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EXHIBIT 10.12
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AQUA-CHEM, INC.
1998
PHANTOM STOCK PLAN
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TABLE OF CONTENTS
ARTICLE I
ESTABLISHMENT, PURPOSE AND OVERVIEW....................................................................-1-
1.1 Establishment of the Plan.....................................................................-1-
1.2 Purpose of the Plan...........................................................................-1-
1.3 Overview of the Plan..........................................................................-1-
ARTICLE II
PHANTOM SHARE AWARDS...................................................................................-1-
2.1 Award Dates...................................................................................-1-
2.2 Initial Awards of Phantom Shares..............................................................-2-
2.3 Future Awards.................................................................................-2-
2.4 Minimum Performance Requirements..............................................................-2-
2.5 Payout of Awards..............................................................................-3-
(a) Payout of Initial Awards.............................................................-3-
(b) Delayed Payout Dates.................................................................-3-
(c) Effect of Death, Disability, Retirement, Termination.................................-3-
(d) Minimum Payout.......................................................................-4-
2.6 Determination of Maturity Value...............................................................-4-
2.7 Non-transferability of Awards.................................................................-5-
2.8 Award Certificates............................................................................-5-
ARTICLE III
ADMINISTRATION.........................................................................................-6-
3.1 Authority of Board............................................................................-6-
3.2 Delegation....................................................................................-6-
3.3 Liability; Indemnification....................................................................-6-
ARTICLE IV
MISCELLANEOUS..........................................................................................-7-
4.1 Status of Participants........................................................................-7-
4.2 Unfunded Status of Plan.......................................................................-7-
4.3 Tax Withholding...............................................................................-7-
4.4 Successors....................................................................................-7-
4.5 Notices.......................................................................................-8-
4.6 Severability..................................................................................-8-
4.7 Governing Law.................................................................................-8-
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EXHIBIT 10.12
ARTICLE I
ESTABLISHMENT, PURPOSE AND OVERVIEW
1.1 ESTABLISHMENT OF THE PLAN
The Board of Directors (the "Board") of Aqua-Chem, Inc. ("Aqua-Chem")
approved the new Aqua-Chem, Inc. 1998 Phantom Stock Plan ("Plan") as a
substitute for the previous Executive Management Incentive Plan ("EMIP") which
was terminated as of December 31, 1997.
1.2 PURPOSE OF THE PLAN
The goal of the Plan is to provide certain senior level executives and
officers of Aqua-Chem selected by the Board to participate in the Plan
("Participants") with the opportunity to share in future increases in the value
of Aqua-Chem Common Stock without the necessity of using personal funds to
purchase stock. This goal is accomplished by awarding each Participant a
specified number of phantom shares ("Phantom Shares").
1.3 OVERVIEW OF THE PLAN
The Plan provides minimum performance requirements, measured in terms
of earnings before interest, taxes, depreciation and amortization ("EBITDA"). If
these requirements are met, a Participant, who is employed by the Company on the
scheduled payment dates (subject to certain exceptions described below), will be
entitled to receive the value as of specified maturity dates of the Phantom
Shares initially awarded to the Participant (the "Maturity Value"). Maturity
Value will be equal to (i) the number of Phantom Shares initially awarded to the
Participant, multiplied by (ii) the value of a share of Aqua-Chem Common Stock
as determined by the formula set forth in Section 2.6 below.
ARTICLE II
PHANTOM SHARE AWARDS
2.1 AWARD DATES
On April 1 of each year ("Award Date"), commencing April 1, 1998, the
Board shall grant to each Participant entitled thereto, as determined by the
Board, awards of Phantom Shares ("Awards").
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2.2 INITIAL AWARDS OF PHANTOM SHARES
On the initial Award Date, April 1, 1998, each Participant in the Plan
will receive three separate awards of Awards, subject to the conditions and
requirements set forth below:
- The first Award ("1999 Award") will entitle the Participant to
receive the Maturity Value as of March 31, 1999 ("Maturity
Date").
- The second Award ("2000 Award") will entitle the Participant
to receive the Maturity Value as of March 31, 2000.
- The third Award ("2001 Award") will entitle the Participant to
receive the Maturity Value as of March 31, 2001.
2.3 FUTURE AWARDS
The number of Phantom Shares to be included in future Awards, the dates
Awards will be paid out ("Payout Date") and the Budgeted EBITDA requirements
applicable thereto will be determined for each such future Award by the Board in
its discretion. Any future Awards will all have a Maturity Date ending on the
last day of the third fiscal year following the Award Date.
2.4 MINIMUM PERFORMANCE REQUIREMENTS
The right of a Participant to receive the Maturity Value of the 1999
Award is contingent upon Aqua-Chem and its subsidiaries, on a consolidated
basis, achieving during the fiscal year beginning April 1, 1998 and ending March
31, 1999 "Actual EBITDA" equal to ninety percent (90%) or more of "Budgeted
EBITDA" (as these terms are defined below) for such fiscal year.
The right of a Participant to receive the Maturity Value of the 2000
Award is contingent upon Aqua-Chem and its subsidiaries, on a consolidated
basis, during the fiscal year beginning April 1, 1999 and ending March 31, 2000)
achieving Actual EBITDA equal to eighty percent (80%) or more of the Budgeted
EBITDA for such fiscal year. The right of a Participant to receive the Maturity
Value of the 2001 Award is contingent upon Aqua-Chem and its subsidiaries on a
consolidated basis during the fiscal year beginning April 1, 2000 and ending
March 31, 2001) achieving Actual EBITDA equal to eighty percent (80%) or more of
the Budgeted EBITDA for such fiscal year.
"Actual EBITDA" for any fiscal year shall mean earnings (with
appropriate accruals for Awards under the Phantom Stock Plan) before interest,
depreciation and amortization as set forth on the annual year end audited
consolidated balance sheet of Aqua-Chem with such adjustments, for
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EXHIBIT 10.12
transactions not in the ordinary course of business or otherwise as the
Board, in its discretion, determines to be appropriate. "Budgeted EBITDA" shall
(subject to such adjustment as the Board, in its discretion determines, to be
appropriate in the event of any acquisitions, joint ventures or divestitures)
mean the following amounts for the fiscal years indicated:
Fiscal Year Ending Budgeted EBITDA
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March 31, 1999 $18,333,000
March 31, 2000 $22,909,000
March 31, 2001 $28,678,000
2.5 PAYOUT OF AWARDS
(a) PAYOUT OF INITIAL AWARDS. Payout Dates for initial Awards
shall be as follows:
(i) Two-thirds (2/3) of the Maturity Value of the 1999
Award will be paid to Participants on June 1, 1999
and one-third (1/3) of the Maturity Value of the 1999
Award will be paid to Participants on June 1, 2000.
(ii) Two-thirds (2/3) of the Maturity Value of the 2000
Award will be paid to Participants on June 1, 2000
and one-third (1/3) of the Maturity Value of the 2000
Award will be paid to Participants on June 1, 2001.
(iii) Two-thirds (2/3) of the Maturity Value of the 2001
Award will be paid to Participants on June 1, 2001
and one-third (1/3) of the Maturity Value of the 2001
Award will be paid to Participants on June 1, 2002.
(b) DELAYED PAYOUT DATES. Payout Dates for any Award may be delayed, as
necessary, if the audited year-end financial statements of Aqua-Chem or any of
its subsidiaries are delayed for the fiscal year necessary to calculate the
Maturity Value (as defined in Section 2.6 below) of such Award.
(c) EFFECT OF DEATH, DISABILITY, RETIREMENT, TERMINATION. In order to
be entitled to receive any payment under the Plan, a Participant must be
employed by Aqua-Chem or its subsidiary on the Payout Date for such Award unless
the Participant's employment was previously terminated due to:
(i) death;
(ii) disability (as defined in the Aqua-Chem long-term disability
insurance policy as in effect from time to time);
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EXHIBIT 10.12
(iii) retirement (either normal retirement, as defined in the
Aqua-Chem qualified retirement plan as in effect from time to
time or early retirement, with the prior written consent of
Aqua-Chem); or
(iv) termination by Aqua-Chem or any of its subsidiaries for
reasons other than "Cause" (Cause includes such acts as
violation of confidentiality or noncompete agreements; acts of
fraud, dishonesty, or gross misconduct; and such other acts
which are deemed by the Board to constitute a material breach
of employment terms).
In the event of a Participant's termination of employment in accordance with
Subsections (i)-(iv) of this Section 2.5(c), such Participant shall be entitled
(on such Payout Dates as are specified in Section 2.5 or in future Awards) to
payout of the prorated Maturity Value of each Award granted to such Participant,
determined by multiplying the Maturity Value of the Award by a fraction, the
numerator of which is the number of months in the fiscal year ending on the
Maturity Date of such Award in which the Participant was employed by Aqua-Chem
or its subsidiary (including the month of separation) and the denominator of
which is twelve. If a Participant is for any other reason not employed by
Aqua-Chem or a subsidiary on the Payout Date for any Award, any and all amounts
otherwise payable to the Participant under such Award shall be forfeited.
(d) MINIMUM PAYOUT. In the event that for any Participant (i) the
amount (based upon performance for 1996 and 1997) that was scheduled to be paid
out at the end of the 1998 calendar year under the prior EMIP Plan is greater
than the amount that becomes payable to the Participant under the Plan on June
1, 1999 (i.e., two-thirds of the Maturity Value of the 1999 Award) then, in such
event the Participant shall, in lieu of the amount payable under the Plan, be
entitled to receive the amount that he or she would have received under the EMIP
Plan at the end of the 1998 calendar year and (ii) the amount (based upon
performance for 1997) that was scheduled to be paid out at the end of the 1999
calendar year under the prior EMIP Plan is greater than the amount that becomes
payable to the Participant under the Plan on June 1, 2000 (i.e., two-thirds of
the Maturity Value of the 2000 Award) then, in such event the Participant shall,
in lieu of the amount payable under the Plan, be entitled to receive the amount
that he or she would have received under the EMIP Plan at the end of the 1999
calendar year.
2.6 DETERMINATION OF MATURITY VALUE
The "Maturity Value" of an Award shall mean an amount equal to (i) the
number of Phantom Shares included in the Award, multiplied by (ii) the "Per
Share Stock Value" as defined below.
The "Per Share Stock Value" shall mean an amount, determined as of the
Maturity Date of an Award, equal to the following:
(i) six (6) times Actual EBITDA for the fiscal year ending on the
Maturity Date; plus
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(ii) the excess, if any, of the book value of cash and marketable
securities as reflected on Aqua-Chem's fiscal year end audited
balance sheet as of the Maturity Date over Eight Million
Dollars ($8,000,000); minus
(iii) the sum of the following as reflected on Aqua-Chem's fiscal
year end audited balance sheet as of the Maturity Date:
(a) the excess, if any, of amount of any indebtedness
pursuant to any short term or revolving credit
facility which is utilized to meet working capital
requirements over Eight Million Dollars ($8,000,000);
plus
(b) the amount of all other indebtedness arising in
connection with borrowed funds, but excluding
accounts payable and accrued expenses; plus
(c) the book value of the issued and outstanding Series
A, B and C Preferred Stock plus accrued dividends
thereon;
with the result so obtained, divided by
(iv) the number of shares of Aqua-Chem Common Stock outstanding or
reserved for issuance on the Valuation Date computed on a
fully-diluted basis, excluding the Phantom Shares awarded
under the Plan but including, without limitation, all shares
of Common Stock which may be issuable upon the exercise of any
and all stock options or warrants.
2.7 NON-TRANSFERABILITY OF AWARDS
Participants may not assign Awards other than by will or descent,
except that Participants may designate a beneficiary ("Beneficiary") to receive
any amounts payable with respect to Awards upon the death of a Participant. A
Participant may from time to time revoke or change his Beneficiary without the
consent of any prior Beneficiary by filing a new designation with the Committee.
The last such designation received by the Committee shall be controlling;
provided, however, that no designation or change or revocation thereof, shall be
effective unless received by the Committee prior to the Participant's death, and
in no event shall any designation be effective as of a date prior to such
receipt. If no such Beneficiary designation is in effect at the time of the
Participant's death, or if no designated Beneficiary survives the Participant,
or if such designation conflicts with law, the Participant's estate acting
through his legal representative, shall be entitled to payout. If the Committee
is in doubt as to the right of any person to payout, the Committee may refuse to
payout such Award, without liability, until the Committee determines the person
entitled to payout. The person applying to the Committee for payout or the
Committee may apply to any court of appropriate jurisdiction and such
application shall be a complete discharge of the liability of the Committee
therefor.
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2.8 AWARD CERTIFICATES
Any Awards made under the Plan will be evidenced by a Certificate
signed by the President of Aqua-Chem.
ARTICLE III
ADMINISTRATION
3.1 AUTHORITY OF BOARD
The Board, or any committee which the Board may appoint ("Committee",
unless context clearly indicates otherwise all references to the Board shall
also be deemed to be references to the Committee), shall have the sole and
exclusive right and authority to:
(a) select participants;
(b) make any and all determinations required in connection with
the operation and administration of the Plan;
(c) make any and all modifications to the terms of the Plan that
the Board, in its sole discretion, deems to be appropriate in
the event that there should occur a stock split, stock
dividend, recapitalization or any other event, which in the
sole and exclusive opinion of the Board equitably requires
that a modification be made; and
(d) terminate the Plan and any Awards previously made pursuant to
the Plan; provided, however, that any amounts payable in the
future to Participants, pursuant to Awards previously made
which have reached their scheduled Maturity Date, shall be
paid out in accordance with the terms of the Plan.
Any determination made or action by the Board pursuant to the preceding
provisions shall be final and binding on the Participants and Aqua-Chem.
3.2 DELEGATION
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The Board and the Committee each may delegate to one or more of its
respective members or to any other person or persons such ministerial duties
hereunder as it may deem advisable; provided, however, that neither the Board
nor the Committee may delegate any of its responsibilities hereunder to any
person who is not both a "Non-Employee Director", as that term is defined in
subparagraph (b)(3)(i) of Rule 16b-3, and an "outside director", within the
meaning of Section 162(m) of the Code. The Board may also employ attorneys,
consultants, accountants or other professional advisors and shall be entitled
reasonably to rely upon the advice opinions or valuations of any such advisors.
3.3 LIABILITY; INDEMNIFICATION
No member of the Board or the Committee, nor any person to whom
ministerial duties have been delegated, shall be personally liable for any
action, interpretation or determination made with respect to the Plan or Awards
made thereunder, and each member of the Board and Committee shall be fully
indemnified, held harmless and protected by Aqua-Chem with respect to any
liability he or she may incur with respect to any such action, interpretation or
determination, to the extent permitted by applicable law and, in addition, to
the extent provided in Aqua-Chem's articles of incorporation and by-laws, as
amended from time to time, or under any agreement between any such member and
Aqua-Chem.
ARTICLE IV
MISCELLANEOUS
4.1 STATUS OF PARTICIPANTS
Selection to be a Participant in the Plan does not confer upon any
Participant any right to continued employment with Aqua-Chem or any of its
subsidiaries or any right to receive any additional future Awards under the
Plan.
4.2 UNFUNDED STATUS OF PLAN
The Plan is an unfunded non-qualified deferred compensation plan for
those employees of Aqua-Chem who, in the sole and absolute discretion of the
Board, are selected to be Participants. Phantom Shares are only a vehicle for
measuring the amount to be paid to each Participant in the Plan. The Plan does
not involve the actual ownership of any stock of Aqua-Chem and shall not confer
upon any Participant any right to acquire or own any actual shares of Aqua-Chem
stock or any rights as a stockholder of Aqua-Chem The status of a Participant,
as to any and all amounts due under the Plan, shall be that of a general
unsecured creditor.
4.3 TAX WITHHOLDING
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EXHIBIT 10.12
Any and all amounts payable to Participants under the Plan shall be
subject to reduction for such withholding as may, from time to time, be required
under any applicable federal, state or local laws.
4.4 SUCCESSORS
The obligations of Aqua-Chem under the Plan shall be binding upon any
successor corporation or organization resulting from the merger, consolidation
or other reorganization of Aqua-Chem, or upon any successor corporation or
organization succeeding to all or substantially all of the assets and business
of Aqua-Chem. In the event of any of the foregoing, the Board may, in its
discretion prior to the consummation of the transaction and in accordance with
Sections 2.4 and 3.1 hereof, exchange, adjust or modify any outstanding Awards,
in such manner as the Board deems appropriate and in accordance with applicable
law.
4.5 NOTICES
Notices required or permitted to be given under the Plan shall be
sufficiently given if in writing and personally delivered to a Participant or
sent by regular mail addressed: to a Participant at the Participant's address as
set forth in the books and records of Aqua-Chem or its subsidiaries or
affiliates, or to Aqua-Chem or the Board at the principal office of Aqua-Chem
clearly marked "Attention: Board of Directors - Compensation Committee."
4.6 SEVERABILITY
In the event that any provision of the Plan shall be held illegal or
invalid for any reason, such illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.
4.7 GOVERNING LAW
To the extent not preempted by Federal law, the Plan, and all
agreements hereunder, shall be construed in accordance with and governed by the
laws of the State of Wisconsin.
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