CH2M HILL Companies, Ltd. Amended and Restated Executive Officers Long Term Incentive Plan Amended and Restated on May 8, 2008 to be Effective as of January 1,2005
Exhibit 10.1
CH2M HILL Companies, Ltd.
Amended and Restated
Executive Officers Long Term Incentive Plan
Amended and Restated on May 8, 2008
to be Effective as of January 1, 2005
CH2M HILL Companies, Ltd.
Executive Officers Long Term Incentive Plan
ARTICLE I
INTRODUCTION
1.1 Establishment. CH2M HILL Companies, Ltd., an Oregon corporation, hereby amends and restates the CH2M HILL Companies, Ltd. Executive Officers Long Term Incentive Plan to award incentive compensation to eligible Participants.
1.2 Purposes. The purposes of the Plan are to:
· Reward a limited group of Executive Officers for the creation of value in the organization through the achievement of established goals such as sustained increases in CH2M HILL’s Available Funds, share price appreciation and other established financial and strategic goals; and
· Provide financial incentives to Plan Participants to incentivize their contribution to the annual and long-term financial performance of CH2M HILL, thereby increasing shareholder value; and
· Provide Plan Participants an opportunity to earn market-competitive compensation and to enable CH2M HILL to motivate and retain its senior Executive Officers.
ARTICLE II
DEFINITIONS
2.1 Affiliate means any corporation or other entity that is affiliated with CH2M HILL through stock or other equity ownership or otherwise which is designated by either the Committee or the Board as an entity whose eligible Executive Officers may be selected to participate in the Plan. The Committee may select an entity to be designated as an Affiliate if LTD owns directly or indirectly at least 50% of the entity. The Board, in its sole discretion, may select an entity to be designated as an Affiliate if LTD owns directly or indirectly at least 10% of the entity.
2.2 Available Funds means those LTD level consolidated funds remaining from gross revenue after all normally accrued operating expenses are deducted (including LTD expenses and any Profit Center operating costs for units in a startup or investing mode), but prior to accruals for incentive compensation programs, retained earnings and income taxes.
2.3 Award means a pre-established, performance-based grant payable in Stock Instruments and/or cash under the Plan, which is intended to satisfy the performance-based goal requirements of Code § 162(m).
2.4 Board means the LTD Board of Directors.
2.5 CEO means Chief Executive Officer of CH2M HILL Companies, Ltd.
2.6 CH2M HILL means CH2M HILL family of companies, which includes CH2M HILL Companies, Ltd., and, when appropriate, the Affiliates.
2.7 Change of Control. For purposes of the Plan, a Change of Control will occur if any one of the following events occurs:
a. Any one person, or more than one person acting as a group, acquires ownership of stock of CH2M HILL Companies, Ltd. that, together with stock held by such person or group, constitutes more than 50% of the total Fair Market Value of CH2M HILL Companies, Ltd. stock. If any one person or more than one person acting as a group, however, owns more than 50% of the total Fair Market Value of CH2M HILL Companies, Ltd. stock, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of CH2M HILL Companies, Ltd. (or to cause a change in the effective control of CH2M HILL Companies, Ltd.).
b. There is a change in the effective control of CH2M HILL Companies, Ltd. A change in the effective control of CH2M HILL Companies, Ltd. occurs on the date that either:
(i) any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of CH2M HILL Companies, Ltd. that represents 30% or more of the total voting power of CH2M HILL Companies, Ltd. stock; or
(ii) a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election.
c. Any one person, or more than one person acting as a group, acquires ownership of all or substantially all of the assets of CH2M HILL Companies, Ltd.
d. The stockholders of CH2M HILL Companies, Ltd. approve a plan of liquidation or dissolution of CH2M HILL Companies, Ltd. and such transaction is consummated.
For purposes of the definition in this Section 2.7 Persons Acting as a Group means persons will not be considered to be acting as a group solely because they purchased stock of LTD at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the corporation. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting
as a group with other shareholders in a corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.
For the avoidance of doubt, this Section shall be interpreted in accordance with Treasury guidance for the definition of Change in Control under Code § 409A.
2.8 Code means the Internal Revenue Code of 1986, as amended.
2.9 Committee means a committee appointed by the Board consisting solely of two or more outside directors (within the meaning of Code § 162(m)(4)(C)(i)) empowered to take actions with respect to the administration of the Plan as described in Article V.
2.10 Competitor means any corporation or other entity that is engaged in any business in which CH2M HILL is actively engaged, as described in the CH2M HILL’s most recent (at the relevant time) Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission; and/or any business the entry into which is contemplated by CH2M HILL at the time the Participant separates from service.
2.11 “Disabled” or “Disability” shall mean that the participant either
a. Is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or
b. Is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the participant’s employer.
For the avoidance of doubt, this Section shall be interpreted in accordance with Treasury guidance for the definition of Disability under Code § 409A.
2.12 Effective Date means the effective date of the Plan, which is January 1, 2005.
2.13 Executive Officer means each of members of the CH2M HILL executive leadership team, including the CEO and any employee who is an officer of LTD and whose total compensation for the taxable year is required to be reported to shareholders under the Securities Exchange Act of 1934 because the employee is one of the four highest compensated officers for the taxable year (other than the CEO).
2.14 Fair Market Value means the value of CH2M HILL, denominated in United States dollars, as determined by the Board in a manner that is not inconsistent with Code § 409A.
2.15 Full Service Revenue means revenue generated by CH2M HILL from work outside CH2M HILL’s traditional consulting engineering business, primarily integrated project delivery (design/build), operations and maintenance (O&M), remediation, and construction work.
2.16 Global Revenue means revenue generated by CH2M HILL from clients located and work performed outside the North American continent.
2.17 LTD means CH2M HILL Companies, Ltd.
2.18 Participant means a current or former Executive Officer designated to be eligible to receive an Award under the Plan as provided in Section 3.1.
2.19 “Performance-Based Compensation” means compensation the entitlement to or amount of which is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least 12 consecutive months, as determined by the Committee in accordance with the Treasury Regulations.
2.20 Plan means the CH2M HILL Companies, Ltd. Executive Officers Long Term Incentive Plan.
2.21 Profit Center means any applicable operating unit of CH2M HILL, including but not limited to the holding company of CH2M HILL family of companies, LTD, and its subsidiary business units as designated from time to time by the Committee.
2.22 Program means each one-year, two-year, or three-year Plan cycle.
2.23 Program Period means (a) a period beginning on January 1st of each calendar year and ending 36 months thereafter (e.g., January 1, 2003 through December 31, 2005) for a three-year Program, (b) a period beginning on January 1st of each calendar year and ending 24 months thereafter (e.g., January 1, 2003 through December 31, 2004) for a two-year Program, and (c) a period beginning on January 1st of each calendar year and ending 12 months thereafter (e.g., January 1, 2003 through December 31, 2003) for a one-year Program. Each Award shall state the Program Period to which it applies.
2.24 Stock Instruments means the following instruments:
a. Stock for CH2M HILL Employees residing in the United States,
b. Stock, Phantom Stock, or International SVEUs (depending on instruments approved for distribution in the country of residency of the employee) for International Employees, or
c. Other instruments approved from time to time by the Board to use for incentive and compensation purposes.
For purposes of these definitions:
· Stock means one share of CH2M HILL common stock.
· International SVEU means one unit held in trust under the CH2M HILL Companies, Ltd. International Deferred Compensation Plan.
· Phantom Stock means a hypothetical interest in the value of one share, denominated in United States dollars, which is granted pursuant to the CH2M HILL Companies, Ltd. Phantom Stock Plan.
· International Employees means those employees who work for CH2M HILL and are not resident in the United States and whose regular workplace is outside of the United States, determined as of the time of the Award payout, except that International Employees shall exclude an individual who is a United States citizen employed by an Affiliate organized in the United States, regardless of where the individual performs services.
2.24 Target Bonus means the bonus amount established by the Committee under the Plan for Participants.
ARTICLE III
ELIGIBILITY
3.1 Eligibility for Plan Participation. The Committee, in its sole discretion, shall determine which Executive Officers shall be eligible to participate in the Plan for any Program Period.
3.2 No Entitlement. Eligibility to participate in the Plan in any one Program Period does not create any entitlement to participate in any other Program Period.
ARTICLE IV
AWARDS
4.1 Award. Within 90 days of the beginning of each Program Period, as required by the Code, the Committee in its sole discretion shall establish performance goals and Awards and notify Participants in writing. The Award notification shall include the length of the Program Period, a Participant’s Target Bonus for the Program Period, and one or more of the following performance goals:
a. Available Funds target to be achieved during the Program Period. The Committee, in its sole discretion, shall establish the Available Funds target for each Award. The Available Funds target may be identical for all Participants in a given Program Period.
b. Full Service Revenue target to be achieved during the Program Period. The Committee, in its sole discretion, shall establish the Full Service Revenue target for each Award. The Full Service Revenue target may be identical for all Participants in a given Program Period.
c. Global Revenue target to be achieved during the Program Period. The Committee, in its sole discretion, shall establish the Global Revenue target for each Award. The Global Revenue target may be identical for all Participants in a given Program Period.
d. Gross Margin Ratio target to be achieved during the Program Period. The Committee, in its sole discretion, shall establish the Gross Margin ratio target for each Award. The Gross Margin Ratio target may be identical for all Participants in a given Program Period.
e. Stock Price Appreciation target to be achieved during the Program Period. The Committee, in its sole discretion, shall establish the Stock Price Appreciation target for each Award. The Stock Price Appreciation target may be identical for all Participants in a given Program Period.
f. Return On Equity target to be achieved during the Program Period. The Committee, in its sole discretion, shall establish the Return on Equity target for each Award. The Return on Equity target may be identical for all Participants in a given Program Period.
g. Backlog target to be achieved during the Program Period. The Committee, in its sole discretion, shall establish the Backlog target for each Award. The Backlog target may be identical for all Participants in a given Program Period.
The cumulative effect of all these target factors and modifiers will generally not exceed two times Target Bonus as determined by the Committee, but will be within the discretion of the Committee to determine subject to provisions of Sec. 4.2 and 4.3 below with respect to compliance with the requirements of Code § 162(m).
4.2 Code § 162(m) Compliance. CH2M HILL intends that the Awards will satisfy the Performance-Based Compensation requirements of Code § 162(m) so that CH2M HILL may deduct any compensation paid under the Plan for federal income tax purposes without limitation under Code § 162(m). If any provision of this Plan or any Award would otherwise frustrate or conflict with such intent, that provision, to the extent possible, shall be interpreted and deemed amended so as to avoid such conflict.
4.3 Award Determination Process. As soon as practicable after the end of each Program Period, but no later than December 31st of the calendar year following the end of the Program Period, the Committee shall compare actual performance results against performance targets achieved during the Program Period and determine whether and to the extent the Participant actually achieved his/her performance goals for the Program Period. The amount payable under the Plan to a Participant, who has actually achieved his/her performance goals for a Program Period, shall be determined by the Committee in its sole discretion. All determinations by the Committee shall be made in the Committee’s sole discretion and shall be final and binding on all Participants. The Participant shall not be entitled to any compensation under the terms of the Award until the Committee certifies in writing that the Participant has met his/her specific performance goals and determines the amount of compensation payable under the Award. Award provisions shall not be modified or amended, however, if the modification or amendment would cause compensation payable pursuant to such Award to fail to constitute qualified Performance-Based Compensation under Code § 162(m).
4.4 Maximum Award Amount. Maximum Award payout for each Participant for any Program Period, shall not exceed $10,000,000 for that Program Period and may be adjusted to a lesser amount in the discretion of the Committee. The maximum payout for all Participants for any Program Period shall not exceed $45,000,000.
4.5 Payouts of Awards. The payment of Awards will be made as soon as practicable after the end of the Program Period when the Committee has determined Award payout amounts but no later than two and a half months following the end of the Program Period. Except as provided in Article VII, a Participant must be employed by CH2M HILL or an Affiliate as of the Award payout date to be eligible for the payout, but does not need to be a current Executive Officer for the entire Program Period or at the date of payment. Unless otherwise determined by the Committee in its sole discretion, all Awards will be paid 40% in cash and 60% in Stock Instruments based on Participant’s eligibility to hold specific Stock Instruments. To the extent an Award payout results in a Participant exceeding CH2M HILL ownership limitations pursuant to CH2M HILL’s Articles of Incorporation and Bylaws, the Award shall be paid out in cash.
4.6 Code § 409A Compliance. CH2M HILL intends that the Awards will satisfy the Performance-Based Compensation requirements of Code § 409A.
4.7 Non-Transferability of Awards. No Award shall be assignable or transferable.
4.8 Restrictions on Transfers of Instruments. All Stock Instruments transferred to a Participant in accordance with the Plan will be subject to the terms, conditions, and restrictions on CH2M HILL Stock set forth in CH2M HILL’s Articles of Incorporation and Bylaws, as amended from time to time, including: (i) restrictions that grant CH2M HILL the right to repurchase shares upon termination of the shareholder’s affiliation with CH2M HILL; (ii) restrictions that grant CH2M HILL a right of first refusal if the shareholder wishes to sell shares other than in the Internal Market; and (iii) restrictions that require the approval of CH2M HILL for any other sale of shares.
4.9 Withholding Requirement. All Awards are subject to withholding of all taxes, government mandated social benefit contributions, or other payments required to be withheld which are applicable to the Participants.
ARTICLE V
5.1 Committee. The Plan shall be administered by the Committee appointed by the Board. The Committee shall at all times consist solely of outside directors (within the meaning of Code § 162(m)(4)(C)(i)) and shall at all times have at least two members. The Board may from time to time remove members from or add members to the Committee, and vacancies on the Committee shall be filled by the Board. Members of the Committee may resign at any time upon written notice to the Board.
5.2 Committee Meetings and Actions. The Committee shall hold meetings at such times and places as it may determine. A majority of the members of the Committee shall constitute a quorum, and the acts of the majority of the members present at a meeting or a consent in writing signed by all members of the Committee shall be the acts of the Committee and shall be final, binding and conclusive upon all persons, including CH2M HILL, its shareholders, and all persons having any interest in Awards which may be or have been granted pursuant to the Plan. The
Chairman of the Committee, in his or her sole discretion, may delegate any or all of the responsibilities of the Committee to one or more Committee members, whose actions shall be deemed to be the acts of all of the members.
5.3 Powers of Committee. Except as otherwise provided elsewhere in this plan document, the Committee shall, in its sole discretion, determine the time at which Awards are to be made and paid-out, actual performance against targets for purposes of Award payout calculations, specific weighing of the components of Award payout calculations, and establish such other terms under the Plan as the Committee may deem necessary or desirable and consistent with the terms of the Plan. Except as otherwise provided elsewhere in this plan document, the Committee shall have the full and exclusive right to grant and determine terms and conditions of all Awards granted under the Plan. The Committee shall determine the form or forms of agreements with Participants that shall evidence the particular provisions, terms, and conditions, which need not be identical except as may be provided in the Plan. The Committee may from time to time adopt such rules and regulations for carrying out the purposes of the Plan as it may deem proper and in the best interests of CH2M HILL.
5.4 Interpretation of Plan. The determination of the Committee as to any disputed question arising under the Plan, including questions of construction and interpretation, shall be final, binding and conclusive upon all persons, including CH2M HILL, its shareholders, and all persons having any interest in Stock Instruments which may be or have been granted pursuant to the Plan.
5.5 Limitation of Liability and Indemnification.
a. No member of the Committee shall be liable for any action or determination made in good faith.
b. Each person who is or shall have been a member of the Committee or of the Board shall be indemnified and held harmless by CH2M HILL Companies, Ltd. against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid in settlement thereof, with CH2M HILL’s approval, or paid in satisfaction of a judgment in any such action, suit or proceeding against him, provided such person shall give CH2M HILL an opportunity, at its own expense, to handle and defend the same before undertaking to handle and defend it on such person’s own behalf.
ARTICLE VI
CHANGE IN CONTROL
Notwithstanding any requirements contained in this Plan or any Award grant, all outstanding Awards shall become immediately payable at two times the Target Bonus in cash upon the occurrence of a Change in Control event, and shall be paid to Participants no later than
the December 31st of the calendar year in which the Change in Control occurred, or the first date it is administratively feasible to make the payment, if later.
ARTICLE VII
TERMINATION OF AFFILIATION
7.1 Retirement. If a Participant separates from service, within the meaning of Code § 409A, (retires) after attainment of age 55 while holding Plan Awards, and provided that subsequent to such separation from service he/she does not affiliate with a Competitor (directly or indirectly as an employee, consultant, director, officer, or shareholder of more than 5% of equity), the Participant shall be entitled to the payouts of all outstanding Awards. Notwithstanding the foregoing, the payouts will be prorated to the actual period that the Participant actually worked for CH2M HILL in the year when the Award was made, if the Participant did not work for that entire year. The payout(s) will be made at the time each outstanding Award payout is due for each Program. It will be made 100% in cash and will be calculated prorata for the time that the Participant actually participated in each Program, based on the actual CH2M HILL Available Funds and/or other performance goals as of the end of each relevant Program Period.
7.2 Death. If a Participant dies while employed by CH2M HILL, payouts of all his/her outstanding Awards will be made prorata to the actual period worked for CH2M HILL during the first year of each outstanding Award Program to the personal representative of the Participant’s estate or the designated beneficiary or other person or persons who shall have acquired entitlement to earned benefits under the Plan by bequest or inheritance (hereafter, “Beneficiary”) as provided in Section 4.5 of the Plan. Such payout will be made 100% in cash and will be calculated prorata for the time that the Participant actually participated in each Program, based on hypothetical Available Funds and other performance goal levels for the not yet completed Program Periods, derived by assuming that Available Funds and other performance goals through the end of each Program Period for each outstanding Award, would be proportionate to the performance as of the time of death, including consideration of projected performance in out-years where appropriate. The Committee’s determination with respect to payout amounts based on the above criteria shall be final and binding on the Beneficiary.
7.3 Disability. Upon the Participant’s separation from service, within the meaning of Code § 409A, with CH2M HILL by reason of Disability, payouts of the Participant’s prorata share of all his/her outstanding Awards (based on the actual period worked for CH2M HILL during the first year of each outstanding Award Program) shall be made to the Participant as provided in Section 4.5 of this Plan. Such payout will be made 100% in cash and will be calculated prorata for the time that the Participant actually participated in each Program, based on hypothetical Available Funds and other performance goal levels for the not yet completed Program Periods, derived by assuming that Available Funds and other performance goals through the end of each Program Period for each outstanding Award, would be proportionate to the performance as of the time of termination, including consideration of projected performance in out-years where appropriate. The Committee’s determination with respect to payout amounts based on the above criteria shall be final and binding on the Participant.
7.4 Other Termination. Upon the Participant’s voluntary or involuntary separation from service (within the meaning of Code § 409A) with CH2M HILL (except as otherwise
provided in Article VI or in Sections 7.1, 7.2 and 7.3), all rights a Participant has under any outstanding and not yet paid Awards shall terminate.
ARTICLE VIII
REQUIREMENTS OF LAW
8.1 Requirements of Law. All Awards pursuant to the Plan shall be subject to all applicable laws, rules and regulations.
8.2 Governing Law. The Plan and all agreements under the Plan shall be construed in accordance with and governed by the laws of the State of Colorado, United States of America.
8.3 Governing Currency. The Plan and all agreements under the Plan shall be denominated in the currency of the United States of America.
ARTICLE IX
AMENDMENT, MODIFICATION AND TERMINATION
The Board may amend or modify any provision of the Plan at any time, except that no amendment or modification shall be effective without the approval of the stockholders of LTD if such approval is necessary to satisfy the requirements of Code § 162(m). The Board may suspend the granting of Awards under the Plan or terminate the Plan at any time.
The Board may determine that any Awards granted under the Plan shall be subject to additional and/or modified terms and conditions, and the terms of the Award shall be adjusted accordingly, as may be necessary to comply with or take account of any securities, exchange control, or taxation laws, regulations or practice of any territory which may have application to the relevant Participant.
ARTICLE X
MISCELLANEOUS
10.1 Gender and Number. Except when otherwise indicated by the context, the masculine gender shall also include the feminine gender, and the definition of any term herein in the singular shall also include the plural.
10.2 No Right to Continued Employment. Nothing contained in the Plan or in any Award granted under the Plan shall confer upon any Participant any right with respect to the continuation of the Participant’s employment by, or consulting relationship with, CH2M HILL and/or Affiliates, or interfere in any way with the right of CH2M HILL or Affiliates, subject to the terms of any separate employment agreement or other contract to the contrary, at any time to terminate such services or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of an award. Any Participant who leaves the employment of CH2M HILL shall not be entitled to any compensation for any loss of any right or any benefit or prospective right or benefit under this Plan which the Participant might otherwise have enjoyed whether such compensation is claimed by way of damages for wrongful dismissal or other breach of contract or by way of compensation for loss of office or otherwise.
CH2M HILL hereby agrees to the provisions of the Plan and in witness of its agreement, by its duly authorized officer has executed the Plan on the date written below.
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