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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 205491
SCHEDULE 14A
Proxy Statement Pursuant to Section(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) of the Securities
Exchange Act ofOF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No.(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_][ ]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
McDERMOTT
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MC DERMOTT INTERNATIONAL, INC.
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(Name of Registrant as Specified Inin Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other thanOther Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_][ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set(Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_]-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[_][ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Formform or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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Notes:-----------------------------------------------------------------------
McDermott2
[McDermott International, Inc. -------------------------------------------------------------------
[LOGO OF J. RAY McDERMOTT, S.A. APPEARS HERE]logo]
MCDERMOTT INTERNATIONAL, INC.
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R. E. Tetrault 1450 Poydras Street
Chairman of the Board and P.O. Box 61961
Chief Executive Officer New Orleans, Louisiana, 70161-1961
June 29, 1999
March 30, 2000
Dear Shareholder:
Last year, we changed our March 31 fiscal year end to a December 31 fiscal
year end. Consequently, this year's Annual Meeting of Shareholders will be held
earlier in the year than in the past. You are cordially invited to the Company's Annual Meeting of Shareholders toattend this
year's meeting, which will be held on Tuesday, August 3, 1999,May 2, 2000, in the La SalleGrand
Ballroom D and E of the Sheraton New Orleans Hotel, Inter-Continental, 444 St. Charles Avenue,500 Canal Street, New
Orleans, Louisiana, commencing at 9:30 a.m. local time. The Noticenotice of Annual Meetingannual
meeting and Proxy Statementproxy statement following this letter describe the matters to be
acted uponon at the meeting.
If your shares are held of record with First Chicago Trust Division of
EquiServe, the Company'sour transfer agent and registrar, we have enclosed a proxy card has been
enclosed for
your use. You may vote these shares by completing and returning the proxy card,
or alternatively, calling a toll-free telephone number or using the Internet as
described on the proxy card. If your shares are held by a broker or other
nominee (i.e., in "street name"), they have enclosed a voting instruction form,
which you should use to vote thesethose shares. Whether you have the option to vote
thesethose shares by telephone or via the Internet is indicated on the voting
instruction form.
Your vote is important. Whether or not you plan to attend the meeting,
please take a few minutes now to vote your shares. If you attend the meeting,
you may change your vote at that time.
Thank you for your interest in our Company.
Sincerely yours,
/s/ R. E. Tetrault
R. E.R.E. TATRAULT
R.E. TETRAULT
3
McDERMOTT INTERNATIONAL, INC.
1450 Poydras StreetPOYDRAS STREET
P.O. BoxBOX 61961
New Orleans, LouisianaNEW ORLEANS, LOUISIANA 70161-1961
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Notice of 1999 Annual Meeting of Shareholders
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NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
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The 19992000 Annual Meeting of the Shareholders of McDermott International,
Inc., a Panama corporation (the "Company"), will be held in the La SalleGrand Ballroom D
and E of the Sheraton New Orleans Hotel Inter-Continental at 444 St. Charles Avenue,500 Canal Street, New Orleans,
Louisiana, on Tuesday, August 3, 1999,May 2, 2000, at 9:30 a.m. local time, for the following
purposes:
1. To elect three Directors;
2. To approve an amendment to the Company's 1996 Officer Long-Term
Incentive Plan increasing the numberselection of shares authorized for issuance
under the plan from 2,500,000 to 4,000,000;
3. To reapprove the Company's 1994 Variable Supplemental Compensation Plan
for tax deductibility reasons;
4. To retain PricewaterhouseCoopers LLP as the Company'sour
independent accountants for the upcoming fiscal year;year ending December 31, 2000; and
5.3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
If you were a shareholder as of the close of business on June 24, 1999,March 23, 2000,
you are entitled to vote at the meeting and at any adjournmentsadjournment thereof.
Please indicate your vote as to the matters to be acted upon at the meeting
by following the instructions provided in the enclosed proxy card or voting
instruction form, whether or not you plan on attending the meeting. If you
attend the meeting, you may change your vote at that time.PLEASE INDICATE YOUR VOTE AS TO THE MATTERS TO BE ACTED ON AT THE MEETING
BY FOLLOWING THE INSTRUCTIONS PROVIDED IN THE ENCLOSED PROXY CARD OR VOTING
INSTRUCTION FORM, WHETHER OR NOT YOU PLAN ON ATTENDING THE MEETING. IF YOU
ATTEND THE MEETING, YOU MAY CHANGE YOUR VOTE AT THAT TIME.
We have enclosed a copy of our report to shareholders for the Company'snine-month
period ended December 31, 1999 Annual Report to Shareholders with this Noticenotice and Proxy Statement.proxy statement.
By Order of the Board of Directors,
/s/ S. Wayne Murphy
S. WAYNE MURPHYJOHN T NESSER III
JOHN T. NESSER, III
Secretary
Dated: June 29, 1999March 30, 2000
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PROXY STATEMENT FOR 19992000 ANNUAL
MEETING OF SHAREHOLDERS
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TABLE OF CONTENTS
PagePAGE
----
General Information.......................................................Information......................................... 1
Voting Information........................................................Information.......................................... 1
Record Date and Who May Vote............................................Vote.............................. 1
How to Vote.............................................................Vote............................................... 1
How to Change Your Vote.................................................Vote................................... 2
Quorum..................................................................Quorum.................................................... 2
Proposals to be Voted on; Vote Required and How Votes are
Counted.......Counted................................................ 2
Confidential Voting.....................................................Voting....................................... 3
Election of Directors (Item 1)............................................ 3.............................. 4
Board of Directors and its Committees...................................Committees..................... 6
Directors' Attendance and Compensation.................................. 6Compensation.................... 7
Executive Officers........................................................ 8Officers.......................................... 9
Security Ownership of Directors and Executive Officers.................... 9Officers...... 10
Security Ownership of Certain Beneficial Owners...........................Owners............. 11
Report on Executive Compensation..........................................Compensation............................ 12
Performance Graph......................................................... 17Graph........................................... 16
Compensation of Executive Officers........................................ 18Officers.......................... 17
Summary Compensation Table.............................................. 18
Option Grant Table...................................................... 20Table................................ 17
Option Exercises and Year-EndPeriod End Value Table............................... 21
Performance Stock Awards................................................ 22
Tetrault Employment Agreement........................................... 22Table............... 19
Retirement Plans........................................................ 23
Amendment to the Company's 1996 Officer Long-Term Incentive Plan (Item 2). 25
ReapprovalPlans.......................................... 19
Approval of the Company's 1994 Variable Supplemental Compensation Plan
(Item 3)................................................................. 29
RetentionSelection of Independent Accountants (Item 4)............................. 302)... 21
Certain Transactions...................................................... 30Transactions........................................ 21
Compliance with Section 16(a) of the Securities Exchange Act
of 1934...... 311934................................................... 22
Shareholders' Proposals................................................... 31Proposals..................................... 22
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GENERAL INFORMATION
We are mailing this proxy statement and accompanying proxy card to our
shareholders beginning on June 29, 1999. The Company'sMarch 30, 2000. Our Board of Directors is soliciting
your proxy to vote your shares at the Company's 1999our Annual Meeting.Meeting to be held on May 2, 2000.
We will bear all expenses incurred in connection with this proxy solicitation,
which is expectedwe expect to beconduct primarily by mail. We have engaged Morrow & Co., Inc.
to assist in the solicitation for a fee of $7,000, plus out-of-pocket expenses.
In addition to solicitation by mail and by Morrow & Co., our officers and
regular employees may solicit your proxy by telephone, by facsimile transmission
or in person, for which they will not be compensated. If your shares are held
through a broker or other nominee (i.e., in "street name"), we have requested
that they forward this proxy statement to you and obtain your voting
instructions, for which we will reimburse them for reasonable out-of-pocket
expenses. If your shares are held through The Thrift Plan for Employees of
McDermott Incorporated and Participating Subsidiary and Affiliated Companies
(the "McDermott Thrift Plan") or The Thrift Plan for Salaried Employees of
Babcock & Wilcox Canada, the trustees of those plans have sent you this proxy
statement and a voting instruction form with which you may direct them on how to
vote your plan shares.
VOTING INFORMATION
Record Date and Who May Vote
The Company'sRECORD DATE AND WHO MAY VOTE
Our Board of Directors selected June 24, 1999March 23, 2000 as the record date (the
"Record Date") for determining shareholders entitled to vote at the Annual
Meeting. This means that if you were a registered shareholder with the
Company'sour transfer
agent and registrar--Firstregistrar -- First Chicago Trust Division of EquiServe--onEquiServe -- on the
Record Date, you may vote your shares on the matters to be considered by the Company'sour
shareholders at the Annual Meeting. If your shares were held in street name on
that date, the broker or other nominee that was the record holder of your shares
has the authority to vote them at the Annual Meeting. They have forwarded to you
this proxy statement seeking your instruction on how you want your shares voted.
On the Record Date, 59,324,44059,948,132 shares of the Company'sour Common Stock were outstanding.
Each outstanding share of Common Stock entitles its holder to one vote on each
matter that is consideredto be acted on at the meeting. McDermott Incorporated, a subsidiary of
the Company,ours, owned 100,000 shares of our Common Stock on the Record Date, but has advised the Company that it will not
vote itits shares at the Annual Meeting.
How to VoteHOW TO VOTE
You can vote yoursyour shares in person at the Annual Meeting or vote now by
giving us your proxy. By giving us your proxy, you will be directing us on how
to vote your shares at the meeting. Even if you plan on attending the meeting,
we urge you to vote now by giving us your proxy. This will ensure that your vote
is represented at the meeting. If you do attend the meeting, you can change your
vote at that time. If your shares are held in street name, the broker or nominee
that holds your shares has the authority to vote them and has enclosed a voting
instruction form with this proxy statement. They will vote your shares as you
direct on their voting instruction form. You can vote by completing the enclosed
proxy card or voting instruction form and returning it in the enclosed U.S.
postage prepaid envelope. If your shares are held in street name and you want to
vote your shares in person at the Annual Meeting, you must obtain a legal proxy
from your broker or nominee.
If your shares are held of record, you also will be able to give your proxy
by calling a toll-free telephone number or using the Internet--24Internet -- 24 hours a day,
seven days a week. If your shares are held in street name, the availability of
telephone or Internet voting depends on the voting process used by the broker or
nominee that holds your shares. In either case, you should refer to the
instructions provided in the enclosed proxy card or voting instruction form.
Telephone and Internet voting procedures have been designed to verify your
identity through a PINpersonal identification or control number and to confirm that
your voting instructions have been properly recorded. If you vote using either
of these electronic means, you will save the Companyus return mail expense.
1
You will receive more than one proxy statement and proxy card or voting
instruction form if your shares are held through more than one account (i.e.,
through different names or different brokers or nominees). Each
1
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proxy card or voting instruction form only covers those shares of Common Stock
held in the applicable account. If you hold shares in more than one account, you
will have to provide voting instructions as to all your accounts to vote all of
your shares.
How to Change Your VoteHOW TO CHANGE YOUR VOTE
You may change your proxy voting instructions at any time prior to
theshareholder vote at the Annual Meeting. For shares held of record, you may
change your vote by written notice to the Company'sour Corporate Secretary, granting a new
proxy or by voting in person at the Annual Meeting. Unless you attend the
meeting and vote your shares in person, you should change your vote using the
same method (by telephone, Internet or mail) that you first used to vote your
shares. That way, the inspectors of election for the meeting will be able to
verify your latest vote.
For shares held in street name, you should follow the instructions in the
voting instruction form provided by your broker or nominee to change your vote.
If you want to change your vote as to shares held in street name by voting in
person at the Annual Meeting, you must obtain a legal proxy from the broker or
nominee that holds such shares for you.
QuorumQUORUM
The Annual Meeting will be held only if a quorum exists. The presence at
the meeting, in person or by proxy, of holders of a majority of the Company'sour outstanding
shares of Common Stock as of the Record Date will constitute a quorum. If you
attend the meeting or vote your shares using the enclosed proxy card or voting
instruction form (including any telephone or Internet voting procedures
provided), your shares will be counted toward a quorum, even if you abstain from
voting. Broker non-votes (i.e., shares held by brokers and other nominees as to
which they have not received voting instructions from the beneficial owners and
lack the discretionary authority to vote on a particular matter) also will count
for quorum purposes.
Proposals to be Voted on; Vote Required and How VotesPROPOSALS TO BE VOTED ON; VOTE REQUIRED AND HOW VOTES ARE COUNTED
We are Counted
You are being askedasking you to vote on the following:
.- the election of Joe B. Foster, Kathryn D. SullivanRobert L. Howard, Roger E. Tetrault and Richard E.
WoolbertJohn N. Turner to
Class IIIII of the Company'sour Board of Directors, with a term expiring at the Company'sour Annual
Meeting in 2002;
. an amendment to2003; and
- the Company's 1996 Officer Long-Term Incentive Plan to
increase the numberapproval of shares authorized for issuance under such plan
from 2,500,000 to 4,000,000;
. the reapproval of the Company's 1994 Variable Supplemental Compensation
Plan for tax deductibility reasons; and
. the retentionour selection of PricewaterhouseCoopers LLP
("PricewaterhouseCoopers") as the Company'sour independent accountants for the upcoming fiscal
year.year ending December 31, 2000.
Each proposal, including the election of directors, requires the
affirmative vote of a majority of the shares of Common Stock present, in person
or by proxy, at the Annual Meeting and entitled to vote on the matter. In the
election of directors, you may vote "FOR" all director nominees, "AGAINST" all
director nominees or withhold your vote for any one or more of the director
nominees. For eachthe other proposal, you may vote "FOR" or "AGAINST" or abstain
from voting. Because abstentions are counted for purposes of determining whether
a quorum is present but are not affirmative votes for a proposal, they have the
same effect as an "AGAINST" vote. Your shares will be voted as you direct,
including abstentions.
2
If you submit a signed proxy card without specifying your vote, your shares
will be voted "FOR" the election of all director nominees and "FOR" eachthe selection of
the three other proposals described above.PricewaterhouseCoopers as our independent accountants. If you hold your shares
in street name and you do not instruct your broker or nominee how to vote yoursuch
shares, held in street name, they may vote your shares as they decide as to matters which they have discretionary voting
authority under New York Stock Exchange rules. Shares held by a broker or
other nominee as to which they have not received voting instructions from the
beneficial owners and lack the discretionary authority to vote on a particular
matter are called "broker non-votes". While broker non-votes will be counted
toward a quorum, theydecide.
We are not entitled to vote on, or considered present for
purposes of, the matter for which the broker or nominee lacks the authority to
vote. Therefore, they will have no effect on the vote on any such matter.
We do not knowaware of any other matters tothat may be presented or acted uponon at
the meeting. If you vote by signing and returning the enclosed proxy card or
using its telephone or Internet voting procedures, the individuals named as
proxies on the card may vote your shares, in their discretion, on any other
matter requiring a shareholder vote that comes before the meeting.
Confidential Voting2
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CONFIDENTIAL VOTING
All voted proxies and ballots will be handled to protect shareholderyour voting
privacy. No suchprivacy as a shareholder. Your vote will not be disclosed except:
.- to meet any legal requirements;
.- in limited circumstances such as a proxy contest in opposition to the
Company'sour
Board of Directors;
.- to permit independent inspectors of election to tabulate and certify theyour
vote; or
.- to adequately respond to shareholders who haveyour written comments on theiryour proxy cards.card.
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ELECTION OF DIRECTORS
(ITEM 1)
The Company'sOur Articles of Incorporation provide for the classification of theour Board
of Directors into three classes, as nearly equal in number as possible, with the
term of office for each class expiring on the date of the third annual
shareholders' meeting for the election of directors following the most recent
election of directors for such class.
The term of office of the Company'sour Class IIIII Directors -- Robert L. Howard, Roger E.
Tetrault and John N. Turner -- will expire at this year's Annual Meeting. In February 1999,On the
Company adopted anomination of our Board of Directors, Messrs. Howard, Tetrault and Turner will
stand for re-election as Class III Directors at this year's Annual Meeting.
Although Mr. Turner has reached the mandatory retirement age of 70 for directors
subjectunder our by-laws, on the recommendation of our Directors Nominating &
Governance Committee, this limitation has been waived by our Board Directors as
to any currentMr. Turner's continued service as a Company director being able
to serve out his remaining term of office. Under this new policy, Theodore H.
Black and William McCollam, Class II Directors of the Company, must retire
from the Board and will not stand for re-election at this year's Annual
Meeting. In anticipation of Messrs. Black's and McCollam's retirement, Kathryn
D. Sullivan and Joe B. Foster were recently appointed to the Company's Board.
Upon the nomination of the Board of Directors, Ms. Sullivan and Messrs.
Woolbert and Foster will stand for election as Class II Directors at this
year's Annual Meeting.an additional
three-year term. If elected, each of Ms. SullivanMessrs. Howard, Tetrault and Messrs. Woolbert
and FosterTurner will
hold office until the Company'sour Annual Meeting in 20022003 and a successor is elected and
qualified.
Unless otherwise directed, the persons named as proxies in the enclosed
proxy card intend to vote "FOR" the election of the nominees. If any nominee
should become unavailable for election, the shares will be voted for such
substitute nominee as may be proposed by theour Board of Directors. However, nowe are
not aware of any circumstances are now known that would prevent any of the nominees from
serving. Set forth below under "Class I Directors" and "Class IIIII Directors" are
the names of theour other directors of the Company currently in office.directors. Class I Directors will continue to serve until
the Company'sour Annual Meeting of Shareholders in 2001, and Class IIIII Directors will continue
to serve until the
Company'sour Annual Meeting of Shareholders in 2000.2002. All directors have
been previously elected by the shareholders or are standing for election as
directors at this year's Annual Meeting.
3
shareholders.
Set forth below is certain information (ages as of August 3, 1999)May 2, 2000) with
respect to each nominee for election as a director and each director of the
Company.
Class II Director
Nominees Age Since
-------- --- --------
Kathryn D. Sullivan ................................. 47 1999
President and Chief Executive Officer of the Ohio
Center for Science and Industry since 1996. Prior
thereto, she was Chief Scientist for the National
[PHOTO] Oceanic & Atmospheric Administration from 1992 to 1996
and a NASA space shuttle astronaut from 1978 to 1992.
Ms. Sullivan is also a director of American Electric
Power Company, Inc.
Richard E. Woolbert.................................. 65 1996
Until his retirement in January 1999, he was Executive
Vice President and Chief Administrative Officer of the
Company and its majority owned subsidiary, J. Ray
[PHOTO] McDermott, S.A. ("J. Ray McDermott"), from February
1995. Previously, Mr. Woolbert was Senior Vice
President and Chief Administrative Officer of the
Company from August 1991. He is also a director of J.
Ray McDermott.
Joe B. Foster ....................................... 65 1999
Chairman of the Board and Chief Executive Officer of
Newfield Exploration Company (oil and gas exploration)
since 1989. He was Executive Vice President of Tenneco
[PHOTO] Inc. from 1981 to 1988 and a director of Tenneco Inc.
from 1983 to 1988. Mr. Foster is Chairman of the
National Petroleum Council and a member of the Offshore
Committee of the Independent Petroleum Association of
America. Mr. Foster is also a director of New Jersey
Resources Corporation and Baker Hughes Incorporated.
Class I
Directors
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Philip J. Burguieres................................. 55 1990
Chief Executive Officer of EMC Holdings, LLC, and Vice
Chairman, The McNair Group. Formerly, he served as
Chairman of the Board of Weatherford International,
[PHOTO] Inc. (a diversified international energy services and
manufacturing company) from December 1992 to May 1998
and as its President and Chief Executive Officer from
April 1991 to October 1996. He is also a director of
Weatherford International, Inc., Chase Bank of Texas,
N.A., Denali Incorporated and Newfield Exploration
Company.
DIRECTOR
NAME AND PRINCIPAL OCCUPATION AGE SINCE
----------------------------- --- --------
CLASS III NOMINEES
Robert L. Howard................................... 63 1997
[Photo of Robert L.
Howard] Until his retirement in March 1995, he was Vice President
Domestic Operations, Exploration and Production, of Shell
Oil Company and President of Shell Western Exploration
and Production Inc. from 1992, and President of Shell
Offshore, Inc. from 1985. He is also a director of
Southwestern Energy Company and Ocean Energy, Inc.
Roger E. Tetrault.................................. 58 1997
[Photo of Roger E.
Tetrault] Chairman of the Board since June 1997 and Chief Executive
Officer and a director of the Company since March 1997.
Formerly, Mr. Tetrault was a Senior Vice President of
General Dynamics Corporation (a supplier of weapons
systems and services to the U.S. government and its
allies) and President of its Land Systems Division from
April 1993; Vice President of General Dynamics
Corporation and President of its Electric Boat Division
from August 1992 until April 1993; Vice President and
General Manager of General Dynamics Corporation's
Electric Boat Division from August 1991 until August
1992; and prior to that, he served as a Vice President
and Group Executive of the Company's subsidiary The
Babcock & Wilcox Company from 1990.
4
Director
Age Since
--- --------
Bruce DeMars......................................... 64 1997
Partner in the Trident Merchant Group. Admiral, United
States Navy (retired). From 1988 until his retirement
from the Navy in October 1996, he was Director, Naval
[PHOTO] Nuclear Propulsion, a joint Department of the
Navy/Department of Energy program responsible for the
design, construction, maintenance, operation and final
disposal of reactor plants for the United States Navy.
He is also a director of Unicom Corporation and
Commonwealth Edison Corporation.
John W. Johnstone, Jr................................ 66 1995
Until his retirement in May 1996, he was Chairman of
the Board from 1988 and Chief Executive Officer from
1987 of Olin Corporation (a manufacturer and supplier
[PHOTO] of chemicals, metals, defense related9
DIRECTOR
NAME AND PRINCIPAL OCCUPATION AGE SINCE
----------------------------- --- --------
John N. Turner...................................... 70 1993
[Photo of John N.
Turner] Partner, Miller Thomson (barristers & solicitors),
Toronto, Canada since 1990. Prior thereto, he was Prime
Minister of Canada and then Leader of Opposition of the
Parliament of Canada from 1984 to 1990. He is also a
director of E-L Financial Corporation, The Loewen Group
Inc. and Nexfor Inc.
CLASS I DIRECTORS
Philip J. Burguieres................................ 56 1990
[Photo of Philip J.
Burguieres] Chief Executive Officer of EMC Holdings, LLC, and Vice
Chairman, The McNair Group. Formerly, he served as
Chairman of the Board of Weatherford International, Inc.
(a diversified international energy services and
manufacturing company) from December 1992 to May 1998 and
as its President and Chief Executive Officer from April
1991 to October 1996. He is also a director of
Weatherford International, Inc., Chase Bank of Texas,
N.A., Denali Incorporated and Newfield Exploration
Company.
Bruce DeMars........................................ 64 1997
[Photo of Bruce
DeMars] Partner in the Trident Merchant Group. Admiral, United
States Navy (retired). From 1988 until his retirement
from the Navy in October 1996, he was Director, Naval
Nuclear Propulsion, a joint Department of the Navy/
Department of Energy program responsible for the design,
construction, maintenance, operation and final disposal
of reactor plants for the United States Navy. He is also
a director of Unicom Corporation and Commonwealth Edison
Corporation.
John W. Johnstone, Jr. ............................. 67 1995
[Photo of John W.
Johnstone, Jr.] Until his retirement in May 1996, he was Chairman of the
Board from 1988 and Chief Executive Officer from 1987 of
Olin Corporation (a manufacturer and supplier of
chemicals, metals, defense-related products and services,
and ammunition). He is also a director of Fortune Brands,
Inc., Phoenix Home Mutual Life Insurance Company and Arch
Chemicals, Inc.
Class III
Directors
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Robert L. Howard..................................... 63 1997
Until his retirement in March 1995, he was Vice
President Domestic Operations, Exploration and
Production, of Shell Oil Company and President of Shell
[PHOTO] Western Exploration and Production Inc. from 1992, and
President of Shell Offshore, Inc. from 1985. He is also
a director of J. Ray McDermott, Southwestern Energy
Company and Ocean Energy, Inc.
Roger E. Tetrault.................................... 57 1997
Chairman of the Board since June 1997 and Chief
Executive Officer since March 1997 of the Company and
J. Ray McDermott. Formerly, Mr. Tetrault was a Senior
[PHOTO] Vice President of General Dynamics Corporation (a
supplier of weapons systems and services to the U.S.
government and its allies) and President of its Land
Systems Division from April 1993; Vice President of
General Dynamics Corporation and President of its
Electric Boat Division from August 1992 until April
1993; Vice President and General Manager of General
Dynamics Corporation's Electric Boat Division from
August 1991 until August 1992; and prior to that, he
served as a Vice President and Group Executive of the
Company's Babcock & Wilcox subsidiary from 1990.
John N. Turner....................................... 70 1993
Partner, Miller Thomson (barristers & solicitors),
Toronto, Canada since 1990. Prior thereto, he was
[PHOTO] Leader of Opposition of the Parliament of Canada from
1984. He is also a director of E-L Financial
Corporation, The Loewen Group Inc., Noranda Forest Inc.
and Triple Crown Electronics, Inc.
5
10
DIRECTOR
NAME AND PRINCIPAL OCCUPATION AGE SINCE
----------------------------- --- --------
CLASS II DIRECTORS
Kathryn D. Sullivan................................. 48 1999
[Photo of Kathryn
D. Sullivan] President and Chief Executive Officer of the Ohio Center
for Science and Industry since 1996. Prior thereto, she
was Chief Scientist for the National Oceanic &
Atmospheric Administration from 1992 to 1996 and a NASA
space shuttle astronaut from 1978 to 1992. Dr. Sullivan
is also a director of American Electric Power Company,
Inc.
Richard E. Woolbert................................. 66 1996
[Photo of Richard
E. Woolbert] Until his retirement in January 1999, he was Executive
Vice President and Chief Administrative Officer of the
Company from February 1995. Previously, Mr. Woolbert was
Senior Vice President and Chief Administrative Officer of
the Company from August 1991.
Joe B. Foster....................................... 65 1999
[Photo of Joe B.
Foster] Interim Chairman of the Board, President and Chief
Executive Officer of Baker Hughes Incorporated (oilfield
services) since January 31, 2000. He is also the
non-executive Chairman of the Board of Newfield
Exploration Company (oil and gas exploration). From
January 1989 to January 31, 2000, Mr. Foster was the
Chairman of the Board and Chief Executive Officer of
Newfield Exploration Company. He was also Executive Vice
President of Tenneco Inc. from 1981 to 1988 and a
director of Tenneco Inc. from 1983 to 1988. Mr. Foster is
the immediate past Chairman of the National Petroleum
Council and a member of the Offshore Committee of the
Independent Petroleum Association of America. Mr. Foster
is also a director of New Jersey Resources Corporation.
BOARD OF DIRECTORS AND ITS COMMITTEES
Our Board of Directors and its Committees
The Board of Directors of the Company maintains the following committees:
Audit Committee. TheOur Audit Committee is currently composed of Messrs.
McCollamTurner (Chairman), Burguieres, and Howard and Turner and Ms.Dr. Sullivan. During the Company's fiscal yearnine-month period
ended MarchDecember 31, 1999, ("fiscal year 1999"), the Audit Committee met fourthree times. The functions of
the Audit Committee currently include (i)(1) reviewing the accounting principles
and practices employed by the Companywe employ and, to the extent the Audit Committee deems
appropriate, employed by the Company's
subsidiaries; (ii)our subsidiaries, (2) meeting with the Company'sour independent
accountants to review their report on their examination of the Company'sour accounts, their
comments on theour internal controls of the Company and the actions taken by our management with
regard to such comments; (iii)those comments, (3) approving professional services, including
non-audit services, rendered by suchour independent accountants;accountants, and (iv)(4)
recommending annually to the Board of Directors the appointment of the Company'sour
independent accountants.
The Securities and Exchange Commission ("SEC") and the New York Stock
Exchange recently adopted new rules relating to audit committee duties,
responsibilities and independence for publicly traded companies. We have
reviewed and are currently updating our Audit Committee charter to comply with
these new rules beginning with the first quarter of fiscal year 2000.
6
11
Directors Nominating & Governance Committee. TheOur Directors Nominating &
Governance Committee is currently composed of Messrs. Burguieres (Chairman),
BlackFoster and Johnstone.Woolbert. During fiscal yearthe nine-month period ended December 31, 1999, the
Directors Nominating & Governance Committee met threetwo times. The function of suchThis committee
isrecommends to recommend to the Company'sour Board of Directors (i)(1) for approval and adoption, the
qualifications, term limits and nomination and election procedures relating to
the Company'sour directors, and (ii)(2) nominees for election to the
Company'sour Board of Directors.
Compensation Committee. TheOur Compensation Committee is currently composed of
Messrs. Howard (Chairman), DeMars and Johnstone.Johnstone and Dr. Sullivan. During fiscal yearthe
nine-month period ended December 31, 1999, the Compensation Committee met threesix
times. The Compensation Committee (i)(1) determines the salaries of all of the Company'sour
officers elected to their positions by theour Board of Directors, and also reviews and
makes recommendations regarding the salaries of officers of the Company's subsidiaries; (ii)our subsidiaries,
(2) administers and makes awards under the Company'sour stock incentive compensation and supplemental compensation
plans and programs, and (iii)(3) monitors and makes recommendations with respect to
the Company'sour and itsour subsidiaries' various employee benefit plans, such as retirement and
pension plans, thrift plans, health and medical plans, and life, accident and
disability insurance plans.
Special Committee. TheOur Special Committee is currently composed of Messrs.
TurnerDeMars (Chairman), DeMarsTurner and McCollam.Woolbert. The Special Committee oversees and
monitors the ongoing investigations by the Company, the U.S. Department of
Justice and the Securities and Exchange Commission ("SEC")SEC into alleged anti-
competitiveanti-competitive activity in the Company'sour marine
construction business, other possible violations of law and related matters. The
Special Committee also monitors the Company'sour overall compliance program.
Finance Committee. TheOur Finance Committee is currently composed of Messrs.
Johnstone (Chairman), Burguieres McCollam and DeMars.Foster. The Finance Committee reviews and
recommends for approval by the Board the Company'sour strategic business and financial
initiatives, including the Company's recent acquisition
of substantially all of the publicly-held shares of J. Ray McDermott Common
Stock ("JRM Common Stock") through a cash tender offer of $35.62 per share. It
is anticipated that all such remaining shares of JRM Common Stock will be
acquired by the Company at the same cash consideration through a second-step
merger between J. Ray McDermott and a wholly owned subsidiary of the Company
(the "Merger") prior to the Annual Meeting.
Directors' Attendance and Compensationinitiatives.
DIRECTORS' ATTENDANCE AND COMPENSATION
Directors' Attendance and Fees; Insurance. During fiscal yearthe nine-month period
ended December 31, 1999, the
Company'sour Board of Directors held eightfive meetings. Each
incumbent director attended 75% or more of the aggregate number of meetings of
the Board and of the committees on which he served. Employee directors are not
paid for their services as a director or as a member of any committee of the
Board. All other directors are compensated as follows:
.- an annual stipend of $28,000, plus a fee of $2,500 for each Board meeting
attended;
.- a fee of $1,000 for each telephonic Board meeting in which such director
participates;
6
.- the Chairman of the Audit Committee receives an annual fee of $3,000;
.- each other member of the Audit Committee receives an annual fee of
$2,000;
.- the ChairmenChairman of theeach other committees of the Board eachcommittee receives an annual fee of
$2,500;
.- each other member of the other Board committees receives an annual fee of
$1,750; and
.- each committee member also receives a fee of $1,650 for each committee
meeting attended and a fee of $1,000 for each telephonic committee
meeting in which such director participates.
The CompanyWe also providesprovide travel accident insurance and health care benefits to
non-employee directors under the same terms and conditions applicable to
employees.
DirectorDirectors Stock Program. The Company hasPlan. In addition to the fees and benefits provided to our
directors described above, we have a 1997 Director Stock Program,directors stock plan under which is administered by a committee comprised of those members of the Board of
Directors that are employees of the Company. Under the program, this committee
maywe grant to non-employee directors
stock options and rights to purchaseissue restricted stock in an aggregateto our non-employee directors. A
maximum of up to 100,000 shares of our Common Stock.
Pursuant toStock may be issued under this plan,
which we adopted and our shareholders approved in 1997. Under the program:
.directors
stock plan:
- each eligiblenon-employee director is granted options to purchase 900, 300 and
300 shares of our Common Stock on the first day of the first, second and
third years, respectively, of such director's term;
.7
12
- the options are granted at the fair market value of theour Common Stock
(average of high and low trading price) on the date of grant, become
exercisable in full six months after the date of grant, and remain
exercisable for ten years and one day after the date of grant;
.- each eligiblenon-employee director also is granted rights to purchase 450, 150
and 150 restricted shares of our Common Stock on the first day of the
first, second and third years, respectively, of such director's term at
$1.00 per share;
.- shares of restricted stock are subject to transfer restrictions and
forfeiture provisions, which generally lapse at the end of a director's
term;
. in the event of- if a change in control of the Company occurs, all suchtransfer restrictions
and forfeiture provisions on restricted stock lapse and all outstanding
stock options become immediately exercisable; and
. during fiscal year- for the nine-month period ended December 31, 1999, we granted 4,250
options to acquire 4,050 shares of Common Stock were granted, and 2,0252,125 shares of restricted stock were issued, under the
1997 Director Stock Program.
Termination of Retirement Plan for Non-Management Directors. In February
1998, the Company terminated its Retirement Plan for Non-Management Directors.
In connection with such plan termination, during fiscal years 1998 and 1999,
Messrs. Black, Burguieres, DeMars, Howard, Johnstone, McCollam and Turner
received 8,970, 10,475, 1,945, 1,945, 5,005, 14,250 and 8,185 shares of Common
Stock, respectively, to compensate them for the accrued value of their
retirement benefits, loss of future benefits, and taxes.
7stock.
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EXECUTIVE OFFICERS
Set forth below is the age (as of August 3, 1999)May 2, 2000), the principal positions
held with the Company andor certain subsidiaries, and certain other business
experience information for each of the Company'sour executive officers who areis not directorsa director
of the Company.
Daniel R. Gaubert, 50,51, Senior Vice President and Chief Financial Officer of
the Company since February 1997. Prior thereto, he was Vice President and Chief
Financial Officer of the Company from September 1996; Vice President, Finance
and Controller of the Company from February 1995; and Vice President and
Controller of the Company from February 1992.
Mr.
Gaubert has also been Senior Vice President and Chief Financial Officer of J.
Ray McDermott since August 1997, prior to which he was Vice President,
Finance, of J. Ray McDermott from August 1995 and Acting Controller of J. Ray
McDermott from February 1995.
S. Wayne Murphy, 64, Senior Vice President, General Counsel and Corporate
Secretary since February 1997. Prior thereto, he was Vice President, General
Counsel and Corporate Secretary from June 1996; Acting General Counsel and
Acting Corporate Secretary from February 1996; and Associate General Counsel
from August 1993. Mr. Murphy has also beenJohn T. Nesser, III, 51, Senior Vice President, General Counsel and
Corporate Secretary of J. Ray McDermottthe Company since August 1997,January 2000, prior to which he was
ActingVice President and Associate General Counsel from June 1999 and Acting Corporate SecretaryAssociate
General Counsel from October 1998. Prior thereto, he served as managing partner
of Nesser, King & LeBlanc, a New Orleans law firm, which he co-founded in 1985.
Robert H. Rawle, 52, President of the Company's subsidiary J. Ray
McDermott, from February 1996.
Robert H. Rawle, 51, President and Chief Operating Officer of S.A. ("J. Ray McDermottMcDermott") since January 1997. Previously, Mr. Rawlehe was Vice
President and Group Executive of J. Ray McDermott's North, Central and South
AmericanAmerica Operations from January 1996, prior to which, he was Vice President,
Domestic Operations, of J. Ray McDermott from January 1995. From March 1993 to
January 1995, he was Vice President of the Domestic Operations of the Company's
Marine Construction Services Division.
Mr. Rawle is also a director of J. Ray
McDermott.
E. Allen Womack, Jr., 56,57, President of the Company's subsidiaries BWX
Technologies, Inc. and McDermott Technology, Inc. and Chief Technical Officer.
He was also an Executive Vice President and President, BWX
Technologies, Industrial and Technical Group sinceof the Company from April 1998.1998 until
August 1999. Previously, he was Senior Vice President and Group Executive,
Industrial Group, from September 1996; Senior Vice President and Group
Executive, Shipbuilding and Industrial Group, from August 1995; and Senior Vice
President, Research and Development and Contract Research Divisions, of the Company'sThe
Babcock & Wilcox unitCompany from August 1991. He has also been the Company's Chief Technical Officer
since February 1993.
James F. Wood, 57,58, President of The Babcock & Wilcox Company. He was also
an Executive Vice President of the Company and President of the Companysits Babcock & Wilcox
Power Generation Group sincefrom October 1996 prior to which,until August 1999. Prior thereto, he
was Vice President and General Manager, Global Ventures and Power, of the
Babcock & Wilcox Power Generation Group from June 1996. From January 1989 until
January 1996, he was an officer of Wheelabrator Technologies, Inc. and certain
of its subsidiaries.
J. RodR. Woolsey, 51,52, Senior Vice President and Chief Administrative Officer
of the Company since January 1999. Previously, he was Vice President, Business
Venture Relations, of the Company from October 1997,1997; and Vice President and
General Manager, Nuclear Equipment Division, of the Company's Government Group
from 1990. He has also been the Company's Compliance Director since November
1997 and Senior Vice
President and Chief Administrative Officer of J. Ray McDermott since January
1999.
81997.
9
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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of June 15, 1999February 29, 2000 (except as
otherwise noted), the number of shares of our Common Stock beneficially owned by
each director or nominee as a director, each Named Executive Officer, as defined inwe
define that term below under the caption "COMPENSATION OF EXECUTIVE OFFICERS",OFFICERS,"
and all our directors and executive officers
of the Company as a group, including shares which
such persons have the right to acquire within 60 days pursuant toon the exercise of stock
options.
Shares
Beneficially
Name OwnedSHARES
BENEFICIALLY
NAME OWNED
- ---- ------------
Philip J. Burguieres(1)............................................ 28,550..................................... 29,000
Bruce DeMars(2).................................................... 4,270............................................. 4,736
Joe B. Foster(3)................................................... 2,025............................................ 3,425
Daniel R. Gaubert(4)............................................... 67,457........................................ 112,655
Robert L. Howard(5)................................................ 3,820......................................... 5,810
John W. Johnstone, Jr.(6).......................................... 8,605................................... 9,055
Robert H. Rawle(7)................................................. 18,658.......................................... 108,640
Kathryn D. Sullivan(8)............................................. 75...................................... 1,575
Roger E. Tetrault(9)............................................... 264,306........................................ 404,813
John N. Turner(10)................................................. 12,760.......................................... 13,210
E. Allen Womack, Jr.(11)........................................... 110,051.................................... 136,864
James F. Wood(12).................................................. 16,945........................................... 39,796
Richard E. Woolbert(13)............................................ 231,127..................................... 255,313
All directors and executive officers as a group (15
persons)....... 841,483.................................................. 1,184,438
- -----------------------
(1) Shares owned by Mr. Burguieres include 4,0504,350 shares of Common Stock that he
may be acquired uponacquire on the exercise of stock options as described above, and 600
restricted shares of Common Stock as to which he has sole voting power but
no dispositive power.
(2) Shares owned by Mr. DeMars include 1,850 shares of Common Stock that he may
acquire on the exercise of stock options as described above, and 600
restricted shares of Common Stock as to which he has sole voting power but
no dispositive power.
(3) Shares owned by Mr. Foster include 950 restricted shares of Common Stock
that he may acquire on the exercise of stock options as described above,
and 450 restricted shares of Common Stock as to which he has sole voting
power but no dispositive power.
(2)(4) Shares owned by Mr. DeMarsGaubert include 1,55088,842 shares of Common Stock that he
may be acquired uponacquire on the exercise of stock options as described above, and 14,385
restricted shares of Common Stock as to which he has sole voting power but
no dispositive power. Also includes 1,244 shares of Common Stock held in
the McDermott Thrift Plan as of December 31, 1999.
(5) Shares owned by Mr. Howard include 2,577 shares of Common Stock that he may
acquire on the exercise of stock options as described above, and 775
restricted shares of Common Stock as to which he has sole voting power but
no dispositive power.
(6) Shares owned by Mr. Johnstone include 2,700 shares of Common Stock that he
may acquire on the exercise of stock options as described above, and 600
restricted shares of Common Stock as to which he has sole voting power but
no dispositive power.
(7) Shares owned by Mr. Rawle include 72,765 shares of Common Stock that he may
acquire on the exercise of stock options as described above, and 26,481
restricted shares of Common Stock as to which he has sole voting power but
no dispositive power. Also includes 1,670 shares of Common Stock held in
the McDermott Thrift Plan as of December 31, 1999.
(8) Shares owned by Dr. Sullivan include 1,050 shares of Common Stock that she
may acquire on the exercise of stock options as described above, and 450
restricted shares of Common Stock as to which she has sole voting power but
no dispositive power.
10
15
(9) Shares owned by Mr. Tetrault include 320,596 shares of Common Stock that he
may acquire on the exercise of stock options as described above, and 33,122
restricted shares of Common Stock as to which he has sole voting power but
no dispositive power. Also includes 570 shares of Common Stock held in the
McDermott Thrift Plan as of December 31, 1999.
(10) Shares owned by Mr. Turner include 3,350 shares of Common Stock that he may
acquire on the exercise of stock options as described above, and 750
restricted shares of Common Stock as to which he has sole voting power but
no dispositive power.
(11) Shares owned by Mr. Womack include 97,600 shares of Common Stock that he
may acquire on the exercise of stock options as described above, and 15,445
restricted shares of Common Stock as to which he has sole voting power but
no dispositive power. Also includes 2,330 shares of Common Stock held in
the McDermott Thrift Plan as of December 31, 1999.
(12) Shares owned by Mr. Wood include 38,995 shares of Common Stock that he may
acquire on the exercise of stock options as described above. Also includes
776 shares of Common Stock held in the McDermott Thrift Plan as of December
31, 1999.
(13) Shares owned by Mr. Woolbert include 185,152 shares of Common Stock that he
may acquire on the exercise of stock options as described above, and 450
restricted shares of Common Stock as to which he has sole voting power but
no dispositive power. (3) Shares owned by Mr. Foster include 50 restrictedAlso includes 5 shares of Common Stock held in a
custodial account for an immediate family member under the Uniform Gifts to
Minors Act as to which he has sole voting power but no dispositive power.
(4) Shares owned by Mr. Gaubert include 50,424 shares of Common Stock that
may be acquired upon the exercise of stock options as described above,
and 10,345 restricted shares of Common Stock as to which he has sole
voting power but no dispositive power.Woolbert disclaims beneficial ownership. Also
includes 1,0231,779 shares of Common Stock held in the McDermott Thrift Plan as
of MarchDecember 31, 1999.
(5) Shares owned by Mr. Howard include 1,250 shares of Common Stock that may
be acquired upon the exercise of stock options as described above, and
625 restricted shares of Common Stock as to which he has sole voting
power but no dispositive power.
(6) Shares owned by Mr. Johnstone include 2,400 shares of Common Stock that
may be acquired upon the exercise of stock options as described above,
and 450 restricted shares of Common Stock as to which he has sole voting
power but no dispositive power.
(7) Shares owned by Mr. Rawle include 10,510 shares of Common Stock that may
be acquired upon the exercise of stock options as described above, and
1,920 restricted shares of Common Stock as to which he has sole voting
power but no dispositive power. Also includes 573 shares of Common Stock
held in the McDermott Thrift Plan as of March 31, 1999.
(8) The 75 shares owned by Ms. Sullivan are restricted Common Stock as to
which she has sole voting power but no dispositive power.
(9) Shares owned by Mr. Tetrault include 204,494 shares of Common Stock that
may be acquired upon the exercise of stock options as described above,
and 18,900 restricted shares of Common Stock as to which he has sole
voting power but no dispositive power. Also includes 387 shares of Common
Stock held in the McDermott Thrift Plan as of March 31, 1999.
9
(10) Shares owned by Mr. Turner include 3,050 shares of Common Stock that may
be acquired upon the exercise of stock options as described above, and
600 restricted shares of Common Stock as to which he has sole voting
power but no dispositive power.
(11) Shares owned by Mr. Womack include 110,051 shares of Common Stock that
may be acquired upon the exercise of stock options as described above,
and 19,410 restricted shares of Common Stock as to which he has sole
voting power but no dispositive power. Also includes 2,112 shares of
Common Stock held in the McDermott Thrift Plan as of March 31, 1999.
(12) Shares owned by Mr. Wood include 16,359 shares of Common Stock that may
be acquired upon the exercise of stock options as described above. Also
includes 561 shares of Common Stock held in the McDermott Thrift Plan as
of March 31, 1999.
(13) Shares owned by Mr. Woolbert include 28,990 shares of Common Stock that
may be acquired upon the exercise of stock options as described above.
Also includes 1,752 shares of Common Stock held in the McDermott Thrift
Plan as of March 31, 1999.
As of June 15, 1999, Messrs. Gaubert, Howard, Rawle, Tetrault and Woolbert
also beneficially owned 18,840, 1,200, 60,383, 80,493 and 30,550 shares,
respectively, of JRM Common Stock. With respect to the shares of JRM Common
Stock beneficially owned by Messrs. Gaubert, Howard, Rawle, Tetrault and
Woolbert, 16,800, 800, 55,083, 72,393 and 30,550 shares, respectively, may be
acquired upon the exercise of vested stock options or options that will vest
in connection with the Merger. With respect to Messrs. Gaubert, Howard, Rawle
and Tetrault, shares beneficially owned also include 2,040, 400, 5,300, and
8,100 shares, respectively, of restricted JRM Common Stock as to which such
individuals have sole voting power but no dispositive power. As of such date,
all directors and executive officers of the Company as a group beneficially
owned 203,606 shares of JRM Common Stock. Any options to acquire JRM Common
Stock remaining after the Merger will become vested options to acquire a
comparable amount of Common Stock. Each person who holds restricted shares of
JRM Common Stock will receive $35.62 in cash per share unless such person
makes a prior election to receive a replacement award of a comparable amount
of restricted Common Stock.
Shares beneficially owned in all cases constituted less than one percent of
the outstanding shares of the applicable security,our Common Stock, except that the 841,4831,184,438 shares of
Common Stock beneficially owned by all directors and executive officers as a
group constituted approximately 1.4%1.95% of the outstanding shares of our Common
Stock on June 15, 1999,February 29, 2000, less shares held by McDermott Incorporated, plus
those shares deemed to be outstanding pursuant to Rule 13d-3(d)(1) under the
Securities Exchange Act of 1934.
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table furnishes information concerning all persons known to
the Companyby
us to beneficially own 5% or more of theour outstanding shares of Common Stock,
which is theour only class of voting stock of the Company:stock:
Amount and
Nature of
Name and Address of Beneficial Beneficial Percent
Title of Class Owner Ownership of Class(1)AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS(1)
- -------------- ------------------------------------------------------------------ ---------- -----------
Common Stock......Stock.... The Prudential Insurance Company 8,542,744(2) 14.4%
of America 8,482,334(2) 14.2%
751 Broad Street
Newark, NJ 07102-3777
Common Stock...... FMR Corp. 6,668,294(3) 11.3%
82 DevonshireStock.... Wellington Management Company, LLP 3,242,500(3) 5.4%
75 State Street
Boston, MA 02109-3614
Common Stock...... Soros Fund Management LLC 6,362,200(4) 10.7%
George Soros
Stanley F. Druckenmiller
888 Seventh Avenue, 33rd Floor
New York, NY 10106
Duquesne Capital Management, L.L.C.
2579 Washington Road, Suite 322
Pittsburgh, PA 15241-259102109
- -----------------------
(1) Percent of class based uponon the outstanding shares of our Common Stock on
June
15, 1999,February 29, 2000, less shares held by McDermott Incorporated, plus those
shares deemed to be outstanding pursuant to Rule 13d-3(d)(1) under the
Securities Exchange Act of 1934.
(2) As reported on a Schedule 13G (Amendment No. 4)5) dated January 29, 1999.
Such filing indicates that (a) 13,800 shares of Common Stock are held by
Prudential Insurance Company of America for its own general account and
(b) 8,528,944 shares are held for the benefit of its clients through
various accounts, registered investment companies, subsidiaries and
affiliates.31, 2000.
(3) As reported on a Schedule 13G (Amendment No. 10) dated May 10,December 31, 1999. Such
filing indicates that all of these shares are beneficially owned through
two wholly-owned subsidiaries of FMR Corp. While FMR Corp. has sole
dispositive power over all 6,668,294 shares, it has sole voting power over
160,394 shares and no voting power over 6,507,900 shares. Such filing also
indicates that Edward C. Johnson 3d, Chairman of FMR Corp., and Abigail P.
Johnson, a director of FMR Corp., together with other family members, may
be deemed to beneficially own the same shares.
(4) As reported on a Schedule 13G dated February 12, 1999 jointly filed by
Soros Fund Management LLC ("SFM"), George Soros, Stanley Druckenmiller and
Duquesne Capital Management, L.L.C. ("DCM"). According to such filing, (a)
SFM is managed by a management committee comprised of, among others,
Messrs. Soros and Druckenmiller, and Mr. Soros is the Chairman and Mr.
Druckenmiller is the Lead Portfolio Manager of SFM; (b) SFM has sole
voting and dispositive power, and Mr. Soros has shared voting and
dispositive power by virtue of his positions with SFM, over 5,488,000
shares of Common Stock held for the account of Quantum Partners LDC
("Quantum"); (c) each of SFM and Mr. Soros may be deemed to be the
beneficial owner of the 5,488,000 shares of Common Stock held for the
account of Quantum; (d) DCM has sole voting and dispositive power over
874,200 shares of Common Stock held for the account of DCM's clients; (e)
Mr. Druckenmiller owns a 75% interest in, and is the sole managing member
of, DCM; (f) Mr. Druckenmiller may be deemed to be the beneficial owner of
all 6,362,200 shares of Common Stock (5,488,000 shares held by SFM as to
which he has shared voting and dispositive power by virtue of his position
with SFM, and 774,200 shares held by DCM as to which he has sole voting
and dispositive power by virtue of his relationship with DCM); and (g)
each of SFM and Mr. Soros disclaims beneficial ownership of the 774,200
shares held by DCM and DCM disclaims beneficial ownership of the 5,488,000
shares held by SFM.
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16
REPORT ON EXECUTIVE COMPENSATION
ToTO OUR SHAREHOLDERS
Our Shareholders
The Compensation Committee is comprised of threefour independent, non-employee
directors who have no "interlocking" relationships with the Company. The
Compensation Committee exists to develop executive compensation policies that
support the Company'sour strategic business objectives and values. The duties of this
committee include:
. Review- Reviewing and approval ofapproving the design of our executive compensation programs
and all salary arrangements that Companyour executives receive;
. Assessment of- Assessing the effectiveness of theour executive compensation programs in
light of our compensation policies; and
. Evaluation of- Evaluating executive performance.
Compensation PhilosophyCOMPENSATION PHILOSOPHY
The Compensation Committee adheres to an executive compensation philosophy
that supports the Company's business strategies. These strategies are to:
.- Maximize profits;
.- Increase shareholder value;
.- Strengthen cash flow;
.- Be the high tech, low costhigh-tech, low-cost provider of products and services within our
markets; and
.- Pursue internal and external initiatives for growth.
The Compensation Committee's philosophy for executive compensation is to:
.- Emphasize at-risk compensation, while balancing short-term and long-term
compensation to support the Company's business and financial strategic
goals;
.- Reflect positive, as well as negative, Company and individual performance
in pay;
.- Emphasize equity-based compensation and maintain Common Stock ownership
requirements for Company executives to reinforce
our management's focus on shareholder value; and
.- Provide competitive pay opportunities that will attract, retain and
develop executive talent.
ExecutivesOur executives participate in a comprehensive compensation program that is built
around this four-pronged philosophy. The key components of this program include
base salary, annual bonus opportunities, long-term equity-based incentives
(stock options and performance stock awards of restricted shares) and benefits.
Each of these components is reviewed by the Compensation Committee as
previously described. To ensure the Company's pay isthat our executive compensation levels are comparable to median
market practices, competitive market data is collected from multiple external
sources. The data is collected both on an industry-specific basis and an overall
industrial basis. The industry-specific comparison is collected using a group of
companies that have national and international business operations and similar sales
volumes, market capitalizations, employment levels and one or more lines of
business.business that are similar to ours. The Compensation Committee reviews and
approves the selection of companies used for this purpose and attempts to mirror the peerpurpose. This comparison group
reflected in the performance graph. These comparison groups, however, are not
identical because the market data used by the Company is much more broad-based than the companies included in the peer group reflected in
the performance graph peer group.included in this proxy statement. This market information,
which is reviewed annually by the Compensation Committee reviews annually, is used for assessing all
components of executives' pay.
In October 1998, the Company retained the Hay Group to perform a
comprehensive study of the Company's compensation practices. The purpose of
the study was to measure the competitiveness of the Company's
12
our executive compensation program against ten companies within a similar
industry.program. In connection with our annual
review, we utilized the services of The study addressed base salary, bonus, short-term and long-term
incentives and benefits. As a result of the study, certain adjustments were
made to specific components of the Company'sHay Consulting Group, an executive
compensation programconsulting firm to more closely reflect the market with respect to these peer group companies.provide an independent overcheck of our own
analysis. The Compensation Committee believes that, in the aggregate, the Company'staken as a whole, our
executive compensation program as adjusted, is competitive within the
Company's industry.our industries.
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When setting compensation levels, the Compensation Committee considers each
component of an executive's pay. Certain quantitative formulas have been adopted
for individual compensation plans. The Compensation Committee uses a combination
of the results of the performance-based compensation determiners
(mathematical formulas)formulas and discretion,
depending on the particular component involved. Each component of the Company'sour executive
compensation program is discussed in greater detail below.
Base SalaryBASE SALARY
Generally, salaries reflect an individual's level of responsibility, prior
experience, breadth of knowledge, personal contributions, position within the
Company's executive structure and market pay practices. Overall, salaries are
targeted at the median of the market practice, with annual adjustments based uponon
performance. When making annual adjustments, a qualitative assessment of
performance is conducted, which considers many factors including individual
performance, both past and present. The factors used in making this evaluation
may vary by position.
When Mr. Tetrault joinedFor the Company in March 1997, the Compensation
Committee purposely set his base salary substantially lower than the median
base salary for comparable chief executive officer positions. The balance of
Mr. Tetrault's total compensation was placed "at risk" through equity based
compensation. See "Tetrault Employment Agreement".
Effective Marchnine-month period ended December 31, 1999, Mr. Tetrault's
annualized base salary was $740,040. On March 1, 2000, his salary was increased
12.1%
($80,040)8.1% to $740,040. This increase$800,000. Mr. Tetrault's salary reflects the Compensation Committee's
evaluation of Mr. Tetrault's individual contribution to the Company's financial
performance for the last year as well as competitive data for chief executive
officers of comparable companies as previously described. Mr. Tetrault's base
salary however, remains belowapproximates the median base salary for comparable chief executive
officer positions and his totalpositions.
ANNUAL BONUS
As part of the short-term component of our overall executive compensation
package remains heavily weighted toward "at risk" equity based incentives.
Annual Bonus
To support its short-term financial focus, the Company providesprogram, we provide annual bonus opportunities under aour Variable Supplemental
Compensation Plan. TheOur shareholders initially approved the current version of
this plan was adopted by the Company and approved by its shareholders in 1994. Payments under the plan are intended to comply with the tax
deductibility requirements set forth under Section 162(m) of the Internal Revenue CodeCode. In
accordance with the requirements of 1986, as amended. Because this plan allows the Compensation Committee to
select among several performance goals and establish different targets under
such goals in awarding annual bonuses, CompanySection 162(m), our shareholders must reapprovereapproved
the plan this year for future bonuses to be tax deductible as performance-based
compensation under Section 162(m). See "REAPPROVAL OF THE COMPANY'S 1994
VARIABLE SUPPLEMENTAL COMPENSATION PLAN".in 1999.
For fiscal yearthe nine-month period ended December 31, 1999, as in the prior fiscal
year, the bonuses under the plan waswere tied to net income return on capital. However, this formula was adjusted from the prior year at
the recommendation of the Company's executive compensation consultants to make
the threshold and maximum awards more difficult to achieve. The
plan is formula driven and self-funded, based on a minimum level of financial
performance to be achieved each year (8% adjusted net income return on capital
for the corporate staff, including the Chief Executive Officer, for fiscal
year 1999)Officer). Executives'Our executive's
bonus opportunities under the plan are expressed as a targeted percent of base
salary.salary based on his or her title and position within the Company or its
subsidiaries. These targets, like base salary, are set at approximately the
median market levels, as indicated by a survey of a group of similar companies.
TheFor a full 12-month fiscal year, the Chief Executive Officer hashad a bonus target
of 70%80% of base salary. The Compensation Committee believes the goals associated
with target bonus payments are achievable yet require considerable effort and
innovation on
13
the part of each executive. Executives only receive payments under
the plan if the minimum level of financial performance is reached. Financial
performance at the minimum level results in bonuses of one-half the targeted
amounts. If the minimum level of financial performance is exceeded, bonus
payments are increased. BonusThe Compensation Committee considers annual bonus awards
are considered when the Compensation Committeeit reviews the Company's financial performance after the close of theeach
fiscal year. Adjustments to net income for determination of bonus awards usually
exclude the negative impact of any changes in accounting principles, any unusual
or nonrecurring events and extraordinary items.
For the nine-month period ended December 31, 1999, the Chief Executive
Officer's bonus target was 60% of his base salary. Mr. Tetrault's fiscal year 1999 bonus payment
for that period was $924,000,$293,056, which represents 140%39.6% of his base salary in
effect at the beginning of fiscal year 1999 (versus
a 70% target). Mr. Tetrault'sthat period. The Compensation Committee determined
bonus reflects the Company's superior adjusted
net income returnamounts for other executives (including executives of The Babcock & Wilcox
Company) based on capital for fiscal year 1999 (22.8%), which greatly
exceeded the minimum level of financial performance for the year. Other
executive's bonuses were determined based upon the same general factors.
Long-Term Incentives
The Company's13
18
LONG-TERM INCENTIVES
Our 1996 Officer Long-Term Incentive Plan provides our executives with
equity-based opportunities to earn additional compensation based uponon Company and
stock performance over the mid- to long-term. UseThe Compensation Committee
believes that our use of suchthese incentives focuses management on the long-termbest
interests of shareholders.
The Compensation Committee considers the following multiple factors when determining
award sizes. Weighting between the factors listed below is
informal, not quantitative.
.sizes:
- Various financial performance criteria (which may include return on
capital or assets, profitability and shareholder return);
.- Level of responsibility;
.- Prior experience;
.- Historical award data; and
.- Market practices among similar companies.
Weighting between the factors listed above is informal, not quantitative.
Stock Options. Stock options are granted to Companyour executives to provide an
equity basedequity-based incentive component to their compensation. Under the Company'sour 1996 Officer
Long-Term Incentive Plan, the Company grants stock options are granted at exercise prices
equal to fair market value of the underlying Common Stockcommon stock on the date of grant.
Executives do not realize value unless the stock price rises above the price on
the date of grant.
This reflectsWe did not grant any stock options to any of the Company's focus on
increasing shareholder value.
To reinforceor its
subsidiaries' current officers or employees during the focus on creating shareholdernine-month period ended
December 31, 1999. However, in connection with our acquisition of the publicly
held minority interest in our subsidiary J. Ray McDermott in July 1999 (the "JRM
merger"), several executive officers of J. Ray McDermott (including Mr.
Tetrault) received Company stock options with an equivalent value for their
outstanding J. Ray McDermott stock options. In that connection, Mr. Tetrault
received 46,672 Company stock options in exchange for the mid-term as well
as36,360 J. Ray
McDermott stock options that he held at the long-term,time of the JRM merger.
The Compensation Committee anticipates that, in late March 2000, we will
grant stock options granted in fiscal years 1998to our officers and 1999 were grantedsenior managers with a five-year term as opposed to a ten-year term for option grants in
previous years. Moreover, these option grantsterms that
vest in 50% incrementsthree equal annual installments beginning on the first and second anniversariesanniversary of
the dategrant date. Additionally, because of grant. Previous grants vestedits concern about the Company's ability
to retain key employees in one-third increments on the first, secondcurrent business environment, the Compensation
Committee is considering providing officers and third anniversariesall other key employees of the
date
of the grant.
During fiscal year 1999, Mr. Tetrault received a grant of options to acquire
98,860 shares of Common Stock at an exercise price of $29.375 per share. He
also received a grant of options to acquire 26,860 shares of JRM Common Stock
at an exercise price of $32.4375 per share in recognition of the services that
he provides as ChairmanCompany and Chief Executive Officer of J. Ray McDermott. These
option grants were priced at the fair market value of the underlying common
stock on the date of grant,its subsidiaries (including The Babcock & Wilcox Company and reflect the Compensation Committee's continued
focus on the "at risk" component of Mr. Tetrault's total compensation. In
connectionits
subsidiaries) with the Merger,opportunity to convert their outstanding stock options
into deferred restricted stock units of equivalent economic value, 50% of which
would vest upon The Babcock & Wilcox Company's emergence from its Chapter 11
reorganization proceeding with the other 50% vesting a year later (and all
options to acquire JRM Common Stock, whether
vested or not, will become immediately exercisable for $35.62 in cash per
share, less applicable option costs. Any remaining JRM Common Stock optionsamounts vesting no later than five years after the Merger will become vested options to purchase a comparable amount of
Company Common Stock.grant).
Performance Stock Awards.Shares. Beginning in 1998, the Compensation Committee increased
the "at risk" component of the Company's restricted stock program by tying the
number of restricted shares awarded, if any, 14
to future stock performance. Under
the newthis program, Companyour executives receive performance stock awards of restricted
stock ("Performance Shares") based uponon salary multiples corresponding to their
titletitles and position withinpositions with the Company.Company and its subsidiaries. Performance stock awardsShares
are made as notional grants of restricted stock. No shares are issued by the
Company at the time of the grant. The number of shares of restricted sharesstock
actually received by a participant, if any, is determined on the second
anniversary of the grant date by calculating the difference between the fair
market value of a share of theour Common Stock (based uponon the preceding 30
trading daytrading-day average) and the fair market value on the grant date. The difference
is multiplied by thatthe number of shares in an executive's notional grant, and the
resulting product is divided by the fair market value of the Common Stock as of
the second anniversary of the grant date, calculated as described above. The
resulting number is added to (in the case of an increase in share price) or
subtracted from (in the case of a decrease in share price) the number of shares
in an executive's notional grant. The notional grant, as adjusted (to the extent
not reduced to zero), is then issued to the executive as restricted stock on the
second anniversary of the grant date, for which the executive is required to pay
$1.00 per share. The restricted stock vests two years thereafter. As with previous restricted stock awards,Until
14
19
then, the restricted shares are nontransferable and are subject to forfeiture
under certain circumstances
prior to vesting.circumstances. The Compensation Committee believes that the above describedthis
program reinforces the importance of creating shareholder value because the
ultimate size of each annual restricted stock award, if any, is based upon the
future performance of the Common Stock.
During fiscal yearWe did not grant any Performance Shares to any of the Company's or its
subsidiaries' current officers or employees during the nine-month period ended
December 31, 1999. In addition, no shares of Company restricted stock were
issued during that period as a payout under any past Performance Share award.
However, in connection with the JRM merger in July 1999, several J. Ray
McDermott executive officers (including Mr. Tetrault) received, at their
election, shares of Company restricted stock in lieu of pro-rata cash payments
for their outstanding J. Ray McDermott Performance Shares. In that connection,
Mr. Tetrault received a performance stock award of
28,090 restricted14,222 shares of Common Stock. Additionally, Mr. Tetrault received
a performanceCompany restricted stock awardin lieu of 7,630 restricted shares of JRM Common Stock in
his capacity as J. Ray McDermott's Chairman and Chief Executive Officer. Other
officers received performance stock awards in accordance with the method
described above. Upon the consummation of the Merger, all JRM performance
stock awards will be converted into a
pro-rata cash payment (as provided in(based on a $35.62 per share cash price) for his then
outstanding 11,080 J. Ray McDermott's Executive Long-Term Incentive Compensation Plan upon a "change
in control") unless the recipient makes a prior election to receive a
replacement award of a comparable amount of restrictedMcDermott Performance Shares. These shares of Company
Common Stock.
Benefitsrestricted stock will vest at the earlier of Mr. Tetrault's retirement or July
2001.
BENEFITS
Benefits offered to our key executives serve a different purpose than the
other elements of compensation.our compensation program. In general, they provide a safety
net of protection against financial catastrophes that can result from illness,
disability or death. Benefits offeredwe offer to key executives are generally the same
as those offeredwe offer to theour general employee population, with some variation to
promote tax efficiency and replacement of benefit opportunities lost due to
regulatory limits.
Policy with respect to SectionPOLICY WITH RESPECT TO SECTION 162(m)
Section 162(m) of the Internal Revenue Code limits theour tax deduction the
Company can take with respectdeductions
relating to the compensation ofwe pay certain executive officers, unless the
compensation is performance-based and the material terms of the applicable
performance goals are disclosed to and approved by the Company'sour shareholders. The Company'sOur
executive compensation plans have received shareholder approval and were
draftedprepared with the intention that suchour incentive compensation would qualify as
performance-based compensation under Section 162(m).
At this Annual Meeting, shareholders are being asked to approve an amendment
to the Company's 1996 Officer Long-Term Incentive Plan increasing the number
of shares authorized for issuance under the plan from 2,500,000 to 4,000,000
shares, and to reapprove the Company's 1994 Variable Supplemental Compensation
Plan. Such approvals are intended to comply with Section 162(m).
While the Compensation Committee intends to continue to rely on
performance-
basedperformance-based compensation programs, it is cognizant of the need for
flexibility in making executive compensation decisions, based uponon the relevant
facts and circumstances, so that the best interests of the Company are achieved,
regardless of Section 162(m).achieved.
To the extent consistent with this goal, the committeeCompensation Committee anticipates
that suchthose programs will continue to satisfy the requirements of Section 162(m) with respect to the deductibility of executive
compensation paid.
15
Conclusion.
CONCLUSION
The Compensation Committee believes theseour executive compensation policies and
programs serve the interests of our shareholders and the Company effectively.
Theeffectively,
and that the various pay vehicles offeredwe offer are appropriately balanced to provide
increasedappropriate motivation for executives to contribute to the Company'sour overall future
success, thereby enhancing the value of the Company for theour shareholders'
benefit.
We will continue to monitor the effectiveness of the Company's total
compensation programs to meet the current needs of the Company.
March 1, 2000 COMPENSATION COMMITTEE
R. L.R.L. Howard, Chairman
B. DeMars
J. W.J.W. Johnstone, Jr.
16K.D. Sullivan
15
20
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total stockholder
return on theour Common Stock for the last five fiscal yearsfrom March 31, 1995 through December 31, 1999 with
the cumulative total return of the S&PStandard & Poor's 500 Index and a Peer Group
Index which reflects the
Company'sreflecting our primary business segments,segments. The Peer Group Index is composed
of Chicago Bridge & Iron Company N.V., Fluor Corporation, Foster Wheeler
Corporation, Halliburton Company, Ingersoll-Rand Company, Jacobs Engineering
Group, Inc., Schlumberger Limited, Stone & Webster Inc., and Weatherford
International Inc.
Comparison of Five Year Cumulative Total Return*
McDermott International, Inc;COMPARISON OF CUMULATIVE TOTAL RETURN*
MCDERMOTT INTERNATIONAL, INC; S&P 500; and Peer Group
[GRAPH APPEARS HERE]AND PEER GROUP
[PERFORMANCE GRAPH]
* Assumes $100 invested on March 31, 19941995 in McDermott International, Inc.
common stock;our Common Stock; S&P 500; and
the Peer Group and the reinvestment of dividends as they are paid.
3/31/94 3/31/95 3/31/96 3/31/97 3/31/98 3/31/99 12/31/99
------- ------- ------- ------- ------- ---------------
McDermott International,
Inc....Inc.................... $100.00 $142.28 $104.88 $119.84 $232.93 $143.77$ 73.71 $ 84.22 $163.71 $101.04 $ 36.53
S&P 500.........................500.................. $100.00 $115.55 $152.52 $182.71 $270.20 $320.00$132.00 $158.13 $233.85 $276.95 $319.26
Peer Group......................Group............... $100.00 $107.93 $150.90 $182.45 $255.70 $206.59$139.82 $169.05 $236.93 $191.43 $209.27
1716
21
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation TableSUMMARY COMPENSATION TABLE
The following table summarizes the annual and long-term compensation of the
Company'sour
Chief Executive Officer ("CEO"), the and our other four highest paid executive
officers other than the CEO and a former executive officer (collectively, the "Named Executive Officers") for the nine-month
period ended December 31, 1999 and the three fiscal years ended March 31, 1999,
1998 and 1997.
Summary Compensation TableSUMMARY COMPENSATION TABLE
Annual Compensation(1) Long-Term Compensation
----------------------------- -----------------------------
Awards Payouts
---------------------LONG-TERM COMPENSATION
---------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION(1) ----------------------- -------
Securities
Other Underlying All
Fiscal Annual Restricted Stock------------------------------------- SECURITIES
UNDERLYING
PERIOD OTHER ANNUAL RESTRICTED STOCK LTIP Other
Name Principal Position Year Salary Bonus Comp.(2) Stock(3) Options(4) Payout Comp.ALL OTHER
NAME PRINCIPAL POSITION ENDED SALARY BONUS COMPENSATION(2) STOCK(3) OPTIONS(4) PAYOUT COMP.(5)
- ---- ------------------------------------- ------ -------- -------- ----------------------- ---------- ---------- ------- -----------------
R.E. Tetrault(6)........... Chairman & Chief 199912/99 $555,030 $293,056 $ 11,446 $ 0 0 $0 $3,858
Executive Officer 3/99 $666,670 $924,000 $ -- $ 0 125,720 $ 0 $ 5,709
Executive Officer 1998$0 $5,709
3/98 $550,000 $756,000 $122,031 $ 0 49,500 $ 0 $ 5,550
1997$0 $5,550
3/97 $ 45,000 $336,000(7) $ -- $582,863 422,340 $0 $1,413
R.H. Rawle......... President, J. Ray 12/99 $266,715 $ 44,339 $ -- $ 0 $ 1,413
R.H. Rawle.............. President & Chief 19990 $0 $3,762
McDermott 3/99 $343,800 $378,180 $ -- $ 0 36,040 $ 0 $ 5,508
Operating Officer, 1998$0 $5,508
3/98 $275,040 $302,544 $ -- $ 0 12,460 $ 0 $ 5,228
J. Ray McDermott 1997$0 $5,228
3/97 $192,540 $ 0 $ -- $ 0 10,090 $0 $4,614
E.A. Womack, Jr. ... President, BWX 12/99 $277,830 $244,490 $ -- $ 0 $ 4,614
E.A. Womack, Jr......... Executive VP 19990 $0 $4,314
Technologies, Inc. 3/99 $359,640 $359,640 $ -- $ 0 26,930 $ 0 $ 7,230
1998$0 $7,230
and McDermott 3/98 $332,140 $329,640 $ -- $ 0 14,540 $ 0 $ 7,230
1997$0 $7,230
Technology, Inc. 3/97 $300,315 $ 0 $ 32,530 $ 0 17,290 $0 $5,594
J.F. Wood(8)....... President, The 12/99 $251,910 $164,875 $ -- $ 0 $ 5,594
J.F. Wood(8)............ Executive VP 19990 $0 $3,788
Babcock & Wilcox 3/99 $305,040 $305,040 $ -- $ 0 22,850 $ 0 $ 5,550
1998$0 $5,550
Company 3/98 $275,040 $275,040 $ -- $ 0 12,130 $ 0 $ 5,550
1997$0 $5,550
3/97 $186,472 $ 0 $ 29,192 $ 0 15,440 $ 0 $$0 4,890
R.E. Woolbert(9)........ Former Ex. VP & 1999 $309,780 $309,780 $ -- $ 0 39,330 $ 0 $45,512
Chief Adminis- 1998 $410,040 $410,040 $ -- $ 0 23,010 $ 0 $ 9,372
trative Officer 1997 $373,410 $ 0 $ -- $ 0 26,120 $ 0 $ 7,956
D.R. Gaubert............Gaubert....... Senior VP & 199912/99 $233,325 $ 84,697 $ 741 $ 0 0 $0 $3,762
Chief Financial 3/99 $292,200 $292,200 $ -- $ 0 17,960 $ 0 $ 5,168
Chief Financial 1998$0 $5,168
Officer 3/98 $272,160 $272,160 $ -- $ 0 15,270 $ 0 $ 4,914
Officer 1997$0 $4,914
3/97 $242,280 $ 0 $ -- $ 0 18,290 $ 0 $ 4,614$0 $4,614
- -----------------------
(1) Includes amountssalary and bonus earned in thea fiscal year,period, whether or not
deferred. Bonuses are paid after the fiscal yearperiod during which they are
earned.
(2) TheExcept as otherwise provided, the aggregate value of perquisites and other
personal benefits received by a Named Executive Officer during a fiscal
period are not included if they do not exceed the lesser of $50,000 or 10 percent10%
of the total amount of such officer's annual salary and bonus for such
period. For the applicable fiscal year.
For fiscalnine-month period ended December 31, 1999, the amounts shown
for Messrs. Tetrault and Gaubert are attributable to reimbursement for taxes
relating to their personal use of Company aircraft. Fiscal year 1998
includes relocation expenses of $111,754 for Mr. Tetrault. For fiscalFiscal year 1997
includes $20,439 for cost of personal use of Company aircraft forby Mr. Womack
and $29,192 for relocation expenses for Mr. Wood.
(3) NoWe stopped granting annual restricted stock awards were earned by Companyto our officers forin fiscal
years 1999, 1998 andyear 1997. However, Mr. Tetrault however, received 18,900did receive a restricted shares of Common Stock and 8,100 restricted shares of JRM
Common Stockstock award in
fiscal year 1997 when he joined the Company and J. Ray
McDermott. Restricted stock awards are valued at the closing market price
of Common Stock or JRM Common Stock, as applicable, on the date of grant
less any amounts paid by the executive officers for such awards ($1.00 per
share).Company. As of 18
MarchDecember 31, 1999, the
total number of restricted shares of Common Stock and
JRM Common Stockrestricted stock held by the Named Executive
Officers (other than Mr. Wood, who holds no such shares) and their market
values (based upon a closing market pricesprice on MarchDecember 31, 1999 of $25.3125 and
$29.875, respectively)$9.0625,
less a $1.00 per share purchase price) are as follows:
Shares of Market
Name Restricted Stock ValueSHARES OF MARKET
NAME RESTRICTED STOCK VALUE
---- ---------------- --------
Tetrault
Common Stock.................................. 18,900 $459,506
JRM Common Stock.............................. 8,100 $233,888
Rawle
Common Stock.................................. 1,920 $ 46,680
JRM Common Stock.............................. 5,300 $153,038
Womack
Common Stock.................................. 19,410 $471,906
Gaubert
Common Stock.................................. 10,345 $251,513
JRM Common Stock.............................. 2,040 $ 58,905Tetrault............................................ 33,122 $267,046
Rawle............................................... 26,481 $213,503
Womack.............................................. 16,215 $130,733
Gaubert............................................. 14,385 $115,979
Messrs. Wood and Woolbert hold no restricted shares.
Dividends are paid on restricted sharesstock at the same time and at the same
rate as dividends paid to all shareholders. Grants of restricted stock
generally vest 50% in five years with the remaining 50% vesting in three to
ten years based on Company financial performance. In the event of a change
of control of the Company, the Compensation Committee may cause all
restrictions to lapse.
Upon the consummation of the Merger, each person
who holds restricted shares of JRM Common Stock will receive $35.62 in cash
per share unless such person makes a prior election to receive a
replacement award of a comparable amount of restricted Common Stock.
Beginning inwith fiscal year 1998, instead ofwe began granting Performance Shares
(rights to receive restricted stock awards,based upon future stock performance) to
our officers on an annual basis; however, no Performance Shares were
granted to our officers during the Company granted performance stock awards, which are more fully
described in the table entitled "Long-Term Incentive Plans--Performance
Stock Awards in Last Fiscal Year".nine-month period ended December 31,
1999.
(4) IncludesNo options to purchase our Common Stock were granted during the nine-month
period ended December 31, 1999. Stock option grants for previous fiscal
years include options to acquire J. Ray McDermott common stock ("JRM Common
Stock for services rendered byStock") granted to Messrs. Tetrault, Rawle Woolbert and Gaubert in their capacity as
officers of J. Ray McDermott in the respective amounts of (a) 26,860,
36,040, 8,400, andas follows:
17
22
FISCAL YEAR FISCAL YEAR FISCAL YEAR
NAME 1999 1998 1997
---- ----------- ----------- -----------
Tetrault.................................... 26,860 9,500 108,000
Rawle....................................... 36,040 12,460 10,090
Gaubert..................................... 5,950 during fiscal year 1999, (b) 9,500, 12,460, 4,920
and 3,260 during fiscal year 1998, and (c) 108,100, 10,090, 5,340 and 3,740
during fiscal year 1997.
In connection with the Merger,JRM merger in July 1999, all unexercised options to
acquire JRM Common Stock options will become immediately exercisable for $35.62 in
cash per share, less applicable option costs. Any remaining ("JRM Common
Stock options after the Merger will becomestock options") became vested options to
purchase a comparable amount of our Common Stock. As a result of the JRM
merger, Messrs. Tetrault, Rawle and Gaubert received Company stock options
for JRM stock options as follows:
JRM COMPANY
NAME STOCK OPTIONS STOCK OPTIONS
---- ------------- -------------
Tetrault.......................................... 36,360 46,672
Rawle............................................. 48,500 62,255
Gaubert........................................... 12,950 16,623
(5) Amounts shown for fiscal yearthe nine-month period ended December 31, 1999 include (a)
companyour matching contributions to the McDermott Thrift Plan in the amount of
$4,800$3,600 for each Named Executive Officer and (b) the value of insurance
premiums we paid
by the Company for Messrs. Tetrault, Rawle, Womack, Wood, Woolbert and Gaubert in
the amounts of $909, $708, $2,430, $750, $5,940$258, $162, $714, $188, and $368,$162, respectively.
(6) Compensation information for fiscal year 1997 only reflects the amounts received bywe
paid Mr. Tetrault from the time he joined the Company on March 1, 1997 to
March 31, 1997.
(7) Bonus paid in June 1997 to Mr. Tetrault in connection with his election as the Company's
Vice Chairman of the Board and CEO on March 1, 1997.
See
"Tetrault Employment Agreement".
(8) Compensation information for fiscal year 1997 only reflects the amounts received bywe
paid Mr. Wood from the time he joined the Company in June 1996 through
March 1997.
(9) Compensation information for fiscal year 1999 only reflects amounts
received by Mr. Woolbert until his retirement on January 1, 1999.
1918
Option Grant Table
The following table provides information about option grants to the Named
Executive Officers during fiscal year 1999. Options granted in fiscal year
1999 vest in equal installments of one-half on the first and second
anniversaries of the date of grant and expire five years from the date of
grant. In general, vesting is contingent on continuing employment with the
Company. Options vest and become immediately exercisable if there is a "change
in control" of the issuing company.
Option Grants in Last Fiscal Year
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term(1)
------------------------------------------- ---------------------------
Number of
Securities % of Total
Underlying Options 5% 10%
Options Granted to Exercise Expiration ------------ --------------
Name Granted Employees(2) Price(3) Date Dollar Gains Dollar Gains
---- ---------- ------------ -------- ---------- ------------ --------------
R.E. Tetrault
Common Stock.......... 98,860 15.3 $ 29.375 11/12/03 $ 802,325 $ 1,772,929
JRM Common Stock(4)... 26,860 10.8 $32.4375 11/11/03 $ 240,716 $ 531,920
R.H. Rawle
JRM Common Stock...... 36,040 14.5 $32.4375 11/11/03 $ 322,986 $ 713,715
E.A. Womack, Jr.
Common Stock.......... 26,930 4.2 $ 29.375 11/12/03 $ 218,558 $ 482,955
J.F. Wood
Common Stock.......... 22,850 3.5 $ 29.375 11/12/03 $ 185,445 $ 409,786
R.E. Woolbert
Common Stock.......... 30,930 4.8 $ 29.375 11/12/03 $ 251,021 $ 554,690
JRM Common Stock(4)... 8,400 3.4 $32.4375 11/11/03 $ 75,280 $ 166,349
D.R. Gaubert
Common Stock.......... 12,010 1.9 $ 29.375 11/12/03 $ 97,470 $ 215,384
JRM Common Stock(4)... 5,950 2.4 $32.4375 11/11/03 $ 53,323 $ 117,830
All Shareholders(5)
Common Stock.......... -- -- $ 29.375 -- $480,836,385 $1,062,522,663
JRM Common Stock(4)... -- -- $32.4375 -- $350,058,452 $ 773,537,632
- --------
(1) Potential Realizable Value is based on the assumed annual growth rates for
each of the grants shown over their five-year option term. For example, if
the exercise price is $29.375, a 5% annual growth rate over five years
results in a stock price of $37.50 per share and a 10% rate results in a
price of $47.30 per share. Actual gains, if any, on stock option exercises
are dependent on the future performance of the stock. Zero percent
appreciation in stock price will result in no gain.
(2) Based on options to acquire 644,955 and 248,280 shares of Common Stock and
JRM Common Stock granted to all employees of the Company and JRM,
respectively, during fiscal year 1999.
(3) Fair market value on date of grant.
(4) In connection with the Merger, all options to acquire JRM Common Stock,
whether vested or not, will become immediately exercisable for $35.62 in
cash per share, less applicable option costs. Any remaining JRM Common
Stock options after the Merger will become vested options to purchase a
comparable amount of Common Stock.
(5) Total dollar gains based on the assumed annual rates of appreciation shown
here and calculated on 59,247,161 outstanding shares of Common Stock and
39,060,814 outstanding shares of JRM Common Stock on March 31, 1999. The
Named Executive Officers' gains as a percentage of the total dollar gains
shown for all shareholders are .32% for Common Stock and .11% for JRM
Common Stock.
20
Option Exercises and Year-End Value Table23
OPTION EXERCISES AND PERIOD END VALUE TABLE
The following table provides information concerning the exercise of stock
options during fiscal yearthe nine-month period ended December 31, 1999 by each of the
Named Executive Officers and the value at MarchDecember 31, 1999 of unexercised
options held by such individuals.
The valuethose persons. As of unexercised options reflects the increase in market value of
Common Stock and JRM Common Stock from the date of grant through MarchDecember 31, 1999 (when the fair market
value of Common Stock and JRMour Common Stock was $25.3125 and $29.875, respectively,$9.0625, per share)., none of the stock options
currently held by our officers were "in the money." The actual value realized uponon
option exercise will depend on the value of the Common Stock or JRMour Common Stock at the time of
exercise. In connectionOur Compensation Committee is considering providing officers and other
key employees of the Company and its subsidiaries with the Merger, all JRM Commonopportunity to
convert their stock options into units of deferred restricted stock. See "Report
on Executive Compensation -- Long Term Incentives -- Stock options will become immediately exercisable for $35.62 in cash per
share, less option costs. Any remaining JRM Common Stock options after the
Merger will become vested options to purchase a comparable amount of Common
Stock.
Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option ValuesOptions."
AGGREGATED OPTION EXERCISES DURING THE NINE-MONTH PERIOD
ENDED DECEMBER 31, 1999
AND PERIOD END OPTION VALUES
Total Value of
Number of Total Number of Unexercised, In-The-Money
Shares Unexercised Options Held Options Held at Fiscal
Acquired at Fiscal Year-End Year-End
on Value -------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable UnexercisableNUMBER OF TOTAL NUMBER OF TOTAL VALUE OF UNEXERCISED,
SHARES UNEXERCISED OPTIONS HELD IN-THE-MONEY OPTIONS HELD
ACQUIRED AT 12/31/99 AT 12/31/99
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- -------- ----------- ------------- ----------- -------------
R.E. Tetrault
Common Stock.......... 25,000 $325,782 204,494 223,606 $588,075 $333,878
JRM Common Stock...... 36,034 $802,728 40,783(1) 67,643 $234,215 $234,215Stock.............. 0 $-- 300,596 174,176 $0 $0
R.H. Rawle
Common Stock.......... 2,310 $ 21,368 10,510Stock.............. 0 $ 19,185 $$-- 72,765 0 JRM Common Stock...... 0 $ -- 25,437(2) 48,853 $161,932 $ 59,069$0 $0
E.A. Womack, Jr.
Common Stock..........Stock.............. 0 $ -- 68,367 45,433 $141,550 $ 55,512$-- 84,567 26,498 $0 $0
J.F. Wood
Common Stock..........Stock.............. 0 $ -- 16,359 34,061 $ 40,533 $ 20,262
R.E. Woolbert
Common Stock.......... 9,950 $ 61,494 167,155 0 $356,631 $ 0
JRM Common Stock...... 0 $ -- 30,550 0 $160,722 $ 0$-- 27,784 22,636 $0 $0
D.R. Gaubert
Common Stock.......... 25 $ 328 48,739 36,105 $120,581 $ 39,317
JRM Common Stock......Stock.............. 0 $ -- 6,691 10,109 $ 45,806 $ 23,072$-- 77,987 21,795 $0 $0
- --------
(1) Mr. Tetrault exercised options to acquire 36,033 shares of JRM Common
Stock after March 31, 1999 and prior to the date of this proxy statement.
(2) Mr. Rawle exercised options to acquire 19,207 shares of JRM Common Stock
after March 31, 1999 and prior to the date of this proxy statement.
21
Performance Stock Awards
The following table provides information concerning performance stock awards
of restricted shares made to each of the Named Executive Officers during
fiscal year 1999.
Long-Term Incentive Plans--Performance Stock Awards
in Last Fiscal Year(1)
Number of
Performance Performance
Name Shares Period
- ---- ----------- -----------
R.E. Tetrault
Common Stock.......................................... 28,090 2 years
JRM Common Stock(2)................................... 7,630 2 years
R.H. Rawle
JRM Common Stock(2)................................... 10,600 2 years
E.A. Womack, Jr.
Common Stock.......................................... 7,960 2 years
J.F. Wood
Common Stock.......................................... 6,750 2 years
R.E. Woolbert
Common Stock.......................................... 9,140 2 years
JRM Common Stock(2)................................... 2,480 2 years
D.R. Gaubert
Common Stock.......................................... 6,470 2 years
JRM Common Stock(2)................................... 1,760 2 years
- --------
(1) No shares are issued at the time of the performance stock award (11/12/98
for the Common Stock and 11/11/98 for JRM Common Stock). Actual number of
shares issued to an executive will be based on the change in the market
price of the Common Stock or JRM Common Stock, as applicable, two years
after the date of the award. The number of shares to be received by an
executive, if any, is determined on the second anniversary of the award
date by calculating the difference between the fair market value of the
stock (based upon the preceding 30 trading day average) and the fair
market value of the stock on the award date. The difference is multiplied
by that number of shares in an executive's award, and the resulting
product is divided by the fair market value of the stock as of the second
anniversary of the award date, calculated as described above. The
resulting number is added to (in the case of an increase in share price)
or subtracted from (in the case of a decrease in share price) the number
of shares in an executive's applicable award. The award, as adjusted (to
the extent not reduced to zero), is then issued to the executive as
restricted stock as of the second anniversary of the award date, for which
the executive is required to pay $1.00 per share. The restricted stock
vests two years thereafter. Prior to vesting, such restricted stock is
nontransferable and subject to forfeiture under certain circumstances.
(2) Upon the consummation of the Merger, each person who holds JRM performance
stock awards will receive a pro-rata cash payment (as provided in J. Ray
McDermott's Executive Long-Term Incentive Compensation Plan upon a "change
in control") unless such person makes a prior election to receive a
replacement award of a comparable amount of restricted Common Stock.
Tetrault Employment Agreement
On March 1, 1997, the Company entered into an employment agreement with Mr.
Tetrault whereby he agreed to serve as the Company's Vice Chairman of the
Board and CEO through February 28, 2000. On June 1, 1997, he also became the
Company's Chairman of the Board. The employment agreement initially provided
Mr. Tetrault with an annual base salary of $540,000 subject to increases by
the Compensation Committee in accordance with Company practices based upon Mr.
Tetrault's performance. Under the employment agreement,
22
Mr. Tetrault also received (i) a $336,000 cash bonus in June 1997, (ii)
options to purchase 314,240 shares of Common Stock and 108,100 shares of JRM
Common Stock and (iii) 18,900 shares of restricted Common Stock and 8,100
shares of restricted JRM Common Stock for which he paid $1.00 per share. Under
the agreement, he is also entitled to receive annual cash bonuses (if any, as
determined by the Compensation Committee based upon the Company's achievement
of certain pre-established performance goals) and to participate in all
retirement or other benefit plans, policies and programs maintained or
provided by the Company for its officers. The Company also purchased Mr.
Tetrault's home and agreed to pay his reasonable relocation expenses according
to the Company's relocation policy.
The employment agreement may be terminated prior to February 28, 2000 under
certain circumstances, including death, disability and voluntary retirement.
However, in the event of termination by the Board without cause, Mr. Tetrault
will continue to receive his annual base salary (which was increased to
$740,040 as of March 1999) and other benefits and rights under the agreement
during its remaining term thereof and all unvested stock options and
restricted stock will fully vest on February 28, 2000. During the term of the
agreement and for the greater of 24 months following the expiration of the
agreement or any other period during which amounts are paid to him under the
agreement, Mr. Tetrault may not engage, directly or indirectly, in any
business or enterprise which is in competition with the Company or induce any
employee of the Company to accept employment with any competitor of the
Company.
Retirement PlansRETIREMENT PLANS
Pension Plans. The Company maintainsWe maintain funded retirement plans covering substantially
all our regular full-time employees, except certain non-resident alien employees
who are not citizens of a European Community country or who do not earn income
in the United States, Canada or the United Kingdom. Officers who are employees
of the Company or certain of its subsidiaries, including McDermott Incorporated
orand The Babcock & Wilcox Company ("B&W"), are covered under The Retirement Plan
for Employees of McDermott Incorporated and Participating Subsidiary and
Affiliated Companies (the "McDermott Retirement Plan"). Under the McDermott
Retirement Plan, salaried B&W employees receivehired prior to April 1, 1998, regardless
of whether they subsequently became employees of the Company or another
participating subsidiary ("B&W Tenured Employees"), accrue pension benefits
under a different benefit amountsformula than other salaried employees. Officers who are
employed by J. Ray McDermott or certain of its subsidiaries or affiliates are
covered under The Retirement Plan of Employees of J. Ray McDermott Holdings,
Inc. (the "J. Ray McDermott Plan"). Employees do not contribute to either of
these plans, and company contributions are determined on an actuarial basis. An
employee must be employed by the applicable company or a subsidiary for one year
prior to participating in the plans and must have five years of continuous
service to vest in any accrued benefits under the plans. To the extent that benefits
payable under these qualified plans are limited by Section 415(b) or 401(a)(17)
of the Internal Revenue Code, pension benefits will be paid directly by the
applicable company or a subsidiary under the terms of the
unfunded excess benefit
plans maintained by them (the "Excess Plans").
The benefit amounts payable under the McDermott Retirement Plan to non-B&W
employeesany
covered employee hired after April 1, 1998 are the same as those payable to
employees covered under the J. Ray McDermott Retirement Plan. The following
table shows the annual benefit payable at age 65 (the normal retirement age) to non-B&Wsuch employees under the McDermott
Retirement Plan and to J. Ray McDermott employees under the J. Ray McDermott
Retirement Plan, at
19
24
age 65 (the normal retirement age), who retire in 19992000 in accordance with the
lifetime only method of payment and before profit sharing plan offsets. Benefits
are based on the formula of a specified percentage (dependent on years of
service) of average annual basic earnings (exclusive of bonus and allowances)
during the 60 successive months out of the 120 successive months prior tobefore
retirement in which such earnings were highest ("Final Average Earnings") less a
specified percentage of anticipated social security benefits. As of MarchDecember 31,
1999, Mr. Rawle had Final Average Earnings of $215,377$254,209 and 20.621.3 years of
credited service under the J. Ray McDermott Retirement Plan and Mr. Gaubert had
Final Average Earnings of $232,640$254,816 and 27.728.4 years of credited service under the
McDermott Retirement Plan. Unless elected otherwise by the employee, payment
will be made in the form of a joint and survivor annuity of equivalent actuarial
value to the amount shown below.
23
McDermott Retirement Plan Benefits for non-BMCDERMOTT RETIREMENT PLAN BENEFITS FOR NON-B&W Employees
andTENURED EMPLOYEES
AND J. Ray McDermott Retirement Plan BenefitsRAY MCDERMOTT RETIREMENT PLAN BENEFITS
Final Annual Benefits At AgeFINAL ANNUAL BENEFITS (IN DOLLARS) AT AGE 65 For Years of Service Indicated
Average -----------------------------------------------------------------
EarningsFOR YEARS OF SERVICE INDICATED
AVERAGE ----------------------------------------------------------------------------------
EARNINGS 10 15 20 25 30 35 40
- -------- ------ ------ ------ ------- ------- ------- -------
200,000 31,686 47,529 63,371 79,214 95,057 110,900 126,74331,614 47,421 63,227 79,034 94,841 110,648 126,455
250,000 40,019 60,029 80,038 100,048 120,057 140,067 160,07639,947 59,921 79,894 99,868 119,841 139,815 159,788
300,000 48,352 72,529 96,705 120,881 145,057 169,233 193,41048,280 72,421 96,561 120,701 144,841 168,981 193,122
The following table shows the annual benefit payable under the McDermott
Retirement Plan at age 65 (the normal retirement age) to B&W employees
retiringTenured Employees
who retire in 19992000 in accordance with the lifetime only method of payment. B&W
benefits are based on the formula of a specified percentage (dependent on the
level of wages subject to social security taxes during the employee's career) of
average annual earnings (inclusive of bonuses) during the 60 successive months
out of the 120 successive months prior to retirement in which such earnings were
highest ("B&W Final Average Earnings"). B&W Final Average Earnings and credited
service under the McDermott Retirement Plan at MarchDecember 31, 1999 for Messrs.
Tetrault, Womack and Wood were $487,867$770,054 and 23.724.4 years, $395,563$477,523 and 23.624.3 years
and $241,050$341,325 and 26.727.4 years, respectively. Unless elected otherwise by the
employee, payment will be made in the form of a joint and survivor annuity of
equivalent actuarial value to the amount shown below.
McDermott Retirement Plan Benefits forMCDERMOTT RETIREMENT PLAN BENEFITS FOR B&W EmployeesTENURED EMPLOYEES
B & W
Final Annual Benefits At Age&W
FINAL ANNUAL BENEFITS (IN DOLLARS) AT AGE 65 For Years of Service Indicated
Average ------------------------------------------------------------------
EarningsFOR YEARS OF SERVICE INDICATED
AVERAGE -------------------------------------------------------------------------------------
EARNINGS 10 15 20 25 30 35 40
- -------- ------ ------------- ------- ------- ------- ------- ------- -------
250,000 31,250 46,875 62,500 78,125 93,750 109,375 125,000
300,000 37,500 56,250 75,000 93,750 112,500 131,250 150,000
400,000 50,000 75,000 100,000 125,000 150,000 175,000 200,000
500,000 62,500 93,750 125,000 156,250 187,500 218,750 250,000
600,000 75,000 112,500 150,000 187,500 225,000 262,500 300,000
700,000 87,500 131,250 175,000 218,750 262,500 306,250 350,000
800,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000
Supplemental Executive Retirement Plan. The Company maintains an unfunded
Supplemental Executive Retirement Plan (the "SERP"). The SERP covers certain
officers of the Company and other designated companies, including McDermott
Incorporated, J. Ray McDermott and B&W. Generally, benefits are based uponon a
specified percentage (determined by age, years of service and date of initial
participation in the SERP) of final 3-yearthree-year average cash compensation (salary
plus supplemental compensation for the highest three out of the last ten years
of service) or 3-yearthree-year average cash compensation prior to the SERP scheduled
retirement date, whichever is greater. The maximum benefit may not exceed 60-
65%60-65%
(dependent upon date of initial participation in the SERP) of such 3-yearthree-year
average cash compensation. Payments under the SERP will beare reduced by an amount
equal to pension benefits payable under any other retirement plan maintained by
the
20
25
Company or any of its subsidiary companies. AThe SERP also provides a surviving
spouse death benefit is also provided under the SERP.benefit. Before giving effect to such reductions, the approximate
annual benefit payable under the SERP to Messrs. Gaubert, Rawle, Tetrault,
WoodWomack and WomackWood at retirement age as stated
in the SERP is 60% of each such person's final 3-yearthree-year
average cash compensation.
At retirement, Mr. Woolbert received an annual benefit of 65% of
his final 3-year average cash compensation.
AWe have established a trust (the assets of which constitute corporate
assets) has been
established, which is designed to ensure the payment of benefits arising under the SERP, the
Excess Plans and certain other contracts and arrangements (collectively, the
"Plans") in the event of an effective change in control of the Company. Although
the Companywe would retain primary responsibility for such payments, the trust would
provide for payments to designated participants, in the form of lump sum
distributions, if certain events occur following an effective change in control
of the Company, including but not limited to our failure by the Company to make such payments
and the termination of a participant's employment under certain specified
circumstances. In addition, with respect to
24
benefits which otherwise would have
been paid in the form of an annuity, the trust provides for certain lump sum
equalization payments which, when added to the basic lump sum payments described
above, would be sufficient, after payment of all applicable taxes, to enable
each active participant receiving a lump sum distribution to purchase an annuity
that would provide such participant with the same net after-tax stream of
annuity benefits that such participant would have realized had he retired as of
the date of the lump sum distribution and commenced to receivebegan receiving annuity payments at
that time under the terms of the applicable Plan, based on salary and service
factors at the time of the effective change in control. With respect to
designated participants who retire prior tobefore an effective change in control and who
receive a basic lump sum distribution under the circumstances described above,
the trust provides for similar lump sum equalization payments, based on salary
and service factors at the time of actual retirement.
AMENDMENT TO THE COMPANY'S
1996 OFFICER LONG-TERM INCENTIVE PLAN
(ITEM 2)
Proposed Amendment
In June 1999, the Board approved, subject to shareholder approval, an
amendment to the Company's 1996 Officer Long-Term Incentive Plan (the "Officer
Plan") to increase the number of shares of Common Stock that may be issued
under the plan from 2,500,000 to 4,000,000 shares. The Officer Plan was
originally approved by Company shareholders on August 6, 1996, and amended and
approved by shareholders on September 2, 1997.
Purpose of Proposed Amendment
A significant part of the Company's compensation philosophy is tied to
equity-based incentives. In addition to aligning the interests of Company
management with those of Company shareholders, stock option grants and other
stock incentive awards under the Officer Plan have been an important element
in the Company's ability to attract and retain quality executives and senior
management.
As a result of the Merger, a number of JRM Common Stock options, JRM
restricted stock and JRM performance stock awards will be converted into
Company stock options and restricted stock under the Officer Plan. After such
conversion, the number of shares available for future grants under the Officer
Plan will be significantly depleted and may not be sufficient for stock option
grants and performance stock awards in the near term. Consequently, the Board
of Directors has approved, and recommends that Company shareholders approve,
an amendment to the Officer Plan increasing the number of shares of Common
Stock issuable under the plan from 2,500,000 to 4,000,000 shares.
Summary of Officer Plan
A general description of the basic features of the Officer Plan, as amended
to increase the number of shares authorized for issuance, is described below.
Other than the increase in the number of shares authorized for issuance under
the plan, no other change or modification has been made to the Officer Plan.
This summary is qualified in its entirety by reference to the full text of the
Officer Plan, as amended, a copy of which may be obtained from the Company at
the address set forth at the beginning of this proxy statement.
Administration. The Officer Plan is administered by the Compensation
Committee of the Company's Board of Directors.
Eligibility. Officers and key employees of the Company and its subsidiaries
are eligible to participate in the Officer Plan. Non-employee directors of the
Company are not eligible. Approximately 28 employees of the Company and its
subsidiaries currently participate in the Officer Plan; however, because the
Officer Plan provides for broad discretion in selecting participants and in
making awards, the total number of persons who actually participate and the
respective benefits to be accorded to them can vary from time to time. It is
anticipated that
25
after the Merger, J. Ray McDermott officers who previously participated in J.
Ray McDermott stock incentive plans will participate in the Officer Plan.
Shares Available for Issuance. The Officer Plan provides for a number of
forms of stock-based compensation as described below. Prior to the proposed
amendment to the Officer Plan, there were 2,500,000 shares of Common Stock
authorized for issuance under the Officer Plan, plus any shares remaining
under the Company's 1992 Officer Stock Incentive Plan and 1987 Long-Term
Incentive Compensation Program. The amendment would increase the number of
shares authorized under the Officer Plan from 2,500,000 shares to 4,000,000
shares. As of June 1, 1999, approximately 1.5 million shares of Common Stock
were available for future stock option grants or stock incentive awards under
the Officer Plan. The Company anticipates that a significant number of such
reserved shares of Common Stock will be used upon the conversion of JRM Common
Stock options, JRM restricted stock and JRM performance stock awards into
Company stock options and restricted stock upon the consummation of the
Merger. The exact number of shares that will be reserved for such conversion
cannot be determined until after the Merger.
Provisions in the Officer Plan permit the reuse or reissuance of shares of
Common Stock underlying canceled, expired or forfeited awards of stock-based
compensation, as well as shares tendered in payment of a stock option exercise
price or withheld by the Company to pay taxes on an award, subject to the
restrictions imposed under the SEC's short-swing trading rules.
Description of Awards Under the Plan. The Compensation Committee may award
to eligible employees incentive and non-qualified stock options and may award
restricted stock, subject to the satisfaction of specific performance goals.
The forms of awards are described below.
Stock Options. The Compensation Committee has discretion to award incentive
stock options ("ISOs"), which are intended to comply with Section 422 of the
Internal Revenue Code, or non-qualified stock options ("NQSOs"), which are not
intended to comply with Section 422 of the Internal Revenue Code. Each option
issued under the Officer Plan must be exercised within the period specified by
the Compensation Committee at the time of grant, but not later than ten years
from the date of grant, and the excise price of an option may not be less than
the fair market value of the underlying shares of Common Stock on the date of
grant. Subject to the specific terms of the Officer Plan, the Compensation
Committee has the discretion to set such additional limitations on option
grants as it deems appropriate.
Each option award agreement sets forth the extent to which the participant
has the right to exercise the option following termination of the participants
employment with the Company. Termination provisions, which are determined
within the discretion of the Compensation Committee, may not be uniform among
all participants and may reflect distinctions based on the reasons for
termination of employment.
Upon the exercise of an option granted under the Officer Plan, the option
price is payable in full to the Company: (i) in cash or its equivalent, (ii)
if permitted in the award agreement, by tendering shares having a fair market
value at the time of exercise equal to the total option price (provided such
shares have been held for at least six months prior to their tender), or (iii)
if permitted in the award agreement, a combination of (i) and (ii).
Restricted Stock. The Compensation Committee is also authorized to award
shares of restricted Common Stock under the Officer Plan upon such terms and
conditions as it shall establish. Participants are required to pay a purchase
price for each share of restricted stock granted equal to the par value of the
Common Stock ($1.00 per share). Awards of restricted stock to any one
participant during a fiscal year are limited to 200,000 shares, provided that
performance restricted stock awards are only limited to an initial notional
grant of 200,000 shares. Award agreements specify the period(s) of
restriction, the number of shares of restricted Common Stock granted,
restrictions based upon achievement of specific performance objectives and/or
restrictions under applicable federal or state securities laws. Although
recipients have the right to vote these shares from the date of grant, they do
not have the right to sell or otherwise transfer the shares during the
applicable period of restriction or until earlier satisfaction of other
conditions imposed by the Compensation Committee in its sole discretion.
26
Participants receive dividends on their shares of restricted stock and the
Compensation Committee, in its discretion, determines how dividends on
restricted shares are to be paid.
Each award agreement for restricted stock sets forth the extent to which the
participant will have the right to retain unvested restricted stock following
termination of the participants employment with the Company. These provisions
are determined in the sole discretion of the Compensation Committee, need not
be uniform among all shares of restricted stock issued pursuant to the Officer
Plan and may reflect distinctions based on reasons for termination of
employment.
Performance Measures. Under the Officer Plan, the Compensation Committee may
establish restricted stock performance goals based on the attainment over a
specified period of time (the "Performance Period") of individual performance,
specified targets or other parameters relating to one or more of the following
business criteria: Cash Flow, Cash Flow Return on Capital, Cash Flow Return on
Assets, Cash Flow Return on Equity, Net Income, Return on Capital, Return on
Assets, Return on Equity and Share Price. Following the end of a Performance
Period, the Compensation Committee determines the value of the performance-
based awards granted for the period based on the attainment of the pre-
established objective performance goals. The Compensation Committee also has
the discretion to reduce (but not to increase) the value of a performance-
based award. The Compensation Committee will certify, in writing, that the
award is based on the degree of attainment of the pre-established objective
performance goals. As soon as practicable thereafter, payment of the awards to
employees, if any, are made in the form of shares of restricted stock.
Under the Officer Plan, awards of restricted stock may be, and since 1998
have been, granted based on the following "Restricted Stock Performance
Formula".
(i) The Compensation Committee makes an initial notional grant of shares
of restricted stock (the "Notional Grant"). At the end of a specified
Performance Period (pre-established by the Compensation Committee), the
number of shares in the Notional Grant is increased or decreased based on
the increase or decrease in the market value of the Common Stock over the
Performance Period.
(ii) The increase or decrease in the number of shares in the Notional
Grant is determined by calculating the difference between the market value
per share of Common Stock at the end of the Performance Period and the
market value per share on the grant date. This difference is multiplied by
the number of shares of restricted stock in the Notional Grant and the
resulting product is divided by the market value at the end of the
Performance Period. The number so determined is added to (in the case of an
increase in market value) or subtracted from (in the case of a decrease in
market value) the number of shares in the Notional Grant. Once the number
of shares has been adjusted in the manner described above, participants
receive an actual grant of such number of restricted Common Stock, with
transfer restrictions and forfeiture provisions continuing to be imposed
for a period of time.
Adjustment and Amendments. The Officer Plan provides for appropriate
adjustments in the number of shares of Common Stock subject to awards and
available for future awards in the event of changes in the outstanding shares
of Common Stock by reason of a merger, stock split, or certain other events.
In case of a pending change of control of the Company, outstanding options
granted under the Officer Plan will become immediately exercisable and will
remain exercisable throughout their entire term and restriction periods and
restrictions imposed on shares of restricted stock shall immediately lapse.
The Officer Plan may be modified or amended by the Board of Directors at any
time and for any purpose which the Board of Directors deems appropriate.
However, no such amendment shall adversely affect any outstanding awards
without the affected holders consent. Shareholder approval of an amendment
will be sought if necessary or desirable under Internal Revenue Service or SEC
regulations, the rules of the New York Stock Exchange or any applicable law.
Non-transferability. No derivative security (including, without limitation,
options) granted pursuant to, and no right to payment under, the Officer Plan
is assignable or transferable by a plan participant except by will or by the
laws of descent and distribution, and any option or similar right shall be
exercisable during a participants lifetime only by the participant or by the
participants guardian or legal representative. These limitations may be waived
by the Compensation Committee in the award agreement, subject to restrictions
imposed under the SECs short-swing trading rules and, if applicable, federal
tax requirements relating to ISOs.
27
Duration of the Officer Plan. The Officer Plan will remain in effect until
all options and rights granted thereunder have been satisfied or terminated
pursuant to the terms of the Officer Plan, and all Performance Periods for
performance-based awards granted thereunder have been completed. However, in
no event will an award be granted under the Officer Plan on or after April 1,
2006.
Federal Income Tax Consequences
Options. With respect to options which qualify as ISOs, a plan participant
will not recognize income for federal income tax purposes at the time options
are granted or exercised if the participant disposes of shares acquired by
exercise of an ISO either before the expiration of two years from the date the
options are granted or within one year after the issuance of shares upon
exercise of the ISO (the "holding periods"), the participant will recognize in
the year of disposition: (i) ordinary income, to the extent that the lesser of
either (a) the fair market value of the shares on the date of option exercise,
or (b) the amount realized on disposition, exceeds the option price; and (ii)
capital gain, to the extent the amount realized on disposition exceeds the
fair market value of the shares on the date of option exercise. If the shares
are sold after expiration of the holding periods, the participant generally
will recognize capital gain or loss equal to the difference between the amount
realized on disposition and the option price.
With respect to NQSOs, the participant will recognize no income upon grant
of the option, and upon exercise, will recognize ordinary income to the extent
of the excess of the fair market value of the shares on the date of option
exercise over the amount paid by the participant for the shares. Upon a
subsequent disposition of the shares received under the option, the
participant generally will recognize capital gain or loss to the extent of the
difference between the fair market value of the shares at the time of exercise
and the amount realized on the disposition.
Restricted Stock. A participant holding restricted stock will, at the time
the shares vest, realize ordinary income in an amount equal to the fair market
value of the shares (less any amount the participant paid for such shares) and
any cash received at the time of vesting, and the Company will be entitled to
a corresponding deduction for federal income tax purposes. Alternatively, the
participant may elect within 30 days of the grant of restricted stock to
recognize ordinary income equal to the then fair market value of the shares
(less any amount the participant paid for such shares). Dividends paid to the
participant on the restricted stock during the restriction period will
generally be ordinary income to the participant and deductible as such by the
Company. In general, the Company will receive an income tax deduction at the
same time and in the same amount which is taxable to the employee as
compensation, except as provided below under Section 162(m). To the extent a
participant realizes capital gains, as described above, the Company will not
be entitled to any deduction for federal income tax purposes.
Section 162(m). Under Section 162(m) of the Internal Revenue Code,
compensation paid by the Company in excess of $1 million for any taxable year
to "covered employees" generally is deductible by the Company or its
affiliates for federal income tax purposes if it is performance-based, is paid
pursuant to a plan approved by Company shareholders and administered by a
committee of outside directors, and meets certain other requirements.
Generally, "covered employee" under Section 162(m) means the chief executive
officer and the four other highest paid executive officers of the Company on
the last day of the taxable year. For the Company's recently completed tax
year, the Named Executive Officers set forth in the "Summary Compensation
Table" are covered employees. The Compensation Committee has taken into
consideration the effect of Section 162(m) in structuring awards under the
Officer Plan. This is not expected to change.
Officer Plan Benefits
The benefits that will be received under the Officer Plan, as amended, by
particular individuals or groups are not determinable at this time. For fiscal
year 1999, a total of 390,370 options to acquire Common Stock and 129,510
awards of performance restricted stock were granted under the Officer Plan, of
which 225,990 options
28
and 68,580 performance restricted stock awards were granted to the Company's
executive officers as a group. Mr. Rawle, who participated in a J. Ray
McDermott stock incentive plan, did not receive Common Stock options or
performance restricted stock awards under the Officer Plan for fiscal year
1999. The Common Stock options and performance restricted stock awards that
were granted to each other Named Executive Officer for fiscal year 1999 under
the Officer Plan are summarized in the tables entitled "Option Grants in Last
Fiscal Year" and in "Long-Term Incentive Plans--Performance Stock Awards in
Last Fiscal Year" on pages 20 and 22.
Recommendation of the Board
The Board recommends a vote "FOR" approval of the amendment to the Officer
Plan. The affirmative vote of holders of a majority of the shares of Common
Stock present, in person or by proxy, at the Annual Meeting and entitled to
vote on the matter is necessary for approval.
REAPPROVALAPPROVAL OF THE COMPANY'S
1994 VARIABLE SUPPLEMENTAL COMPENSATION PLAN
(ITEM 3)
In 1994, the Company adopted the Company's 1994 Variable Supplemental
Compensation Plan (the "1994 Plan") to compensate managerial and other key
employees who contribute materially to the success of the Company and its
subsidiary and affiliated companies. Pursuant to 162(m) of the Internal
Revenue Code, the 1994 Plan was approved by Company shareholders on August 9,
1994 so that awards made under the plan would not be subject to the $1 million
tax deduction limitation. Because the Company's Compensation Committee, which
administers the 1994 Plan, has the authority to select each year among several
shareholder approved performance goals and to establish different targets
under such goals, the 1994 Plan must be reapproved by Company shareholders
every five years for plan awards to continue to be qualified performance-based
compensation under Section 162(m).
Summary of 1994 Plan
The following summary of the 1994 Plan is qualified in its entirety by
reference to the full text of the 1994 Plan, a copy of which may be obtained
from the Company at the address set forth at the beginning of this proxy
statement.
The 1994 Plan is administered by the Compensation Committee, composed of
disinterested outside directors appointed by the Board. All salaried employees
of the Company or its subsidiaries are eligible to participate in the 1994
Plan. The Chief Executive Officer automatically participates in the 1994 Plan.
Actual participation in the 1994 Plan by all other salaried employees is based
upon recommendations by the Chief Executive Officer, subject to approval by
the Compensation Committee. During fiscal year 1999, 163 employees
participated in the 1994 Plan.
The Compensation Committee establishes, for each plan year, performance
goals and award opportunities, in writing, which correspond to various levels
of achievement of the preestablished performance goals. The award opportunity
for any Named Executive Officer is based on the following performance
criteria: (i) the Named Executive Officer's target incentive award; (ii) the
potential final award in relation to the various levels of achievement of the
preestablished performance goals; and (iii) company, group, or division
performance in relation to the preestablished performance goal. Performance
measures that may be used to determine award opportunities for plan
participants are limited to Cash Flow, Cash Flow Return on Capital, Cash Flow
Return on Equity, Net Income, Return on Capital, Return on Assets, and Return
on Equity (as defined in the 1994 Plan). Once established, performance goals
normally can not be changed during the plan year. However, if the Compensation
Committee determines that external changes or other unanticipated business
conditions have materially affected the fairness of the goals, then the
Compensation Committee may approve appropriate adjustments to the performance
goals during the plan year as such goals apply to award opportunities, to the
extent permitted by Section 162(m). In addition, the Compensation Committee
shall have the authority to reduce or eliminate final awards, based upon any
criteria it deems appropriate.
29
At the end of each plan year, awards are computed for each plan participant.
Final individual awards may vary above or below the target award, based on the
level of achievement of the preestablished performance goal. The maximum
payout with respect to any award payable to any one plan participant in any
given plan year is $900,000. However, the Compensation Committee may establish
minimum levels of performance goal achievement, below which no awards will be
paid to any plan participant. The Committee may amend the 1994 Plan from time
to time, as provided in the plan.
1994 Plan Benefits
Future benefits that will be received under the 1994 Plan by particular
individuals or groups can not be determined at this time. For fiscal year
1999, approximately $12.32 million in cash bonuses were paid to employees of
the Company or its subsidiaries under the 1994 Plan, of which approximately
$2.65 million was paid to the Company's executive officers as a group. Mr.
Rawle, who participated in a J. Ray McDermott cash bonus plan, did not receive
any benefits under the 1994 Plan for fiscal year 1999. The cash bonus paid to
each other Named Executive Officer for fiscal year 1999 under the 1994 Plan is
described in "REPORT ON EXECUTIVE COMPENSATION--Annual Bonus" and in the
"Summary Compensation Table" set forth on page 18.
Recommendation of the Board
The Board recommends a vote "FOR" the reapproval of the 1994 Plan. The
affirmative vote of the holders of a majority of the shares of Common Stock
present, in person or by proxy, at the Annual Meeting and entitled to vote on
the matter is necessary for reapproval.
RETENTIONSELECTION OF
INDEPENDENT ACCOUNTANTS FOR
THE
UPCOMING FISCAL YEAR 2000
(ITEM 4)2)
Upon the recommendation of the Audit Committee, theour Board of Directors has
approved the retentionselection of PricewaterhouseCoopers LLP
("PricewaterhouseCoopers") to serve as independent
accountants to audit theour accounts of the Company for the upcoming fiscal year.year ending December 31, 2000.
Although not required to do so, theour Board of Directors considers it advisable that such retention be
submittedis submitting the
selection of PricewaterhouseCoopers to theour shareholders for their approval.
PricewaterhouseCoopers served as our independent accountants offor the Companynine-month
period ended December 31, 1999 and its subsidiaries during the fiscal year ended March 31, 1999.
Representatives of PricewaterhouseCoopers will be present at the Annual Meeting
and will have an opportunity to make a statement if they desire to do so and to
respond to appropriate questions.
The affirmative vote of a majority of the outstanding shares of Common
Stock present, in person or by proxy, at the Annual Meeting and entitled to vote
on the matter is required to approve this proposal. TheOur Board of Directors
recommends that shareholders vote "FOR" the retentionselection of PricewaterhouseCoopers
as the Company'sour independent accountants.
CERTAIN TRANSACTIONS
Pursuant to a production management and operation agreement,
Newfield Exploration Company ("Newfield"), a company of which Joe B.
Foster, (a nominee
for directorone of our directors, is the Company) isNon-executive Chairman of the Board, and Chief Executive
Officer,
manages and operates an offshore producing oil and gas property for one of J.
Ray McDermott's subsidiaries under a subsidiary of the Company.production and operation agreement. Under
the agreement, the Company'sthis subsidiary is required to pay Newfield (i) an operations
management fee of $10,000$10,580 per month, (ii) a marketing services fee at a rate of
$.01/MMBTU with a minimum monthly fee of $1,500, (iii) a minimum accounting and
property supervision fee of $5,000 per month and (iv) certain other costs
incurred by Newfield in connection with the agreement. Such payment terms are applicable untilDuring the nine-month
period ended December 31, 1999, at which time if the parties fail to agree to new payment
terms, either party may terminate the agreement. During fiscal year 1999, the
Companythis subsidiary paid $368,852approximately $464,000 to
Newfield under the agreement. The Company estimatesWe estimate that $750,000this subsidiary will be paid topay Newfield
approximately $720,000 under the agreement in the upcoming fiscal year pursuant to
the agreement.
30current year.
21
A26
Another subsidiary of the Company hasJ. Ray McDermott periodically enteredenters into agreements
to design, fabricate or install several offshore pipelines or structures for Newfield.
Newfield paid suchthat subsidiary approximately $1$1.9 million for the work performed
under these agreements during fiscal yearthe nine-month period ended December 31, 1999. The Company
estimatesWe
estimate that approximately $2.6$1.8 million will be paid by Newfield to this
subsidiary for work performed in the upcoming fiscalcurrent year pursuant to these types
agreements.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company'sour directors
and executive officers, and persons who own 10% or more of the
Company'sour voting stock, to
file reports of ownership and changes in ownership of the Company'sour equity securities with
the SEC and the New York Stock Exchange. Directors, executive officers and 10%
or more holders are required by SEC regulations to furnish the Companyus with copies of all
Section 16(a) forms they file. Based solely on a review of the copies of suchthose
forms furnished to the Company,us, or written representations that no forms were required,
the Company believeswe believe that itsour directors, executive officers and 10% or more beneficial
owners complied with all Section 16(a) filing requirements during fiscal yearthe nine-month
period ended December 31, 1999.
SHAREHOLDERS' PROPOSALS
You may presentAny shareholder who wishes to have a qualified proposal to be considered for
inclusion in our 20002001 proxy statement if we receive itmust send notice of the proposal to our
Corporate Secretary at our principal executive officesoffice no later than March 1, 2000 (or if the date of our 2000 Annual Meeting differs by more thanNovember 30,
days from the date of this year's meeting, a reasonable time before we
begin to print and mail our 2000 proxy statement).2000. With such proposal, you must provide your name, address, the number of
shares of Common Stock held of record or beneficially, the date or dates upon
which such Common Stock was acquired and documentary support for any claim of
beneficial ownership.
You should address yourMoreover, any shareholder who intends to submit a proposal to:for
consideration at our 2001 Annual Meeting, but not for inclusion in our proxy
materials, or intends to submit nominees for election as directors at the
meeting must notify our Corporate Secretary. Under our by-laws, such notice must
(1) be received at our executive offices no earlier than January 3, 2001 or
later than February 1, 2001 and (2) satisfy certain requirements. A copy of the
pertinent by-law provisions can be obtained from our Corporate Secretary McDermott
International, Inc.on
written request.
By Order of the Board of Directors,
/s/ Wayne Murphy
S. WAYNE MURPHYJOHN T. NESSER, III
JOHN T. NESSER, III
Secretary
Dated: June 29, 1999
31March 30, 2000
22
McDermott27
[McDermott International, Inc. logo]
28
MCDERMOTT INTERNATIONAL, INC.
P Solicited by the Board of Directors
RSOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints S. Wayne MurphyJohn T. Nesser, III and Daniel R.
R Gaubert, or either of them, as attorneys, agents and proxies of the
undersigned,
O with full power of substitution, to vote all the shares
of common stock of McDermott International, Inc. (the "Company") which
O the undersigned
X may be entitled to vote at the Company's Annual
Meeting of Shareholders to be held on August 3, 1999May 2, 2000 and at any
adjournment(s)adjournment of such meeting,
Y with all powers which the undersigned
X would possess if personally present.
PLEASE MARK, SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD AND
Y PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE.
The undersigned acknowledges receipt of the Company's Annual Report for the
fiscal yearNine-month Period ended MarchDecember 31, 1999 and its Notice of Annual
Meeting of Shareholders and related Proxy Statement.
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
.o PLEASE FOLD AND DETACH HERE IF YOU ARE NOT VOTING BY INTERNET OR TELEPHONE .
McDERMOTTo
MCDERMOTT INTERNATIONAL, INC.
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, August 3, 1999TUESDAY, MAY 2, 2000
9:30 a.m.
Hotel Inter-Continental
La Salle Ballroom
444 St. Charles Avenue
New Orleans, LouisianaA.M.
SHERATON NEW ORLEANS HOTEL
GRAND BALLROOM D AND E
500 CANAL STREET
NEW ORLEANS, LOUISIANA
29
[X} Please mark your 1317
votes as in this
example.
IMPORTANT-PLEASE MARK APPROPRIATE BOXES ONLY IN BLUE OR BLACK INK AS SHOWN:
1. Nominees as Class III Directors: 01. Robert L. Howard, 02. Roger E.
Tetrault, and 03. John N. Turner.
[X] Please mark your | 1317
votes as in this |__
example.
IMPORTANT - PLEASE MARK APPROPRIATE BOXES ONLY IN BLUE OR BLACK INK AS SHOWN:
1. Nominees as Class II Directors: 01. Joe B. Foster, 02. Kathryn D. Sullivan, and 03. Richard E. Woolbert.
WITHHOLD AUTHORITY
FOR for all nominees
FOR AGAINST ABSTAIN
[_] [_] 2. Amendment to Company's 1996 Officer Long-Term [_] [_] [_][ ] [ ]
INSTRUCTION: To withhold authority to 2. Selection of PricewaterhouseCoopers LLP as the FOR AGAINST ABSTAIN
vote for any Incentive Plan increasingindividual nominee, Company's independent accountants for the number of shares
individual nominee,fiscal [ ] [ ] [ ]
write that nominee's name in authorized for issuance under the plan from
theyear ending December 31, 2000.
space provided below:
2,500,000 to 4,000,000 shares
3. Reapproval of the Company's 1994 Variable [_] [_] [_]
- -----------------------------------
-------------------------------------------
Supplemental Compensation Plan for tax
deductibility reasons
4. Retention of PricewaterhouseCoopers LLP as [_] [_] [_]
the Company's independent accountants for
the upcoming fiscal year
--------------------------------------------
Annual Report
--------------------------------------------
MarkANNUAL REPORT
MARK here to discontinue annual report
mailing for the account [_]
(for multiple-accountmultiple- [ ]
account holders only.
--------------------------------------------only).
-------------------------------------------
Every properly signed Proxy will be voted in accordance with the
specifications made thereon. If not otherwise specified, this Proxy
will be voted FOR the election of Directors and each ofother proposal.
The proxy holders named on the reverse side also will vote in their
discretion on any other proposals.
The proxy holders named onmatter that may properly come before the
reverse side
also will vote in their discretion on any
other matter that may properly come before
the meeting.
SIGNATURE(S) ______________________________________ DATE _________
(Signature(s) should agree with name(s) on stock certificates as specified hereon. Executors, administrators, trustees, etc., should
indicate when signing.)
- ------------------------------------------------------------------------------------------------------------------------------------
. FOLD AND DETACH HERE IF YOU ARE NOT VOTING BY INTERNET OR TELEPHONE .
McDermott International, Inc.SIGNATURE(S) DATE
----------------------- ------------
(Signature(s) should agree with name(s) on stock certificates
as specified hereon. Executors, administrators, trustees, etc.,
should indicate when signing.)
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE IF YOU ARE NOT VOTING BY INTERNET OR TELEPHONE o
MCDERMOTT INTERNATIONAL, INC.
Dear Shareholder:
McDermott International, Inc. encourages you to take advantage of new and
convenient ways to vote your shares. You can vote your shares electronically
through the Internet or the telephone 24 hours a day, 7 days a week. This
eliminates the need to return the proxy card.
To vote your shares electronically you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
the box above must be used to access the system.
1. To vote over the Internet:
.o Log on the Internet and go to the web site
http://www.eproxyvote.com/mdr
2. To vote over the telephone:
.o On a touch-tone telephone call 1-877-PRX-VOTE (1-877-779-8683)
.o Outside of the U.S. and Canada call 201-536-8073.
Your electronic vote authorizes the namednames proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card.
Your vote is important. Thank you for voting.YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
APPENDIX A
- -------------------------------------------------------------------------------
McDERMOTT30
MCDERMOTT INTERNATIONAL, INC.
1996
OFFICER LONG-TERM
INCENTIVETHRIFT PLAN (Amended and Restated through June 2, 1999)
- -------------------------------------------------------------------------------
TABLEFOR EMPLOYEES OF CONTENTS
- -----------------
ARTICLE 1 - ESTABLISHMENT, OBJECTIVES AND DURATION.................................... 1
1.1 Establishment of the Plan............................................... 1
1.2 Objectives of the Plan.................................................. 1
1.3 Duration of the Plan.................................................... 1
ARTICLE 2 - DEFINITIONS............................................................... 1
ARTICLE 3 - ADMINISTRATION............................................................ 6
3.1 The Committee........................................................... 6
3.2 Authority of the Committee.............................................. 6
3.3 Decisions Binding....................................................... 6
ARTICLE 4 - SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS............................. 7
4.1 Number of Shares Available for Grants................................... 7
4.2 Lapsed Awards........................................................... 8
4.3 AdjustmentsMCDERMOTT INCORPORATED
AND PARTICIPATING SUBSIDIARY AND AFFILIATED COMPANIES
MARCH 30, 2000
To those individuals ("Plan Participants") who have an interest in Authorized Shares........................................ 8
ARTICLE 5 - ELIGIBILITY AND PARTICIPATION............................................. 8
5.1 Eligibility............................................................. 8
5.2 Actual Participation.................................................... 8
ARTICLE 6 - STOCK OPTIONS............................................................. 8
6.1 Grant of Options........................................................ 8
6.2 Award Agreement......................................................... 9
6.3 Option Price............................................................ 9
6.4 Duration of Options..................................................... 9
6.5 Exercise of Options..................................................... 9
6.6 Payment................................................................. 9
6.7 Restrictions on Share Transferability................................... 10
6.8 Termination of Employment............................................... 10
6.9 Non-transferability of Options.......................................... 10
ARTICLE 7 - RESTRICTED STOCK.......................................................... 11
7.1 Grant of Restricted Stock............................................... 11
7.2 Restricted Stock Agreement.............................................. 11
7.3 Restricted Stock Price.................................................. 11
7.4 Transferability......................................................... 11
7.5 Other Restrictions...................................................... 11
7.6 Voting Rights........................................................... 12
7.7 Dividends and Other Distributions....................................... 12
7.8 Termination of Employment............................................... 12
ARTICLE 8 - PERFORMANCE MEASURES...................................................... 13
8.1 Performance Measures.................................................... 13
8.2 Adjustments............................................................. 13
8.3 Restricted Stock Performance Formula.................................... 14
8.4 Compliance with Code Section 162(m)..................................... 15
i
ARTICLE 9 - BENEFICIARY DESIGNATION................................................... 15
ARTICLE 10 - DEFERRALS................................................................ 15
ARTICLE 11 - RIGHTS OF EMPLOYEES...................................................... 15
11.1 Employment.............................................................. 15
11.2 Participation........................................................... 16
ARTICLE 12 - CHANGE IN CONTROL........................................................ 16
12.1 Treatment of Outstanding Awards......................................... 16
12.2 Termination, Amendment and Modifications of Change-in-Control Provisions 17
ARTICLE 13 - AMENDMENT, MODIFICATION AND TERMINATION.................................. 17
13.1 Amendment, Modification and Termination................................. 17
13.2 Adjustment of Awards Upon the Occurrence of
Certain Unusual or Non-recurring Events.......................... 17
13.3 Awards Previously Granted............................................... 18
13.4 Compliance with Code Section 162(m...................................... 18
ARTICLE 14 - WITHHOLDING.............................................................. 18
14.1 Tax Withholding......................................................... 18
14.2 Share Withholding....................................................... 18
ARTICLE 15 - INDEMNIFICATION.......................................................... 19
ARTICLE 16 - SUCCESSORS............................................................... 19
ARTICLE 17 - LEGAL CONSTRUCTION....................................................... 19
17.1 Gender and Number....................................................... 19
17.2 Severability............................................................ 19
17.3 Requirements of Law..................................................... 20
17.4 Securities Law Compliance............................................... 20
17.5 Governing Law........................................................... 20
ii
McDermott
International, Inc. 1
Officer Long-Term Incentive Plan
- -------------------------------------------------------------------------------
ARTICLE 1 - ESTABLISHMENT, OBJECTIVES AND DURATION
--------------------------------------------------
1.1 Establishment of the Plan. McDermott International, Inc. A Panamanian
corporation (hereinafter referred to as the "Company"Common Stock, par value $1.00 per share (the "Common
Stock"), hereby
establishes an incentive compensation plan to be known as the
"McDermott International, Inc. 1996 Officer Long-Term Incentive Plan"
(hereinafter referred to as the "Plan") as set forth in this document.
The Plan permits the grant of Nonqualified Stock Options, Incentive
Stock Options, and Restricted Stock.
Subject to approval by the Company's stockholders, the Plan shall
become effective as of April 1, 1996 (the "Effective Date") and shall
remain in effect as provided in Section 1.3 hereof.
1.2 Objectives of the Plan. The objectives of the Plan are to optimize the
profitability and growth of the Company through incentives which are
consistent with the Company's objectives and which link the interests
of Participants to those of the Company's stockholders; to provide
Participants with an incentive for excellence in individual
performance; and to promote teamwork among Participants.
The Plan is further intended to provide flexibility to the Company in
its ability to motivate, attract, and retain the services of
Participants who make significant contributions to the Company's
success and to allow Participants to share in the success of the
Company.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect, subject to
the right of the Board of Directors to amend or terminate the Plan at
any time pursuant to Article 13 hereof, until all shares subject to it
shall have been purchased or acquired according to the Plan"s
provisions. However, in no event may an Award be granted under the Plan
on or after April 1, 2006.
McDermott International, Inc. 2
Officer Long-Term Incentive Plan
- -------------------------------------------------------------------------------
ARTICLE 2 - DEFINITIONS
-----------------------
Whenever used in the Plan, the following terms shall have the meanings set forth
below, and when the meaning is intended, the initial letter of the word shall be
capitalized:
2.1 "Award" means individually or collectively, a grant under this Plan of
Non-qualified Stock Options, Incentive Stock Options, and Restricted
Stock.
2.2 "Award Agreement" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to
Awards granted under this Plan.
2.3 "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act.
2.4 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.5 "Change in Control" of the Company shall be deemed to have occurred (as
of a particular day, as specified by the Board) upon the occurrence of
any event described in this Section 2.5 as constituting a Change in
Control.
A Change in Control will be deemed to have occurred as of the first day
any one (1) or more of the following paragraphs shall have been
satisfied:
(a) Any person as described in Section 3(a)(9) of the Securities
Exchange Act of 1934, (other than a person in control of the
Company on the Effective Date, or other than a trustee or other
fiduciary holding securities under an Employee benefit plan of
the Company, or a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions
as their ownership of Shares of voting securities of the
Company), is or becomes the Beneficial Owner, directly or
indirectly, of voting securities of the Company representing
thirty percent (30%) or more of the combined voting power of the
Company"s then outstanding securities, excluding for
McDermott International, Inc. 3
Officer Long-Term Incentive Plan
- -------------------------------------------------------------------------------
these purposes the Series A Participating Preferred Stock of the
Company; or
(b) During any period of two consecutive years (not including any
period prior to the execution of the Plan), individuals who at
the beginning of such period constitute the Board (and any new
Director, whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds of the Directors then still in office who either were
Directors at the beginning of the period of whose election or
nomination for election was previously so approved), cease for
any reason to constitute a majority thereof; or
(c) The stockholders of the Company approve: (a) a plan of complete
liquidation of the Company; or (b) an agreement for the sale or
disposition of all or substantially all the Company's assets; or
(c) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity), at least 50.1 percent of the
combined voting securities of the Company (or such surviving
entity) outstanding immediately after such merger or
consolidation.
However, in no event shall a Change in Control be deemed to have
occurred with respect to a Participant if the Participant is part of a
purchasing group which consummates the Change-in-Control transaction. A
Participant shall be deemed "part of a purchasing group" for purpose of
the preceding sentence if the Participant is an equity participant, has
been identified as a potential equity participant or has agreed to
become an equity participant in the purchasing company or group (except
for: (i) passive ownership of less than three percent (3%) of the
shares of voting securities of the purchasing company; or (ii)
ownership of equity participation in the purchasing company or group
which is otherwise not deemed to be significant, as determined prior to
the Change in Control by a majority of the disinterested Directors).
2.6 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
McDermott International, Inc. 4
Officer Long-Term Incentive Plan
- -------------------------------------------------------------------------------
2.7 "Committee" means the Compensation Committee of the Board, as specified
in Article 3 herein, or such other Committee appointed by the Board to
administer the Plan with respect to grants of Awards.
2.8 "Company" means McDermott International, Inc., a Panamanian
corporation, together with any and all Subsidiaries, and any successor
thereto as provided in Article 16 herein.
2.9 "Covered Employee" means a Participant who, as of the date of vesting
and/or payout of an Award, as applicable, is one of the group of
"covered employees," as defined in the regulations promulgated under
Code Section 162(m), or any successor statute.
2.10 "Director" means any individual who is a member of the Board of
Directors of the Company.
2.11 "Disability" shall have meaning ascribed to such term in the
Participant"s governing long-term disability plan.
2.12 "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.13 "Employee" means any full-time, active employee of the Company.
Directors who are not employed by the Company shall not be considered
Employees under this Plan.
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.15 "Fair Market Value" shall mean the fair market value of a Share, as
determined in accordance with procedures established by the Committee.
2.16 "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive
Stock Option and which is intended to meet the requirements of Code
Section 422.
McDermott International, Inc. 5
Officer Long-Term Incentive Plan
- -------------------------------------------------------------------------------
2.17 "Insider" shall mean an individual who is subject to Section 16 of the
Exchange Act.
2.18 "Non-employee Director" means an individual who is a member of the
Board of Directors of the Company but who is not an Employee of the
Company.
2.19 "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to meet
the requirements of Code Section 422.
2.20 "Officer" means an Employee of the Company included in the definition
of officer under Section 16 of the Exchange Act and the rules
promulgated thereunder or other Employees designated as Officers by the
Board of Directors.
2.21 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
2.22 "Option Price" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
2.23 "Participant" means an Employee who has outstanding an Award granted
under the Plan. The term "Participant" shall not include Nonemployee
Directors.
2.24 "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.25 "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage
of time, the achievement of performance objectives, or upon the
occurrence of other events as determined by the Committee, at its
discretion), and the Shares are subject to a substantial risk of
forfeiture, as provided in Article 7 herein.
McDermott International, Inc. 6
Officer Long-Term Incentive Plan
- -------------------------------------------------------------------------------
2.26 "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) thereof.
2.27 "Qualified Domestic Relations Order" shall mean a valid and effective
domestic relations order, as determined by the Committee.
2.28 "Restricted Stock" means an Award granted to a Participant pursuant to
Article 7 herein.
2.29 "Retirement" shall have the meaning ascribed to such term in the
Company"s tax-qualified defined benefit retirement plan.
2.30 "Shares" means the shares of Common Stock of the Company.
2.31 "Subsidiary" means any corporation, partnership, joint venture or other
entity in which the Company has a direct or indirect majority voting
interest, except for J. Ray McDermott, S.A. and any of its
subsidiaries.
2.32 "Restricted Stock Performance Formula" shall have the meaning ascribed
to such term in Section 8.3 hereof.
ARTICLE 3 - ADMINISTRATION
--------------------------
3.1 The Committee. The Plan shall be administered by the Committee, which
Committee shall satisfy the "disinterested administration" provisions
of Rule 16b-3 under the Exchange Act, or any successor provision. The
members of the Committee shall be appointed from time to time by, and
shall serve at the discretion of, the Board of Directors.
3.2 Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to
the provisions herein, the Committee shall have full
McDermott International, Inc. 7
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power to select Employees who shall participate in the Plan; determine
the sizes and types of Awards; determine the terms and conditions of
Awards in a manner consistent with the Plan; construe and interpret the
Plan and any agreement or instrument entered into under the Plan;
establish, amend, or waive rules and regulations for the Plan's
administration; and (subject to the provisions of Article 13 herein)
amend the terms and conditions of any outstanding Award to the extent
such terms and conditions are within the discretion of the Committee as
provided in the Plan. Further, the Committee shall make all other
determinations which may be necessary or advisable for the
administration of the Plan. As permitted by law, the Committee may
delegate its authority as identified herein.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders
and resolutions of the Board shall be final, conclusive and binding on
all persons, including the Company, its stockholders, Employees,
Officers, Participants, and their estates and beneficiaries.
ARTICLE 4 - SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
---------------------------------------------------------
4.1 Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.3 herein, the number of Shares hereby reserved
for issuance to Participants under the Plan shall be four million
(4,000,000). Additionally, Shares approved pursuant to the 1987 Long-
Term Incentive Compensation Program and the 1992 Officer Stock
Incentive Program which, as of the effective date of this Plan, have
not been awarded and Shares subject to any Award that is canceled,
terminates, expires, or lapses for any reason shall become available
for grant under the Plan to the extent permitted by the rules
promulgated under Section 16 of the Exchange Act.
The maximum number of such Shares which may be granted in the form of
Restricted Stock pursuant to Article 7 herein shall be an amount equal
to thirty percent (30%) of the total number of Shares reserved for
issuance under the Plan.
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The following rules shall apply to grants of Awards under the Plan:
(a) Stock Options: The maximum aggregate number of Shares that may be
granted in the form of Stock Options, pursuant to any Award
granted in any one fiscal year to any single Participant shall be
four hundred thousand (400,000).
(b) Restricted Stock: The maximum aggregate grant with respect to
Awards of Restricted Stock granted in any one fiscal year to any
single Participant shall be two hundred thousand (200,000)
Shares. Notwithstanding the foregoing sentence, Restricted Stock
granted under the Restricted Stock Performance Formula shall be
limited to an Initial Grant (as defined in Section 8.3) of
200,000 Shares awarded in any one fiscal year to any single
Participant.
(c) Incentive Stock Options: The maximum aggregate number of Shares
that may be granted in the form of Incentive Stock Options shall
be four million (4,000,000) Shares.
4.2 Lapsed Awards. If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason, any Shares subject to
such Award again shall be available for the grant of an Award under the
Plan.
4.3 Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate
transaction, such as any merger, consolidation, separation, including a
spin-off, or other distribution of stock or property of the Company,
any reorganization (whether or not such reorganization comes within the
definition of such term in Code Section 368) or any partial or complete
liquidation of the Company, such adjustment shall be made in the number
and class of Shares which may be delivered under Section 4.1, in the
number and class of and/or price of Shares subject to outstanding
Awards granted under the Plan, and in the Award limits set forth in
subsections 4.1(a) and 4.1(b), as may be determined to be appropriate
and equitable by the Committee, in its sole discretion, to prevent
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dilution or enlargement of rights; provided, however, that the number
of Shares subject to any Award shall always be a whole number.
ARTICLE 5 - ELIGIBILITY AND PARTICIPATION
-----------------------------------------
5.1 Eligibility. Persons eligible to participate in this Plan include
Officers of the Company. Pursuant to Section 3.2, the Committee shall
have full power to select Officers who shall participate in the Plan.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees,
those to whom Awards shall be granted and shall determine the nature
and amount of each Award.
ARTICLE 6 - STOCK OPTIONS
-------------------------
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such
terms, and at any time and from time to time as shall be determined by
the Committee.
6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the
Option, the number of Shares to which the Option pertains, and such
other provisions as the Committee shall determine. The Award Agreement
also shall specify whether the Option is intended to be an ISO within
the meaning of Code Section 422, or an NQSO whose grant is intended not
to fall under the provisions of Code Section 422.
6.3 Option Price. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100% of the Fair
Market Value of a Share on the date the Option is granted.
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6.4 Duration of Options. Each Option granted to a Participant, shall expire
at such time as the Committee shall determine at the time of grant;
provided, however, that no Option shall be exercisable later than the
tenth (10th) anniversary date of its grant.
6.5 Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and
conditions as the Committee shall in each instance approve, which need
not be the same for each grant or for each Participant.
6.6 Payment. Options granted under this Article 6 shall be exercised by the
delivery of a written notice of exercise to the Company, setting forth
the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) if
permitted in the governing Award Agreement, by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares
which are tendered must have been held by the Participant for at least
six (6) months prior to their tender to satisfy the Option Price), or
(c) if permitted in the governing Award Agreement, by a combination of
(a) and (b).
The Committee also may allow cashless exercise as permitted under
Federal Reserve Board"s Regulation T, subject to applicable securities
law restrictions, or by any other means which the Committee determines
to be consistent with the Plan"s purpose and applicable law.
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the
Participant, in the Participant"s name, Share certificates in an
appropriate amount based upon the number of Shares purchased under the
Option(s).
6.7 Restrictions on Share Transferability. The committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an
Option granted under this Article 6 as it may
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deem advisable, including, without limitation, restrictions under
applicable federal securities laws, under the requirements of any stock
exchange or market upon which such Shares are then listed and/or
traded, and under any blue sky or state securities laws applicable to
such Shares.
6.8 Termination of Employment. Each Participant's Option Award Agreement
shall set forth the extent to which the Participant shall have the
right to exercise the Option following termination of the Participant's
employment with the Company. Such provisions shall be determined in the
sole discretion of the Committee, shall be included in the Award
Agreement entered into with each Participant, need not be uniform among
all Options issued pursuant to this Article 6, and may reflect
distinctions based on the reasons for termination of employment.
6.9 Non-transferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under
the Plan shall be exercisable during his or her lifetime only by
such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, non NQSO granted under this
Article 6 may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will, by the
laws of descent and distribution, or pursuant to a Qualified
Domestic Relations Order. Further, except as otherwise provided
in a Participant's Award Agreement, all NQSOs granted to a
Participant under this Article 6 shall be exercisable during his
or her lifetime only by such Participant.
ARTICLE 7 - RESTRICTED STOCK
----------------------------
7.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at
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any time and from time to time, may grant Shares of Restricted Stock to
Participants in such amounts as the Committee shall determine.
7.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the
Period(s) of Restriction, the number of Shares of Restricted Stock
granted, and such other provisions as the Committee shall determine.
7.3 Restricted Stock Price. The price for each Share of Restricted Stock
shall be equal to the par value of a Share of Common Stock of the
Company. Payment of the purchase price shall be required within thirty
(30) days of the date of grant and shall be non-refundable.
7.4 Transferability. Except as provided in this Article 7, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the
applicable Period of Restriction established by the Committee and
specified in the Restricted Stock Award Agreement, or upon earlier
satisfaction of any other conditions, as specified by the Committee in
its sole discretion and set forth in the Restricted Stock Award
Agreement. All rights with respect to the Restricted Stock granted to a
Participant under the Plan shall be available during his or her
lifetime only to such Participant.
7.5 Other Restrictions. Subject to Article 8 herein, the Committee shall
impose such other conditions and/or restrictions on any Shares of
Restricted Stock granted pursuant to the Plan as it may deem advisable
including, without limitation, a requirement that Participants pay a
stipulated purchase price for each Share of Restricted Stock,
restrictions based upon the achievement of specific performance
objectives (Company-wide, business unit, and/or individual), time-based
restrictions on vesting following the attainment of the performance
objectives, and/or restrictions under applicable federal or state
securities laws.
The Company shall retain the certificates representing Shares of
Restricted Stock in the Company's possession until such time as all
conditions and/or restrictions applicable to such Shares have been
satisfied.
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Except as otherwise provided in this Article 7, Shares of Restricted
Stock covered by each Restricted Stock grant made under the Plan shall
become freely transferable by the Participant after the last day of the
applicable Period of Restriction.
7.6 Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares.
7.7 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder shall
be credited with regular cash dividends paid with respect to the
underlying Shares while they are so held. Such dividends may be paid
currently, accrued as contingent cash obligations, or converted into
additional shares of Restricted Stock, upon such terms as the
Compensation Committee establishes.
The Committee may apply any restrictions to the dividends that the
Committee deems appropriate. Without limiting the generality of the
preceding sentence, if the grant or vesting of Restricted Shares
granted to a Covered Employee is designed to comply with the
requirements of the Performance-Based Exception, the Committee may
apply any restrictions it deems appropriate to the payment of dividends
declared with respect to such Restricted Shares, such that the
dividends and/or the Restricted Shares maintain eligibility for the
Performance-Based Exception.
In the event that any dividend constitutes a "derivative security" or
an "equity security" pursuant to Rule 16(a) under the Exchange Act,
such dividend shall be subject to a vesting period equal to the
remaining vesting period of the Shares of Restricted Stock with respect
to which the dividend is paid.
7.8 Termination of Employment. Each Restricted Stock Award Agreement shall
set forth the extent to which the Participant shall have the right to
retain unvested Restricted Shares following termination of the
Participant's employment with the Company. Such provisions shall be
determined in the sole discretion of the Committee, shall be included
in the Award
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Agreement entered into with each Participant, need not be uniform among
all Shares of Restricted Stock issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of
employment.
ARTICLE 8 - PERFORMANCE MEASURES
--------------------------------
8.1 Performance Measures. Unless and until the Committee proposes for
shareholder vote and shareholders approve a change in the general
performance measures set forth in this Article 8, the attainment of
which may determine the degree of payout with respect to Awards of
Restricted Stock to Covered Employees which are designed to qualify for
the Performance-Based Exception, the performance measure(s) to be used
for purposes of such grants shall be chosen from among the following
alternatives:
(a) Cash Flow;
(b) Cash Flow Return on Capital;
(c) Cash Flow Return on Assets;
(d) Cash Flow Return on Equity;
(e) Net Income;
(f) Return on Capital;
(g) Return on Assets;
(h) Return on Equity; and
(i) Stock price.
Subject to the terms of the Plan, each of these measures shall be
defined by the Committee on a corporation, group, or division basis or
in comparison with peer group performance, and may include or exclude
specified extraordinary items, as defined by the corporation's
auditors.
8.2 Adjustments. The Committee shall have the discretion to adjust the
determinations of the degree of attainment of the pre-established
performance objectives; provided, however, that Awards which are
designed to qualify for the Performance-Based Exception, and which are
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held by covered Employees, may not be adjusted upward on a
discretionary basis (the Committee shall retain the discretion to
adjust such Awards downward).
8.3 Restricted Stock Performance Formula. Awards of Restricted Stock may be
granted pursuant to the formula described in this Section (hereinafter
referred to as the "Restricted Stock Performance Formula.") The
Committee shall make an initial grant of Shares of Restricted Stock
(the "Initial Grant.") At the end of a specified, pre-established
performance period (determined by the Committee), the number of Shares
in the Initial Grant shall be increased or decreased based on the
increase or decrease in the value of the Shares over the applicable
performance period.
The increase or decrease described in the preceding paragraph shall be
determined as follows:
(a) At the end of each performance period, the Market Value (as
defined in paragraph (c) below) of a Share shall be compared
to the Market Value per Share on the date the Initial Grant
was awarded.
(b) The Committee shall calculate the difference in the Market
Value of a Share on the last day of the applicable performance
period and the Market Value of a Share on the date of Initial
Grant. That difference shall be multiplied by the number of
Shares in the Initial Grant available to be earned at the end
of the applicable performance period, and the resulting
product shall be divided by the Market Value of a Share on the
last day of the performance period. The number of Shares so
determined shall be added to (in the case of an increase in
Market Value) or subtracted from (in the case of a decrease in
Market Value) the number of Shares in the Initial Grant
available to be earned at the end of the applicable
performance period.
(c) For purposes of this Section 8.3, the "Market Value" of a
Share on the Initial Grant date shall mean the average of the
highest and lowest quoted selling price of a Share on the New
York Stock Exchange on the date of Initial Grant, and the
"Market Value" of a Share on the last day of the applicable
performance period shall mean the average
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of the highest and lowest quoted selling price of a Share on
the New York Stock Exchange over the last thirty (30) trading
days of the applicable performance period.
8.4 Compliance with Code Section 162(m). In the event that applicable tax
and/or securities laws change to permit Committee discretion to alter
the governing performance measures without obtaining shareholder
approval of such changes, the Committee shall have sole discretion to
make such changes without obtaining shareholder approval. In addition,
in the event that the Committee determines that it is advisable to
grant Awards which shall not qualify for the Performance-Based
Exception, the Committee may make such grants without satisfying the
requirements of Code Section 162(m).
ARTICLE 9 - BENEFICIARY DESIGNATION
-----------------------------------
Each Participant under the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Participant. In the absence of any such
designation, benefits remaining unpaid at the Participant"s death shall be paid
to the Participant's estate.
ARTICLE 10 - DEFERRALS
----------------------
The Committee may permit or require a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such Participant by virtue of the exercise of an Option or lapse or
waiver of restrictions with respect to Restricted Stock. If any such deferral
election is required or permitted, the Committee shall, in its sole discretion,
establish rules and procedures for such payment deferrals.
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ARTICLE 11 - RIGHTS OF EMPLOYEES
--------------------------------
11.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment
at any time, nor confer upon any Participant any right to continue in
the employ of the Company.
11.2 Participation. No Employee or Officer shall have the right to be
selected to receive an Award under this Plan, or, having been so
selected, to be selected to receive a future Award.
ARTICLE 12 - CHANGE IN CONTROL
------------------------------
12.1 Treatment of Outstanding Awards. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable
laws, or by the rules and regulations of any governing governmental
agencies or national securities exchanges:
(a) Any and all Options granted hereunder shall become immediately
exercisable, and shall remain exercisable throughout their entire
term; and
(b) Any restriction periods and restrictions imposed on Restricted
Shares shall lapse; provided however, that the degree of vesting
associated with Restricted Stock which has been conditioned upon
the achievement of performance conditions pursuant to Section 7
herein shall be determined in the manner set forth in Section
12.1(c) herein.
(c) The vesting of Restricted Stock which has been conditioned upon
the achievement of performance conditions pursuant to Section 7.5
herein shall be accelerated as of the effective date of the
Change in Control, and there shall be paid out in cash to
Participants within thirty (30) days following the effective date
of the Change in Control a pro-rata amount based upon an assumed
achievement of relevant performance objectives at target levels,
and upon the length of time within the Performance Period which
has elapsed prior tot he Change in Control; provided,
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however, that in the event the Committee determines that actual
performance to the date of the Change in Control exceeds targeted
levels, the pro-rated payouts shall be made at levels
commensurate with such actual performance (determined by
extrapolating such actual performance to the end of the
Performance Period), based upon the length of time within the
Performance Period which has elapsed prior to the Change in
Control; and provided further, that there shall not be an
accelerated payout with respect to Awards which qualify as
"derivative securities" under Section 16 of the Exchange Act
which were granted less than six (6) months prior to the
effective date of the Change in Control.
12.2 Termination, Amendment and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of this Plan or any
Award Agreement provision, the provisions of this Article 12 may not be
terminated, amended, or modified on or after the date of a Change in
Control to affect adversely any Award theretofore granted under the
Plan without the prior written consent of the Participant with respect
to said Participant's outstanding Awards.
ARTICLE 13 - AMENDMENT, MODIFICATION AND TERMINATION
----------------------------------------------------
13.1 Amendment, Modification and Termination. Subject to Section 13.2
herein, the Board may at any time and from time to time, alter, amend,
suspend or terminate the Plan in whole or in part; provided, however,
that no amendment shall be made without shareholder approval if such
approval is necessary to comply with any tax or regulatory requirement,
including for these purposes any approval requirement which is a pre-
requisite for exemptive relief under Section 16(b) of the Exchange Act,
with which the Committee has determined it is necessary or desirable to
have the Company comply.
The Committee shall not have the authority to cancel outstanding Awards
and issue substitute Awards in replacement thereof.
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13.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or Non-
recurring Events. Subject to the restriction set forth in Article 8
herein on the exercise of upward discretion with respect to Awards
which have been designed to comply with the Performance-Based
Exception, the Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of
unusual or non-recurring events (including, without limitation, the
events described in Section 4.3 hereof) affecting the Company or the
financial statements of the Company or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan.
13.3 Awards Previously Granted. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award.
13.4 Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply
with the requirements of Code Section 162(m); provided, however, that
in the event the Committee determines that such compliance is not
desired with respect to any Award or Awards available for grant under
the Plan, then compliance with Code Section 162(m) will not be
required. In addition, in the event that changes are made to Code
Section 162(m) to permit greater flexibility with respect to any Award
or Awards available under the Plan, the Committee may, subject to this
Article 13, make any adjustments it deems appropriate.
ARTICLE 14 - WITHHOLDING
------------------------
14.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company,
an amount sufficient to satisfy federal, state, and local taxes,
domestic or foreign, required by law or regulation to be withheld with
respect to any taxable event arising as a result of this Plan.
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14.2 Share Withholding. With respect to withholding required upon the
exercise of Options or upon the lapse of Restrictions on Restricted
Stock, or upon any other taxable event arising as a result of Awards
granted hereunder, Participants may elect, subject to the approval of
the Committee, to satisfy the withholding requirement, in whole or in
part, by having the Company withhold Shares having a Fair Market Value
on the date the tax is to be determined equal to the minimum statutory
total tax which could be withheld on the transaction. All such
elections shall be irrevocable, made in writing, signed by the
Participant, and shall be subject to any restrictions or limitations
that the Committee, in its sole discretion, deems appropriate.
ARTICLE 15 - INDEMNIFICATION
----------------------------
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she 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 by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgement in any such action, suit, or proceeding against him or her, provided
he or she shall give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and defend it on his
or her own behalf. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
ARTICLE 16 - SUCCESSORS
-----------------------
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a
McDermott International, Inc. 21
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direct or indirect purchase, of all or substantially all of the business and/or
assets of the Company, or a merger, consolidation, or otherwise.
ARTICLE 17 - LEGAL CONSTRUCTION
-------------------------------
17.1 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural
shall include the singular and the singular shall include the plural.
17.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the 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.
17.3 Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
17.4 Securities Law Compliance. With respect to Insiders, transactions under
this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any
provision of the plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee.
17.5 Governing Law. To the extent not pre-empted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the state of Louisiana.
APPENDIX B
================================================================================
MeDermott International, Inc.
================================================================================
The 1994 Variable Supplemental Compensation Plan
. . . . . . . . . . . . . .
================================================================================
================================================================================
Table of Contents
- --------------------------------------------------------------------------------
Page
Article 1 - Purpose.................................................... 1
Article 2 - Definitions................................................ 1
Article 3 - Unfunded Status of the Plan................................ 3
Article 4 - Administration of the Plan................................. 4
Article 5 - Eligibility and Participation.............................. 4
Article 6 - Award Determination........................................ 4
Performance Measures and Performance Goals................. 4
Award Opportunities........................................ 5
Adjustment of Performance Goals and Award Opportunities.... 5
Final Award Determinations................................. 5
Award Limit................................................ 6
Threshold Levels of Performance............................ 6
Article 7 - Payment of Awards.......................................... 6
Article 8 - Named Executive Officers................................... 6
Applicability of Article 8................................. 6
Establishment of Award Opportunities....................... 7
Components of Award Opportunities.......................... 7
No Mid-Year Change in Award Opportunities.................. 7
Non-adjustment of Performance Goals........................ 7
Individual Performance and Discretionary Adjustments....... 7
Permissible Modifications.................................. 7
Article 9 - Limitations................................................ 8
Article 10 - Amendment, Suspension, Termination,
or Alteration of the Plan.................................. 8
Article 11 - Commencement of Awards..................................... 8
The 1994 Variable supplemental Compendation Plan
McDermott International, Inc. Page 1
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Article 1 - Purpose
The purpose of the plan is to make provision for the payment of supplemental
compensation to managerial and other key Employees who contribute materially to
the success of the Company or one or more of its Subsidiary or Affiliated
Companies, thereby affording them an incentive for and a means of participating
in that success.
Article 2 - Definitions
For the purpose of the Plan, the following definitions shall be applicable:
(a) Affiliated Company. Any corporation, joint venture, or other legal entity
in which McDermott International, Inc., directly or indirectly, through one
or more Subsidiaries, owns less than fifty percent (50%) but at least
twenty percent (20%) of its voting control.
(b) Assets. Corporate Assets are defined as "total assets" as reported in the
Company's Consolidated Balance Sheet. Group and division assets are
defined as "total assets" attributable to the group or division averaged
over each of the four quarters in the plan year, excluding cash, long-term
notes payable, interest payable, and interest receivable.
(c) Award Opportunity. The various levels of incentive award payouts which a
Participant may earn under the Plan, as established by the Committee
pursuant to Sections 6(a) and 6(b) herein.
(d) Board. The Board of Directors of McDermott International, Inc.
(e) Capital. With respect to each fiscal year of the Company, the sum of (i)
Notes Payable and Current Maturities of Long-Term Debt (cumulatively also
known as "Short-Term Debt"), (ii) Long-Term Debt, (iii) Deferred and
Noncurrent Income Taxes, (iv) Total Minority Interest, and (v)
Stockholders' Equity, all as reported in or determined from the Company's
Consolidated Balance Sheet at the end of such year.
(f) Cash Flow. With respect to each fiscal year of the Company, Corporate Cash
Flow is defined as the sum of (i) Net Income (ii) Depreciation and
Amortization, (iii) Minority Interest Dividends on Preferred Stock of
Subsidiary, (iv) Interest Expense, all as reported in the Company's
Consolidated Statement of Income and Retained Earnings, and (v) the
difference between Deferred and Noncurrent Income Taxes as at the end of
such fiscal year and the Deferred and Noncurrent Income Taxes as at the end
of the immediately preceding fiscal year, as reported in or determined from
the Company's Consolidated Balance Sheet at the end of such year. Group
and division Cash Flow is further adjusted to remove all financing elements
(including, but not limited to, debt and interest income).
The 1994 Variable supplemental Compendation Plan
McDermott International, Inc. Page 2
- --------------------------------------------------------------------------------
(g) Cash Flow Return on Assets. With respect to each fiscal year of the
Company, that fraction, stated as a percentage, the numerator of which is
"Cash Flow" and the denominator of which is "Assets."
(h) Cash Flow Return on Capital. With respect to each fiscal year of the
Company, the fraction, stated as a percentage, the numerator of which is
"Cash Flow" and the denominator of which is "Capital."
(i) Cash Flow Return on Equity. With respect to each fiscal year of the
Company, that fraction, stated as a percentage, the numerator of which is
"Cash Flow" and the denominator of which is "Equity."
(j) Committee. "Committee" means the Compensation Committee of the Board of
Directors. The Committee shall be constituted so as to permit the Program
to comply with the exemptive provisions of Section 16 of the Securities
Exchange Act of 1934, and the rules promulgated thereunder, and the rules
and regulations approved by national securities exchanges.
(k) Company. "Company" means McDermott International, Inc., a Panamanian
corporation (or any successor thereto) and its subsidiaries and affiliates.
(l) Consolidated Balance Sheet and Consolidated Statement of Income and
Retained Earnings. With respect to each fiscal year of the Company, the
Consolidated Balance Sheet and the Consolidated Statement of Income and
Retained Earnings, included in the Company's Consolidated Financial
Statements for such year, as certified by the Company's independent public
accountants, and set forth in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission.
(m) Consolidated Financial Statements. With respect to each fiscal year of the
Company, the Company's Consolidated Balance Sheet and Consolidated
Statement of Income and Retained Earnings for such year.
(n) Employee. Any person who is regularly employed by the Company or any of
its Subsidiary or Affiliated Companies on a full-time salaried basis,
including any Employee who also is an officer or director of the Company or
of any of its Subsidiary or Affiliated Companies.
(o) Equity. Total stockholders' equity as reported in the Company's
Consolidated Balance Sheet.
(p) Final Award. The actual award earned during a plan year by a Participant,
as determined by the Committee following the end of a plan year.
The 1994 Variable supplemental Compendation Plan
McDermott International, Inc. Page 3
- --------------------------------------------------------------------------------
(q) Named Executive Officer. A Participant who, as of the date of a payout of
a Final Award, is one of the group of "covered employees," as defined in
the Regulations promulgated under Section 162(m)(3) of the Internal Revenue
Code of 1986, as amended.
(r) Net Income. Corporate Net Income is defined as after-tax net income, as
reported in the Company's Consolidated Statement of Income. Group and
division Net Income is defined as pre-tax net income attributable to a
specific business unit.
(s) Participant. An Employee who has received an Award.
(t) Plan. The Variable Supplemental Compensation Plan of McDermott
International, Inc.
(u) Retirement Plans. The RetirementThrift Plan for Employees of McDermott Incorporated and
Participating Subsidiary and Affiliated Companies (the "Thrift Plan"):
We would like to give Plan Participants having an interest in shares of our
Common Stock through the Thrift Plan the right to instruct the Trustee how to
vote the shares of Common Stock representing their interest in the Thrift Plan.
In order that you may have the same information as a shareholder outside
the Thrift Plan, we have enclosed a copy of the Notice of McDermott
International, Inc.'s Annual Meeting of Shareholders and the related Proxy
Statement. This information is being mailed to all shareholders of record as of
March 23, 2000. This material is for your information only and need not be
returned.
Also enclosed is a voting instruction form with which you may instruct the
Trustee how to vote your interest in the shares of Common Stock held in the
Thrift Plan. Please return this voting instruction form in the envelope provided
as soon as possible.
If the Trustee does not receive your instructions by April 25, 2000, the
Trustee will vote your interest, in its discretion, in a manner consistent with
its fiduciary responsibility under the Employee Retirement Income Security Act
of 1974 or other legal requirements.
This letter and the enclosed material relate only to your interest in the
shares of Common Stock held in the Thrift Plan. It has no reference to other
shares of our Common Stock which you may own. If you own other shares of Common
Stock, you will receive proxy materials in a separate mailing, which should be
returned in the envelope provided for that purpose.
Very truly yours,
/s/ Roger E. Tetrault
R.E. Tetrault
Chairman of the Board and
Chief Executive Officer
31
o Please fold and detach card at perforation before mailing o
CONFIDENTIAL VOTING INSTRUCTIONS
TO: THE VANGUARD GROUP, TRUSTEE
UNDER THE THRIFT PLAN FOR EMPLOYEES OF McDERMOTT INCORPORATED
AND PARTICIPATING SUBSIDIARY AND AFFILIATED COMPANIES
The undersigned participant in the Thrift Plan for Employees of McDermott
Incorporated and Participating Subsidiary and Affiliated Companies (the "Thrift
Plan") hereby directs The Vanguard Group, the Trustee of the Thrift Plan, to
vote all the shares of common stock of McDermott International, Inc. (the
"Company") held in the undersigned's Thrift Plan account at the Company's Annual
Meeting of Shareholders to be held in the Grand Ballroom D and E of the Sheraton
New Orleans Hotel, 500 Canal Street, New Orleans, Louisiana, on Tuesday, May 2,
2000, at 9:30 a.m. local time and at any adjournment of such meeting, as
indicated on the reverse side of this voting instruction form.
Every properly signed voting instruction form will be voted in accordance with
the specifications made thereon. If not otherwise specified, properly signed
voting instruction forms will be voted "FOR" the election of all directors and
each other proposal.
The undersigned acknowledges receipt of the Company's Report for the Nine-month
Period ended December 31, 1999, and its Notice of Annual Meeting of Shareholders
and related Proxy Statement.
PLEASE MARK, SIGN AND DATE THE REVERSE SIDE OF THIS VOTING INSTRUCTION FORM AND
PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE.
32
[THE VANGUARD GROUP LOGO] [POSTAGE STAMP]
o Please fold and detach card at perforation before mailing o
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN DARK INK AND SIGN AND DATE BELOW. FOR WITHHOLD AUTHORITY
FOR ALL NOMINEES
[ ] [ ]
1. NOMINEES OF CLASS III DIRECTORS:
01. Robert L. Howard 02. Roger E. Tetrault 03. John N. Turner.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW:
- ----------------------------------------------------------------------------------- FOR AGAINST ABSTAIN
2. Selection of PricewaterhouseCoopers LLP as the Company's independent accountants [ ] [ ] [ ]
for the fiscal year ending December 31, 2000.
(Signature should be the same as the
name on the Thrift Plan accounts.
Executors, administrators, trustees,
etc., should indicate when signing.)
-------------------------------------
SIGNATURE
DATE
---------------------------------
33
McDERMOTT INTERNATIONAL, INC.
THRIFT PLAN FOR SALARIED EMPLOYEES OF BABCOCK & WILCOX CANADA
MARCH 30, 2000
To those individuals ("Plan Participants") who have an interest in McDermott
International, Inc. Common Stock, par value $1.00 per share (the "Common
Stock"), under the Thrift Plan for Salaried Employees of Babcock & Wilcox Company Employee RetirementCanada
(the "Thrift Plan"):
We would like to give Plan Participants having an interest in shares of our
Common Stock through the Thrift Plan the right to instruct the Trustee how to
vote the shares of Common Stock representing their interest in the Thrift Plan.
In order that you may have the same information as a shareholder outside
the Thrift Plan, we have enclosed a copy of the Notice of McDermott
International, Inc.'s Annual Meeting of Shareholders and the Supplemental Executive Retirement Planrelated Proxy
Statement. This information is being mailed to all shareholders of McDermott Incorporated.
(v) Return on Assets. With respectrecord as of
March 23, 2000. This material is for your information only and need not be
returned.
Also enclosed is a voting instruction form with which you may instruct the
Trustee how to each fiscal yearvote your interest in the shares of Common Stock held in the
Thrift Plan. Please return this voting instruction form in the envelope provided
as soon as possible.
If the Trustee does not receive your instructions by April 20, 2000, the
Trustee will not vote your shares.
This letter and the enclosed material relate only to your interest in the
shares of Common Stock held in the Thrift Plan. It has no reference to other
shares of our Common Stock which you may own. If you own other shares of Common
Stock, you will receive proxy materials in a separate mailing, which should be
returned in the envelope provided for that purpose.
Very truly yours,
/s/ ROGER E. TETRAULT
Roger E. Tetrault
Chairman of the Board and
Chief Executive Officer
34
CONFIDENTIAL VOTING INSTRUCTIONS
TO: THE TRUST COMPANY OF BANK OF MONTREAL, TRUSTEE
UNDER THE THRIFT PLAN FOR SALARIED EMPLOYEES OF BABCOCK & WILCOX CANADA
The undersigned participant in the Thrift Plan for Salaried Employees of Babcock
& Wilcox Canada (the "Thrift Plan") hereby directs The Trust Company that
fraction, stated as a percentage,of Bank of
Montreal, the numerator of which is "Net Income"
and the denominator of which is "Assets."
(w) Return on Capital. With respect to each fiscal yearTrustee of the Company, that
fraction, stated as a percentage,Thrift Plan, to vote all the numeratorshares of which is "Net Income"
and the denominatorcommon stock
of which is "Capital."
(x) Return on Equity. With respect to each fiscal year of the Company, that
fraction, stated as a percentage, the numerator of which is "Net Income"
and the denominator of which is "Equity."
(y) Salary. The annual basic compensation payable (including any portion which
may have been deferred) which was in effect on March 31st, the last day of
the fiscal year of the Company.
(z) Subsidiary. Any corporation, joint venture or other legal entity in which
the Company, directly or indirectly, owns more than fifty percent (50%) of
its voting control.
(aa) Target Incentive Award. The award to be paid to Participants when the
Company meets "targeted" performance results, as established by the
Committee.
Article 3 - Unfunded Status of the Plan
(a) Each Final Award shall be paid from the general funds of the Company. The
entire expense of administering the Plan shall be borne by McDermott International, Inc.
The 1994 Variable supplemental Compendation(the "Company") held in the undersigned's
Thrift Plan McDermott International, Inc. Page 4
- --------------------------------------------------------------------------------
(b) No special or separate funds shallaccount at the Company's Annual Meeting of Shareholders to be established, or other segregation of
assets made to execute payment of Final Awards. No Employee, or other
person, shall have, under any circumstances, any interest whatsoever,
vested or contingent,held
in any particular property or assetthe Grand Ballroom D and E of the Company orSheraton New Orleans Hotel, 500 Canal
Street, New Orleans, Louisiana, on Tuesday, May 2, 2000, at 9:30 a.m. local time
and at any Subsidiary or Affiliated Company by virtueadjournment of any Final Award.
Article 4 - Administration of the Plan
Full power and authority to construe, interpret, and administer the Plan shallsuch meeting, as indicated below.
Every properly signed voting instruction form will be vestedvoted in the Committee. A determination by the Committee in carrying out or
administering the Plan shall be final and binding for all purposes and upon all
interested persons, their heirs, and personal representative(s).
Article 5 - Eligibility and Participation
(a) All salaried Employees are eligible for participation in the Plan. Actual
participation in the Plan shall be based upon recommendations by the Chief
Executive Officer, subject to approval by the Committee. The Chief
Executive Officer shall automatically participate in the Plan.
(b) An Employee who becomes eligible after the beginning of a plan year may
participate in the Plan for that plan year. Such situations may include,
but are not limited to (i) new hires, (ii) when an Employee is promoted
from a position which did not meet the eligibility criteria, or (iii) when
an Employee is transferred from an affiliate which does not participate in
the Plan. The Committee, in its sole discretion, retains the right to
prohibit or allow participation in the initial plan year of eligibility for
any of the aforementioned Employees.
Article 6 - Award Determination
(a) Performance Measures and Performance Goals. For each plan year, the
Committee shall select performance measures and shall establish performance
goals for that plan year. Except as provided in Article 8 herein, the
performance measures may be based on any combination of Corporate, group,
divisional, and/or individual goals.
For each plan year, the Committee shall establish ranges of performance
goals which will correspond to various levels of Award Opportunities. Each
performance goal range shall include a level of performance at which one
hundred percent (100%) of the Target Incentive Award shall be earned. In
addition, each range shall include levels of performance above and below
the one hundred percent (100%) performance level.
The 1994 Variable supplemental Compendation Plan
McDermott International, Inc. Page 5
- --------------------------------------------------------------------------------
After the performance goals are established, the Committee will align the
achievement of the performance goalsaccordance with
the Award Opportunities (as
described in Article 6(b) herein), such that the level of achievement of
the pre-established performance goals at the end of the plan yearspecifications made thereon. If not otherwise specified, properly signed
voting instruction forms will determine the Final Awards. Except as provided in Article 8 herein, the
Committee shall have the authority to exercise subjective discretion in the
determination of Final Awards, and the authority to delegate the ability to
exercise subjective discretion in this respect.
The Committee may establish one or more Company-wide performance measures
which must be achieved for any Participant to receive a Final Award payment
for that plan year.
(b) Award Opportunities. For each plan year, the Committee shall establish, in
writing, Award Opportunities which correspond to various levels of
achievement of the pre-established performance goals. The established
Award Opportunities shall vary in relation to the job classification of
each Participant.
(c) Adjustment of Performance Goals and Award Opportunities. Once established,
performance goals normally shall not be changed during the plan year.
However, except as provided in Article 8 herein, if the Committee
determines that external changes or other unanticipated business conditions
have materially affected the fairness of the goals, then the Committee may
approve appropriate adjustments to the performance goals (either up or
down) during the plan year as such goals apply to the Award Opportunities
of specified Participants. In addition, the Committee shall have the
authority to reduce or eliminate the Final Award determinations, based upon
any objective or subjective criteria it deems appropriate.
Notwithstanding any other provision of this Plan, in the event of any
change in Corporate capitalization, such as a stock split, or a Corporate
transaction, such as any merger, consolidation, separation, including a
spin-off, or other distribution of stock or property of the Company, any
reorganization (whether or not such reorganization comes within the
definition of such term in Code Section 368), or any partial or complete
liquidation of the Company, such adjustment shall be made in the Award
Opportunities and/or the performance measures or performance goals related
to then-current performance periods, as may be determined to be appropriate
and equitable by the Committee, in its sole discretion, to prevent dilution
or enlargement of rights; provided, however, that subject to Article 8
herein, any such adjustment shall not be made if it would eliminate the
ability of Award Opportunities held by Named Executive Officers to qualify
for the "performance-based" exception under Code Section 162(m).
(d) Final Award Determinations. At the end of each plan year, Final Awards
shall be computed for each Participant as determined by the Committee.
Subject to the terms of Article 8 herein, Final Award amounts may vary
above or below the Target Incentive
The 1994 Variable supplemental Compendation Plan
McDermott International, Inc. Page 6
- --------------------------------------------------------------------------------
Award, based on the level of achievement of the pre-established Corporate,
group, divisional, and/or individual performance goals.
(e) Award Limit. The Committee may establish guidelines governing the maximum
Final Awards that may be earned by Participants (either in the aggregate,
by Employee class, or among individual Participants) in each plan year.
The guidelines may be expressed as a percentage of Company-wide goals or
financial measures, or such other measures as the Committee shall from time
to time determine; provided, however, that the maximum payout with respect
to a Final Award payable to any one Participant in connection with
performance in any one plan year shall be nine hundred thousand dollars
($900,000.00).
(f) Threshold Levels of Performance. The Committee may establish minimum
levels of performance goal achievement, below which no payouts of Final
Awards shall be made to any Participant.
Article 7 - Payment of Awards
Each and every Final Award shall be payable in a lump sum within thirty (30)
days of the Committee's determination; provided, however, atvoted "FOR" the election of an
Employee made in writing to the Committee not later than the end of a calendar
year, an Employee may irrevocably elect to deferall directors and
each other proposal.
The undersigned acknowledges receipt of payment, subject to
the conditions hereinafter set forth, of all or any portion of a Final Award
until a date, as selected by such employee, on or up to fifteen (15) years after
such Employee's retirement under any of the Retirement Plans (or, if not a
participant in any of the Retirement Plans, under any Subsidiary or Affiliated
Companies), but, in no event, later than such employee's termination of
employment other than by reason of such retirement. Payment of any portion of a
Final Award so deferred shall be made in a lump sum on such deferred payment
date, or as soon after such employee's earlier termination of employment, other
than by reason of retirement, as shall be practicable. Amounts deferred shall
earn interest until paid, compounded daily, at a rate determined by the
Committee periodically from the date the Final Award is determined. In the
event of the death of a Participant, either before or after retirement, all
amounts deferred hereunder, plus interest thereon as provided above, shall be
paid to the legal representative(s) of such Participant's estate in a lump sum
within thirty (30) days of the Committee's receiving notice satisfactory to it
of the judicial recognition or appointment of said representative(s).
Article 8 - Named Executive Officers
(a) Applicability of Article 8. The provisions of this Article 8 shall apply
only to Named Executive Officers. In the event of any inconsistencies
between this Article 8 and the other Plan provisions as they pertain to
Named Executive Officers, the provisions of this Article 8 shall control.
The 1994 Variable supplemental Compendation Plan
McDermott International, Inc. Page 7
- --------------------------------------------------------------------------------
(b) Establishment of Award Opportunities. Except as provided in Article 8(g)
herein, Award Opportunities for Named Executive Officers shall be
established as a function of each Named Executive Officer's base Salary.
For each plan year, the Committee shall establish, in writing, various
levels of Final Awards which will be paid with respect to specified levels
of attainment of the pre-established performance goals.
(c) Components of Award Opportunities. Each Named Executive Officer's Award
Opportunity shall be based on: (a) the Named Executive Officer's Target
Incentive Award; (b) the potential Final Awards corresponding to various
levels of achievement of the pre-established performance goals, as
established by the Committee; and (c) Company, group, or division
performance in relation to the pre-established performance goals. Except
as provided in Article 8(g) herein, performance measures which may serve as
determinants of Named Executive Officers' Award Opportunities shall be
limited to Cash Flow, Cash Flow Return on Capital, Cash Flow Return on
Assets, Cash Flow Return on Equity, Net Income, Return on Capital, Return
on Assets, and Return on Equity. Definitions for each of these performance
measures has been set forth in Article 2. However, the resulting
performance, determined by compliance with the applicable definition(s)
shall, to the extent not inconsistent with Section 162(m), be adjusted to
exclude any negative impact caused by changes in accounting principles and
unusual, nonrecurring events and extraordinary items (including, but not
limited to write-offs, capital gains and losses, acquisitions or
dispositions of businesses). The Compensation Committee of the Board of
Directors shall have the right through discretionary downward adjustments
to exclude the positive impact of the aforementioned items and occurrences.
(d) No Mid-Year Change in Award Opportunities. Except as provided in Article
8(c) and (g) herein, each Named Executive Officer's Final Award shall be
based exclusively on the Award Opportunity levels established by the
Committee.
(e) Non-adjustment of Performance Goals. Except as provided in Article 8(c)
and (g) herein, performance goals shall not be changed following their
establishment, and Named Executive Officers shall not receive any payout
when the minimum performance goals are not met or exceeded.
(f) Individual Performance and Discretionary Adjustments. Except as provided
in Article 8(g) herein, subjective evaluations of individual performance of
Named Executive Officers shall not be reflected in their Final Awards.
However, the Committee shall have the discretion to decrease or eliminate
the amount of the Final Award otherwise payable to a Named Executive
Officer.
(g) Permissible Modifications. If, on the advice of the Company's tax counsel,
the Committee determines that Code Section 162(m) and the Regulations
thereunder will not adversely affect the deductibility for federal income
tax purposes of any amount paid under the Plan by permitting greater
discretion and/or flexibility with respect to Award Opportunities granted
to Named Executive Officers pursuant to this Article 8, then the
The 1994 Variable supplemental Compendation Plan
McDermott International, Inc. Page 8
- --------------------------------------------------------------------------------
Committee may, in its sole discretion, apply such greater discretion and/or
flexibility to such Award Opportunities as is consistent with the terms of
this Plan, and without regard to the restrictive provisions of this Article
8.
Article 9 - Limitations
(a) No person shall at any time have any right to a payment hereunder for any
fiscal year, and no person shall have authority to enter into an agreementReport for the makingNine-month
Period ended December 31, 1999, and its Notice of an Award Opportunity or paymentAnnual Meeting of a Final Award or to
make any representation or guarantee with respect thereto.
(b) An employee receiving an Award Opportunity shall have no rights in respect
of such Award Opportunity, except the right to receive payments, subject to
the conditions herein, of such Award Opportunity, which right may not be
assigned or transferred except by will or by the laws of descentShareholders
and distribution.
(c) Neither the action of the Company in establishing the Plan, nor any action
taken by the Committee under the Plan, nor any provision of the Plan shall
be construed as giving to any person the right to be retained in the employ
of the Company or any of its Subsidiary or Affiliated Companies.
Article 10 - Amendment, Suspension, Termination, or Alteration of the Plan
The Board may, at any time or from time to time, amend, suspend, terminate or
alter the Plan, in whole or in part, but it may not thereby affect adversely
rights of Participants, their spouses, children, and personal representative(s)
with respect to Final Awards previously made.
Article 11 - Commencement of Awards
The Company's fiscal year ending March 31, 1995 shall be the first fiscal year
with respect to which Awards may be made under the Plan.related Proxy Statement.
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN DARK INK AND SIGN AND DATE WHERE
INDICATED BELOW AND PROMPTLY RETURN THIS VOTING INSTRUCTION FORM IN THE ENCLOSED
ENVELOPE.
1. NOMINEES OF CLASS III DIRECTORS
[ ] VOTE FOR ALL [ ] WITHHOLD FROM
(except as marked [X] to VOTING FOR ALL
the contrary below)
[ ] Robert L. Howard
[ ] Roger E. Tetrault
[ ] John N. Turner
2. Selection of PricewaterhouseCoopers LLP as the For Against Abstain
Company's independent accountants for the fiscal [ ] [ ] [ ]
year ending December 31, 2000.
(Signature should be the same as the name on Thrift
Plan accounts. Executors, administrators, trustees,
etc., should indicate when signing.)
----------------------------------- ---------
SIGNATURE DATE