market value of share ownership can fluctuate over time based on a change in pay rates and the value of the underlying shares.  The target ownership levels set forth above are meant as targets to be achieved and maintained over time.

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Prior to attaining the target ownership levels, we believe a participant’s sale of shares obtained through our compensation programs should be reasonably limited.  We expect that at least 50% of shares acquired through our equity compensation programs, after the payment of any applicable taxes, should be retained until the participant meets the relevant target ownership level.  If a participant wishes to sell shares in excess of the allowable amount and is under the relevant target ownership level, the individual may request that the CEO approve an exception prior to the sale. The CEO has discretion in making this determination.  Any exception granted will be reported by the CEO to the Compensation Committee.  Any request for an exception made by the CEO must be approved by the Compensation Committee, which has discretion in making this determination.  No such exceptions were requested or granted in fiscal 2009.  These limitations on sales in the guidelines are applicable to all equity grants made on or after November 2006.

During 2009, each of our NEOs and non-employee Directors complied with the share ownership guidelines either by attaining the required target ownership level or by complying with the provisions of the share ownership guidelines applicable to sales of shares prior to attaining the required targeted ownership level.

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Summary Compensation Table for Fiscal 2009

The following table sets forth the compensation paid or accrued by us during the years ended December 31, 2009, December 26, 2008 and December 28, 2007 for our named executive officers. The title below each name reflects the position held as of March 31, 2010.