FOSTER WHEELER LTD. OMNIBUS INCENTIVE PLAN
 
Notice of Employee Nonqualified Stock Option Grant
 
Participant Information
 
Pursuant to the attached Employee Nonqualified Stock Option Agreement, you,
Raymond J. Milchovich, have been granted a nonqualified stock option to purchase
shares of common stock, $.01 par value per share (a “Share”), of Foster Wheeler
Ltd., a Bermuda company (the “Company”) as follows:
 
Board Approval Date:
August 11, 2006
 
Date of Grant:
August 11, 2006
 
Exercise Price Per Share:
$43.47 per Common Share
 
Total Number of Shares Subject to this Option:
 
280,040 shares of common stock
 
Total Exercise Price:
$4,987,500
 
Type of Option:
Nonqualified Stock Option
 
Expiration Date:
August 11, 2016
 
Vesting Commencement Date:
August 11, 2006
 
Vesting/Exercise Schedule:
So long as you are continuously employed by the Company or any Affiliate, and
except as otherwise set forth in Section 5 of the Option Agreement, the Shares
underlying this Option shall vest and become exercisable in accordance with the
following schedule:
·  One-third of the Shares subject to the Option shall vest and become
exercisable on August 11, 2007;
 
·  Another one-third of the Shares subject to the Option shall vest and become
exercisable on August 11, 2008; and
 
·  The remaining one-third of the Shares subject to the Option shall vest and
become exercisable on August 11, 2009.
 
Termination Period:
Following your termination of employment with the Company and all its
Affiliates, the Option may be exercised, but only as to Shares that were vested
on the date of such termination, through the Expiration Date set forth above.
The Option may terminate as of an earlier date in connection with certain events
as set forth in the Plan and in Section 5 of the Option Agreement.
 
You are responsible for keeping track of the periods during which the Option may
be exercised, including those periods that apply following your termination of
employment with the Company and all its Affiliates for any reason. The Company
will not provide further notice of such exercise periods.
 
Transferability:
Unless otherwise provided in the Option Agreement or the Plan, this Option may
not be transferred.
 

 
 

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By your signature and the signature of the Company’s representative below, you
and the Company agree that this Option is granted under and governed by the
terms and conditions of the Foster Wheeler Ltd. Omnibus Incentive Plan and the
Employee Nonqualified Stock Option Agreement, both of which are attached and
made a part of this document.

In addition, you agree and acknowledge that your rights to any Shares underlying
the Option vest only as you provide services to the Company or its Affiliates
over time, that the grant of the Option is not as consideration for services you
rendered to the Company or its Affiliates prior to your Vesting Commencement
Date, and that nothing in this Notice or the attached documents confers upon you
any right to continue your employment relationship with the Company or its
Affiliates for any period of time, nor does it interfere in any way with your
right or the Company’s (or its Affiliates’) right to terminate that relationship
at any time, for any reason, with or without cause.
 
 
 
 
 
__________________________________
Raymond J. Milchovich
 
FOSTER WHEELER LTD.
 
 
_______________________________
By: Joseph J. Melone
Its:  Deputy Chairman
 

 

 
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FOSTER WHEELER LTD. OMNIBUS INCENTIVE PLAN
 
Employee Nonqualified Stock Option Agreement
 
1.  Grant of Option. Foster Wheeler Ltd., a Bermuda company (the “Company”),
hereby grants to Raymond J. Milchovich (“Optionee”), an option (the “Option”) to
purchase the total number of shares of common stock (the “Shares”) subject to
the Option, set forth in the Notice of Stock Option Grant (the “Notice”), at the
exercise price per Share set forth in the Notice (the “Exercise Price”), subject
to the terms, definitions and provisions of the Foster Wheeler Ltd. Omnibus
Incentive Plan (the “Plan”) adopted by the Company, which is incorporated in
this Agreement by reference. Unless otherwise defined in this Agreement, the
terms used in this Agreement shall have the meanings defined in the Plan;
provided, however, that the term “Shares” as defined above shall be interpreted
to refer to the specific number of shares set forth in the Notice but shall
otherwise have the meaning set forth in Section 2(ww) of the Plan. This Employee
Nonqualified Stock Option Agreement shall be deemed executed by the Company and
Optionee upon execution by such parties of the Notice.
 
2.  Designation of Option. This Option is intended to be a Nonqualified Stock
Option (as defined in Section 2(bb) of the Plan).
 
3.  Exercise of Option. This Option shall be exercisable during its term in
accordance with the Vesting/Exercise Schedule set out in the Notice and with the
provisions of Section 5 of the Plan as follows:
 
(a)  Right to Exercise.
 
(i)  This Option may not be exercised for a fraction of a share of common stock.
 
(ii)  In the event of Optionee’s death, Disability (as defined in Section 4.2
and Section 4.3 of his Employment Agreement with the Company, dated August 11,
2006), Retirement (as defined in Section 2(vv) of the Plan), or other
termination of employment, the exercisability of the Option is governed by
Section 5 below, subject to the limitations contained in this Section 3.
 
(iii)  In no event may this Option be exercised after the Expiration Date of the
Option as set forth in the Notice.
 
(b)  Method of Exercise.
 
(i)  This Option shall be exercisable by delivering to the Company a written
Notice of Exercise (containing the information described in Exhibit A hereto, in
the form attached as Exhibit A, or in any other form acceptable to the
Committee) which shall state Optionee’s election to exercise the Option, the
number of Shares in respect of which the Option is being exercised, and such
other representations and agreements as to the holder’s investment intent with
respect to such Shares as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by Optionee and
shall be delivered to the Company by such means as are determined by the
Committee in its discretion to constitute adequate delivery. The written notice
shall be accompanied by payment of the Exercise Price. This Option shall be
deemed to be exercised upon receipt by the Company of such written notice
accompanied by payment of the Exercise Price.
 
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(ii)  As a condition to the exercise of this Option and as further set forth in
Article 20 of the Plan, Optionee agrees to make adequate provision for federal,
state or other tax withholding obligations, if any, which arise upon the vesting
or exercise of the Option, or disposition of Shares, whether by withholding,
direct payment to the Company, or otherwise. If Optionee fails to satisfy such
obligations in this regard, the Company may require that the Shares otherwise
scheduled to become vested on any given date be forfeited.
 
(iii)  The Company is not obligated, and will have no liability for failure, to
issue or deliver or repurchase any Shares upon exercise of the Option unless
such issuance or delivery or repurchase would comply with the Applicable Laws
(as defined in Section 2(c) of the Plan), with such compliance determined by the
Company in consultation with its legal counsel. This Option may not be exercised
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 221 of Title 12 of the Code of Federal Regulations as promulgated by the
Federal Reserve Board, or other Applicable Laws. As a condition to the exercise
of this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by the Applicable Laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to Optionee on the date on which the Option is exercised with respect to such
Shares. The Company may postpone issuing and delivering any Shares for so long
as the Company reasonably determines to be necessary to satisfy the following:
 
 
(A) its completing or amending any securities registration or qualification of
the Shares or its or the Optionee’s satisfying any exemption from registration
under any federal or state law, rule, or regulation;
 
 
(B) its receiving proof it considers satisfactory that a person seeking to
exercise the Option after the Optionee’s death is entitled to do so;
 
 
(C) the Optionee complying with any requests for representations under the Plan;
 
 
(D) the Optionee complying with any federal, state, or local tax withholding
obligations; and
 
 
(E) its compliance with the restrictions of Code Section 409A to the extent
applicable, including any final regulations issued pursuant thereto, including
the Committee’s right to amend any provision of this Option Agreement, to the
extent necessary to comply with Code Section 409A.
 

4.  Method of Payment. Payment of the Exercise Price (in US dollars) shall be by
any of the following, or a combination of the following, at the election of
Optionee:
 
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(a)  cash or check; or
 
(b)  be tendering (either by actual delivery or attestation) to the Company for
repurchase previously acquired Shares having an aggregate Fair Market Value (as
defined in Section 2(u) of the Plan) at the time of exercise equal to the
Exercise Price together with an assignment of the proceeds of the Share
repurchase to pay the Exercise Price (provided, however, that such Shares
tendered must have been held by the Optionee for at least six (6) months prior
to their tender if acquired under this Plan or any other compensation plan
maintained by the Company or such Shares must have been purchased on the open
market and further provided that any repurchase of Shares shall be subject to
the Companies Act of 1981 of Bermuda) prior to their tender;
 
(c)  through a same-day sale/cashless brokered exercise program, delivery of a
properly executed exercise notice together with irrevocable instructions to a
broker acceptable to the Company to execute such instructions, in such form and
manner as the Company may from time to time require; or
 
(d)  a combination of paragraphs (a), (b) and (c) immediately above.
 
5.  Termination of Relationship; Vesting Acceleration on Certain Events.
Following the date of the Optionee’s termination of employment for any reason
(the “Termination Date”), Optionee may exercise the Option only as set forth in
the Notice and this Section 5. If Optionee does not exercise this Option as to
vested Shares prior to the Expiration Date of the Option as set forth in the
Notice, the Option shall terminate in its entirety. In no event, may the Option
be exercised as to any Shares after the Expiration Date of the Option as set
forth in the Notice.
 
(a)  Termination as a Result of Death or Disability. In the event of the
Optionee’s termination of employment for death or Disability (as defined in
Section 4.2 and Section 4.3 of his Employment Agreement with the Company, dated
August 11, 2006), any unvested Shares under the Option shall immediately become
fully vested and exercisable and all remaining Shares subject to the Option
shall remain exercisable until the earlier of:

(i)  the Expiration Date; or
 
(ii)  the two (2) year anniversary of the day the Optionee terminates employment
or service due to death or Disability.
 
In the event of the Optionee’s death, the Optionee’s beneficiary or estate may
exercise the vested Shares under the Option.

(b)  Termination as a Result of Involuntary Termination or Voluntary Termination
for Good Reason. In the event of the Optionee’s termination of employment as a
result of his Involuntary Termination (as defined in Section 2(aa) of the Plan)
or his voluntary termination for Good Reason (as defined in Section 4.5 of his
Employment Agreement with the Company, dated August 11, 2006), any unvested
Shares under the Option shall immediately become fully vested and exercisable
and all remaining Shares subject to the Option shall remain exercisable until
the earlier of:

(i)  the Expiration Date; or
 
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(ii)  the two (2) year anniversary of the day the Optionee terminates employment
or service due to Involuntary Termination or voluntary termination for Good
Reason.
 
(c)  Termination as a Result of Retirement. In the event of the Optionee’s
termination of employment as a result of his Retirement (as defined in Section
2(vv) of the Plan), the vesting of the Option shall accelerate such that
Optionee shall be vested in and able to exercise the Option as of the
Termination Date as to that number of Shares subject to the Option that equals
the product of:
 
(i)  the total number of Shares subject to the Option, times
 
(ii)  a ratio, the numerator of which is the total number of months of
employment from the date the Option was granted to the end of the month in which
the Termination Date occurs, and the denominator of which is the total number of
months in the vesting schedule as set forth in the Notice of Grant.
 
All vested Shares subject to the Option (including those Shares under the Option
which become immediately vested and exercisable pursuant to this paragraph (c))
shall remain exercisable until the earlier of:

(A)  the Expiration Date; or

(B)  the thirty-sixth (36) month anniversary of the day the Optionee terminates
employment due to Retirement.

The unvested portion of the Option shall be immediately forfeited.

(d)  Termination for Cause. In the event the Optionee’s employment is terminated
for Cause (as defined in Section 4.4 of his Employment Agreement with the
Company, dated August 11, 2006):
 
(i)  any unvested Shares under the Option shall expire immediately, be forfeited
and considered null and void; and
 
(ii)  any vested Shares under the Option shall remain exercisable until the
earlier of:
 
(A) the Expiration Date; or
 
(B) the date which is ninety (90) days following such date of termination for
Cause.
 
(e)  Termination -- General. In the event of the Optionee’s termination of
employment other than as a result of his death, Disability (as defined in
Section 4.2 and Section 4.3 of his Employment Agreement with the Company, dated
August 11, 2006), Involuntary Termination (as defined in Section 2(aa) of the
Plan), voluntary termination for Good Reason (as defined in Section 4.5 of his
Employment Agreement with the Company, dated August 11, 2006), Retirement (as
defined in Section 2(vv) of the Plan) or Cause (as defined in Section 4.4 of his
Employment Agreement with the Company, dated August 11, 2006), Optionee may, to
the extent he is otherwise vested in the Option at the Termination Date,
exercise such Options and such Options shall remain exercisable until the
earlier of:

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(i)  the Expiration Date; or
 
(ii)  the date which is ninety (90) days following such Termination Date.
 
The unvested portion of the Option shall be immediately forfeited.

(f)  Change in Control Acceleration. In the event of a Change in Control (as
defined in Section 4.6.2 of his Employment Agreement with the Company, dated
August 11, 2006) which closes on a date prior to the Optionee’s termination of
employment, any unvested Shares under the Option shall immediately become fully
vested and exercisable and all remaining Shares subject to the Option shall
remain exercisable through their Expiration Date, effective as of immediately
prior to consummation of the Change in Control.
 
6.  Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by him. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of Optionee.
 
7.  Changes in Company’s Capital Structure. Subject to any required action by
the Company’s Board and stockholders, as may be determined to be appropriate and
equitable by the Committee, to prevent dilution or enlargement of rights, the
Committee may:
 
(a)  adjust proportionately the number of Shares covered by the Option and the
Exercise Price for any increase or decrease in the number of issued and
outstanding shares of common stock resulting from a subdivision or combination
of such shares or the payment of a stock dividend or any other increase or
decrease in the number of such outstanding shares of common stock of the Company
effected without the receipt of consideration by the Company; and
 
(b)  if the Company is a participating corporation in any merger or
consolidation and provided the Option is not terminated upon consummation of
such merger or consolidation, modify such Option to pertain to and apply to the
securities or other property to which a holder of the number of shares subject
to the unexercised portion of this Option would have been entitled upon such
consummation.
 
Notwithstanding anything to the contrary, such adjustments by the Committee
shall be final, binding and conclusive.  
 
8.  Tax Consequences. Below is a brief summary as of the date of this Option of
certain United States federal tax consequences of exercise of this nonstatutory
stock option and disposition of the Shares under the laws in effect as of the
Date of Grant. THIS SUMMARY IS INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS
OPTION OR DISPOSING OF THE SHARES. There may be a regular federal (and state)
income tax liability upon your exercise the Option. You will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price. If you are an Employee (as defined in Section
2(s) of the Plan), the Company will be required to withhold from your
compensation or collect from you and pay to the applicable taxing authorities an
amount of income and employment taxes equal to a percentage of this compensation
income at the time of exercise. If Shares issued upon exercise of this Option
are held for at least one year, any gain realized on disposition of those Shares
will be treated as long-term capital gain for federal income tax purposes. You
are obligated as a condition of exercise of this Option to satisfy any
applicable withholding obligations that apply thereto.
 
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9.  Effect of Agreement. Optionee acknowledges receipt of a copy of the Plan and
represents that he or she is familiar with the terms and provisions thereof (and
has had an opportunity to consult counsel regarding the Option terms), and
hereby accepts this Option and agrees to be bound by its contractual terms as
set forth herein and in the Plan. Optionee hereby agrees to accept as binding,
conclusive and final all decisions and interpretations of the Committee (as
defined in Section 2(s) of the Plan) regarding any questions relating to the
Option. In the event of a conflict between the terms and provisions of the Plan
and the terms and provisions of the Notice and this Agreement, the Plan terms
and provisions shall prevail; provided, however, in accordance with Section
3.3.2 of your Employment Agreement with the Company, dated August 11, 2006, in
the event of any inconsistency between this Agreement, the Plan and the terms of
your Employment Agreement with the Company, dated August 11, 2006, your
Employment Agreement with the Company, dated August 11, 2006, shall govern and
control.
 
10.  Governing Law. The laws of the state of New Jersey, without giving effect
to principles of conflicts of law, will apply to the Plan, to the Option and the
Option Agreement (including the Notice). The Company agrees, and Optionee agrees
as a condition to acceptance of the Option, to submit to the jurisdiction of the
courts located in the jurisdiction in which the Optionee is employed, or was
most recently employed, by the Company.
 
11.  Severability. In the event that any provision of this Option Agreement
shall be held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of this Option Agreement, and this Option
Agreement shall be construed and enforced as if the illegal or invalid provision
had not been included.
 
12.  Waiver; Cumulative Rights. The failure or delay of either party to require
performance by the other party of any provision hereof shall not affect its
right to require performance of such provision unless and until such performance
has been waived in writing. Each and every right hereunder is cumulative and may
be exercised in part or in whole from time to time.
 
13.  Representations. As a condition to your receipt of this Option, you
represent and warrant the following:
 
(a)  You are aware of the Company’s business affairs and financial condition and
have acquired sufficient information about the Company to reach an informed and
knowledgeable decision to accept this Option;
 
(b)  You are acquiring the Option and the Shares subject thereto for investment
only for your own account, and not with a view, or for resale in connection
with, any “distribution” thereof under Applicable Law (as defined in Section
2(c) of the Plan);
 
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(c)  You understand that neither Option nor the Shares have been registered in
all State jurisdictions within the United States, and that the exemption(s) from
registration relied upon may depend upon your investment intent as set forth
above;
 
(d)  You further understand that prior to any resale by you of the Shares
acquired upon exercise of this Option without registration of such resale in
relevant State jurisdictions, the Company may require you to furnish the Company
with an opinion of counsel acceptable to the Company that you may sell or
transfer such Shares pursuant to an available exemption under Applicable Law;
 
(e)  You understand that the Company is under no obligation to assist you in
this process by registering the Shares in any jurisdiction or by ensuring that
an exemption from registration is available; and
 
(f)  You further agree that as a condition to exercise of this Option, the
Company may require you to furnish contemporaneously dated representations
similar to those set forth in this Section 13.
 

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EXHIBIT A
 
FOSTER WHEELER LTD. OMNIBUS INCENTIVE PLAN
 
Employee’s Notice of Exercise
 
To:
Attn:
Subject:
 
Foster Wheeler Ltd.
Stock Option Administrator
Notice of Intention to Exercise Stock Option

  
This is official notice that the undersigned (“Optionee”) intends to exercise
Optionee’s option to purchase _________ Common Shares of Foster Wheeler Ltd.,
under and pursuant to the Company’s Omnibus Incentive Plan and the Option
Agreement dated _____________________:
 
Date of Purchase:
 
 
Number of Shares:
 
 
Exercise Price:
 
 
Method of Payment of Purchase Price:
 
 
Social Security Number:
 
 

 
The Shares should be issued as follows:
 
Name:
 
 
Address:
 
 
Signed:
 
 
Date:
 
 

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