MCDERMOTT INTERNATIONAL INC (Form: 8-K, Received: 03/06/2012 16:11:40)

M C DERMOTT INTERNATIONAL, INC.

/s/ Perry L. Elders

Perry L. Elders

Senior Vice President and Chief Financial Officer

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 29, 2012

McDermott International, Inc.

(Exact name of registrant as specified in its charter)


REPUBLIC OF PANAMA	001-08430	72-0593134
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

757 N. Eldridge Parkway Houston, Texas		77079
(Address of principal executive offices)		(Zip Code)

Registrant’s Telephone Number, including Area Code: (281) 870-5000

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On February 29, 2012, the Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of McDermott International, Inc. (“McDermott”) took the following actions relating to the compensation of McDermott’s chief executive officer, chief financial officer and each other executive officer expected to be listed in the Summary Compensation Table in McDermott’s proxy statement for its 2012 Annual Meeting of Stockholders (collectively, the “Named Executive Officers”), which actions were approved by the Board on March 1, 2012. The Named Executive Officers include all persons listed in the Summary Compensation Table in McDermott’s proxy statement for its 2011 Annual Meeting of Stockholders who remain employed by McDermott.

2012 Annual Cash Bonus . The Compensation Committee established 2012 annual target award opportunities and confidential performance measures relative to those opportunities for participants in McDermott’s Executive Incentive Compensation Plan (the “EICP”), including the Named Executive Officers. For the year ending December 31, 2012, the target award opportunities for the Named Executive Officers are as follows:


Named Executive Officer	Target EICP Award Opportunity (as a percentage of 2012 annual base salary earned)
Stephen M. Johnson		100	%
Perry L. Elders		70	%
Gary L. Carlson		70	%
Liane K. Hinrichs		70	%
John T. McCormack		80	%

100% of the 2012 target award opportunity will be attributable to financial performance goals established by the Compensation Committee, (1) subject to adjustment by the Compensation Committee, in its sole discretion, based on the Chief Executive Officer’s individual performance, including but not limited to the individual performance objectives established for the Chief Executive Officer by the Compensation Committee, and (2) for the other participants in the EICP, including the remaining Named Executive Officers, subject to adjustment by the Chief Executive Officer based on each participant’s individual performance, with any such adjustment to be subject to the approval of the Compensation Committee. The financial performance goals are attributable 70% to McDermott’s consolidated operating income and 30% to return on invested capital for determining the minimum (25%), target (100%) and maximum (200%) payment a participant would be eligible to earn under the EICP in 2012. The Compensation Committee established the performance goals based on management’s internal projections of 2012 operating income and return on invested capital. No awards will be paid unless the stated minimum operating income level is achieved, and the Compensation Committee has the discretion to reduce the amount of any payout even if performance goals have been achieved.

2012 Long-Term Incentive . The Compensation Committee approved the types of grants and form of grant agreements to be used in connection with the 2012 grants. The 2012 grants include, for each Named Executive Officer, total shareholder return performance shares, restricted stock units and stock options. The grants were all made pursuant to our 2009 McDermott International, Inc. Long-Term Incentive Plan. Copies of the general forms of those agreements are included as Exhibits 10.1, 10.2 and 10.3, respectively, to this current report.

Perquisite Allowance . The Compensation Committee approved a perquisite allowance for certain of our executive officers, including each of the Named Executive Officers. The perquisite allowance is in the amount of $20,000, is paid in cash that may be used for any purpose determined by the recipient and is in lieu of any reimbursements made by McDermott to those executive officers receiving the perquisite allowance for any individual perquisite, with the exception of any company-required spousal travel for the Chief Executive Officer, and any company-required spousal travel approved by the Chief Executive Officer for the remaining Named Executive Officers.

Deferred Compensation Plan Company Contribution . The Compensation Committee approved a 2012 company contribution under the McDermott International, Inc. Director and Executive Deferred Compensation Plan (the “Deferred Compensation Plan”) for certain of our executive officers, including the Named Executive Officers, in an amount of 5% of Compensation (as defined in the Deferred Compensation Plan) received from McDermott during 2011.

Other Matters . The Compensation Committee deferred any action relating to 2012 adjustments to annual base salaries for the Named Executive Officers.

Item 9.01

Financial Statements and Exhibits.

(d)

Exhibits

10.1

Form of 2009 LTIP 2012 Total Shareholder Return Performance Share Grant Agreement

10.2

Form of 2009 LTIP 2012 Restricted Stock Unit Grant Agreement

10.3

Form of 2009 LTIP 2012 Stock Option Grant Agreement

10.4

Summary of Named Executive Officer 2012 Salaries and Target EICP Compensation

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

March 6, 2012

EXHIBIT INDEX


10.1		Form of 2009 LTIP 2012 Total Shareholder Return Performance Share Grant Agreement

10.2		Form of 2009 LTIP 2012 Restricted Stock Unit Grant Agreement

10.3		Form of 2009 LTIP 2012 Stock Option Grant Agreement

10.4		Summary of Named Executive Officer 2012 Salaries and Target EICP Compensation

Exhibit 10.1

Total Shareholder Return Performance Share Grant Agreement

2009 McDermott International, Inc. Long-Term Incentive Plan

On March 5, 2012 (the “Date of Grant”), the Compensation Committee of the Board of Directors (the “Committee”) of McDermott International, Inc. (“McDermott” or the “Company”) selected you to receive a grant of performance shares (“Performance Shares”) under the 2009 McDermott International, Inc. Long-Term Incentive Plan (the “Plan”). The provisions of the Plan are incorporated herein by reference.

Any reference or definition contained in this Total Shareholder Return Performance Share Grant Agreement (this “Agreement”) shall, except as otherwise specified, be construed in accordance with the terms and conditions of the Plan and all determinations and interpretations made by the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive on you and your beneficiaries, estate or personal representatives. The term “Company,” as used in this Agreement with reference to employment or service, shall include subsidiaries of McDermott. Whenever the words “you” or “your” are used in any provision of this Agreement, under circumstances where the provision should logically be construed to apply to any beneficiary, estate, or personal representative to whom any rights under this Agreement may be transferred by will or by the laws of descent and distribution, they shall be deemed to include any such person or estate. This Agreement shall be subject to the Company’s Clawback Policy, which is attached hereto as Exhibit A and is incorporated herein by reference.

Performance Shares

Performance Shares Award . You have been awarded an initial grant of Performance Shares (the “Initial Performance Shares”) shown on the Notice of Grant dated March 5, 2012, which notice is incorporated herein by reference. This grant represents a right to receive shares of common stock of the Company, calculated as described below, provided the applicable performance measures and vesting requirements set forth in this Agreement have been satisfied. No shares of common stock are awarded or issued to you on the Date of Grant.

Vesting Requirements . Except as provided below, the Initial Performance Shares do not provide you with any rights or interest therein until they become vested, if at all, on the third, fourth and/or fifth anniversary of the Date of Grant (each, a “Vesting Date”), provided you are then still employed by the Company.

•

Reduction in Force . In the event you terminate employment prior to the fifth anniversary of the Date of Grant due to a “Reduction in Force,” then: 25% of the Initial Performance Shares will vest on the third, fourth and/or fifth anniversary of the Date of Grant, provided your termination date is on or after the first anniversary of the Date of Grant; or 50% of the Initial Performance Shares will vest on the third, fourth and/or fifth anniversary of the Date of Grant, provided your termination date is on or after the second anniversary of the Date of Grant; or 75% of the Initial Performance Shares will vest on the fourth and fifth anniversary of the Date of Grant, provided your termination date is after the third anniversary of the Date of Grant. The number of Performance Shares that

will vest pursuant to the preceding sentence will be determined by multiplying (a) the total number of Performance Shares that would have vested, if any, based on actual performance had you remained employed with the Company until the third, fourth and fifth anniversary of the Date of Grant, as determined in accordance with the schedule set forth under “Relative Total Shareholder Return” below by (b) the applicable percentage from the preceding sentence.

For this purpose, the term “Reduction in Force” means an involuntary termination of employment with the Company due to elimination of a previously required position or previously required services, or due to the consolidation of departments, abandonment of facilities or offices, technological change or declining business activities, where such termination is intended to be permanent; or under other circumstances which the Committee, in accordance with standards uniformly applied with respect to all similarly situated employees, designates as a reduction in force.

•

Death or Disability . Prior to the fifth anniversary of the Date of Grant, 100% of the Initial Performance Shares shall vest on the third, fourth and/or fifth anniversary of the Date of Grant in the event of the prior occurrence of either (1) the termination of your employment with the Company due to death or (2) your disability (as defined in the Plan), in each case subject to achievement of the applicable performance measures for vesting. The number of Performance Shares that will vest pursuant to the preceding sentence will be the total number of Performance Shares that would have vested, if any, based on actual performance had you remained employed with the Company until the third, fourth and/or fifth anniversary of the Date of Grant, as determined in accordance with the schedule set forth under “Relative Total Shareholder Return” below.

•

Change in Control . If a Change in Control (as defined in the Plan) of the Company occurs, the number of Performance Shares that shall immediately vest on the date such Change in Control occurs shall be the greater of (i) 100% of the Initial Performance Shares or (ii) the vested percentage of Initial Performance Shares determined in accordance with the schedule set forth under “Relative Total Shareholder Return” below, with a Vesting Date as of the date such Change in Control occurs and based on the TSR Percentile Rank determined as of the date the Change in Control occurs. Shares shall be distributed as soon as administratively practicable after the date of the Change in Control, but in any event no later than 30 days following the date of the Change in Control.

Forfeiture of Performance Shares . Except as provided above, Performance Shares which are not vested as of the date of your termination of employment with the Company shall, coincident therewith, terminate and be of no further force or effect.

then all Performance Shares and all rights or benefits awarded to you under this Agreement shall be forfeited, terminated and withdrawn immediately upon (1) notice to the Committee of such conviction pursuant to (a) above or (2) final determination pursuant to (b) above by the Committee. The Committee shall have the right to suspend any and all rights or benefits awarded to you hereunder pending its investigation and final determination with regard to such matters.

Number of Performance Shares . Except as otherwise provided above, the number of Performance Shares of your Initial Performance Shares in which you will vest, if any, shall be determined based on the Company’s Total Shareholder Return relative to the Total Shareholder Return of the Company’s Peer Group (as identified in Exhibit B to this Agreement), over the Measurement Period as illustrated in the schedule set forth below. The “Measurement Period” means the period beginning on January 1, 2012 and ending on December 31, 2016. The maximum number of Performance Shares in which you can vest in any event is 200% of your Initial Performance Shares.

Relative Total Shareholder Return

The term “Total Shareholder Return” for a particular Measurement Period means the rate of return (expressed as a percentage) achieved with respect to the common stock of the Company and the common stock of each company in the Peer Group for such Measurement Period if:

•

$100 were invested in the common stock of each such company at the beginning of such Measurement Period based on the average closing price of such common stock for the last twenty (20) trading days occurring on or before December 31, 2011;

•

All dividends declared with respect to a particular common stock during such Measurement Period are reinvested in such common stock as of the payment date for such dividends (using the closing price of such common stock on such payment date); and

•

The valuation of such common stock at the end of such Measurement Period is based on the average closing price for the last twenty (20) trading days occurring on or before the last day of such Measurement Period.

Following the calculation of Total Shareholder Return, the Committee or its designee shall determine the Company’s percentile rank (the “TSR Percentile Rank”) based on the Total Shareholder Return of the Company and each such other company for such Measurement Period in accordance with the formula set forth below:


TSR Percentile Rank =	(	a +( n – b )	)	/ n * 100%
TSR Percentile Rank =	(	2	)	/ n * 100%

Where:

a = number of companies in the Peer Group with Total Shareholder Return less than McDermott

b = number of companies in the Peer Group with Total Shareholder Return greater than McDermott

n = total number of companies in the Peer Group (not including McDermott)

The Committee may adjust the composition of the Peer Group in consideration of extraordinary corporate events affecting individual companies in the Peer Group, such as mergers, acquisitions, insolvencies, dissolutions or similar events.

Vested percentages between the amounts shown will be calculated by linear interpolation.


Measurement Period	TSR Percentile Rank	Vested Percentage of Initial Performance Shares
36 Months Ending December 31, 2014 (the “Initial Measurement Date”)	³ 90 ^th Percentile 75 ^th Percentile 50 ^th Percentile 25 ^th Percentile < 25 ^th Percentile	150% 150% 100% 50% 0%
48 Months Ending December 31, 2015 (a “Subsequent Measurement Date”)	³ 90 ^th Percentile 75 ^th Percentile 50 ^th Percentile 25 ^th Percentile < 25 ^th Percentile	200%* 150%* 100%* 50%* 0%*
60 Months Ending December 31, 2016 (a “Subsequent Measurement Date”)	³ 90 ^th Percentile 75 ^th Percentile 50 ^th Percentile 25 ^th Percentile < 25 ^th Percentile	200%* 150%* 100%* 50%* 0%*

Less any amounts earned through the Initial Measurement Date or, as applicable, the Subsequent Measurement Date.

You may earn up to a maximum of 150% of your Initial Performance Shares based on performance through the Initial Measurement Date. You may earn up to a maximum of 200% of your Initial Performance Shares based on performance through each of the two Subsequent Measurement Dates, less any amount previously earned. Subject to the possible application of the Company’s Clawback Policy, you will not be required to return any portion of the Initial Performance Shares earned and paid based on performance through the Subsequent Measurement Dates.

Payment of Performance Shares . Except as otherwise provided above in the section entitled “Vesting Requirements — Change in Control,” you (or your estate or beneficiaries, if applicable) will receive one share of common stock of the Company for each Performance Share that vests. Shares shall be distributed as soon as administratively practicable after the Vesting Date, but in any event no later than 30 days after the applicable Vesting Date or the date a Change in Control occurs.

Taxes

You will realize income in connection with this grant of Performance Shares in accordance with the tax laws of the jurisdictions applicable to you.

By acceptance of this Agreement, you agree that any amount which the Company is required to withhold on your behalf, including state income tax and FICA withholding, in connection with income realized by you under this Agreement will be satisfied by withholding whole shares having an aggregate fair market value as equal in value but not exceeding the amount of such required tax withholding, unless the Committee determines to satisfy the statutory minimum withholding obligation by another method permitted by the Plan.

Regardless of the withholding method referred to above, you are liable to the Company for the amount of income tax which the Company is required to withhold in connection with the income realized by you in connection with this Agreement and you hereby authorize the Company to withhold such amount, in whole or in part, from subsequent salary payments, without further notice to you if the withholding method referred to above is not utilized or does not completely cover such required tax withholding.

Transferability

Performance Shares granted hereunder are non-transferable other than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order.

Securities and Exchange Commission Requirements

If you are a Section 16 insider, this type of transaction must be reported on a Form 4 before the end of the second (2 ^nd ) business day following the Date of Grant. Please be aware that if you intend to reject the grant, you should do so immediately after the Date of Grant to avoid potential Section 16 liability. Please advise Dennis Edge and Kim Wolford immediately by e-mail, fax or telephone if you intend to reject this grant. Absent such notice of rejection, the Company will prepare and file the required Form 4 on your behalf within the required two (2) business day deadline.

If you are currently subject to these requirements, you will have already been advised of your status. If you become a Section 16 insider at some future date, reporting will be required in the same manner noted above.

Other Information

Neither the action of the Company in establishing the Plan, nor any action taken by it, by the Committee or by your employer, nor any provision of the Plan or this Agreement shall be construed as conferring upon you the right to be retained in the employ of the Company or any of its subsidiaries or affiliates.

This award is intended to comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), and ambiguous provisions, if any, shall be construed in a manner that is compliant with or exempt from the application of Section 409A, as appropriate.

Exhibit A

POLICY & PROCEDURE NO. 1405-003 ----- EFFECTIVE DATE: 03/01/11


SUBJECT:		Clawback Policy

AFFECTS:		McDermott International, Inc. and its subsidiaries and affiliated companies (hereinafter referred to as “the Company”)

PURPOSE:		To comply with the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) or any other “clawback” provision required by law or the New York Stock Exchange.

GENERAL:		On July 21, 2010, the Dodd-Frank Act was signed into law, which requires the Securities and Exchange Commission to issue final rules which require issuers to develop and implement a policy providing for the “clawback” of certain compensation. This policy expresses the Company’s intent to comply with the Dodd-Frank Act or any other “clawback” provision required by applicable law or regulation.

POLICY:		The Company shall seek to recover any incentive-based award granted to any executive officer of the Company as required by the provisions of the Dodd-Frank Act or any other “clawback” provision required by law or the listing standards of the New York Stock Exchange.

		The Company may amend this policy at any time as necessary.

Interpretation Contact for the above policy is the Senior Vice President, Chief Administration Officer and Senior Vice President, General Counsel and Corporate Secretary.

Exhibit B

Peer Group:

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Baker Hughes Incorporated

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Cal Dive International, Inc.

•

Cameron International Corporation

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Chicago Bridge & Iron Company N.V.

•

Dresser-Rand Group, Inc.

•

Foster Wheeler AG

•

FMC Technologies, Inc.

•

Halliburton Company

•

Helix Energy Solutions Group, Inc.

•

Jacobs Engineering Group, Inc.

•

KBR, Inc.

•

National Oilwell Varco, Inc.

•

Noble Corporation

•

Oceaneering International, Inc.

•

Oil States International, Inc.

•

The Shaw Group Inc.

•

Tidewater Inc.

Provided that each company included in the Peer Group has had its primary common equity security continuously listed or traded on a national securities exchange throughout the relevant Measurement Period.

Exhibit 10.2

Restricted Stock Unit Grant Agreement

McDermott International, Inc. 2009 Long-Term Incentive Plan

On March 5, 2012 (the “Date of Grant”), the Compensation Committee of the Board of Directors (the “Committee”) of McDermott International, Inc. (the “Company”) selected you to receive a grant of Restricted Stock Units (“RSUs”) under the Company’s 2009 Long-Term Incentive Plan (the “Plan”). The provisions of the Plan are incorporated herein by reference.

Any reference or definition contained in this RSU Grant Agreement (this “Agreement”) shall, except as otherwise specified, be construed in accordance with the terms and conditions of the Plan and all determinations and interpretations made by the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive on you and your beneficiaries, estate or personal representatives. The term “Company” as used in this Agreement with reference to employment or service shall include subsidiaries of McDermott. Whenever the words “you” or “your” are used in any provision of this Agreement under circumstances where the provision should logically be construed to apply to any beneficiary, estate, or personal representative to whom any rights under this Agreement may be transferred by will or by the laws of descent and distribution they shall be deemed to include any such person or estate. This Agreement shall be subject to the Company’s Clawback Policy, which is attached hereto as Exhibit A and is incorporated herein by reference.

Restricted Stock Units

RSU Award . You have been awarded the number of RSUs shown on the Notice of Grant dated March 5, 2012, which is incorporated herein by reference. Each RSU represents a right to receive a share of Company common stock on the Vesting Date (as set forth in the “Vesting Requirements” paragraph below) provided the vesting requirements set forth in this agreement have been satisfied.

Vesting Requirements . Subject to the “Forfeiture of RSUs” paragraph below, RSUs do not provide you with any rights or interest therein until they become vested under one or more of the following circumstances (each such date a Vesting Date):

•

in one-third (1/3) increments on the first, second and third anniversaries of the Date of Grant provided you are still employed with the Company on the applicable anniversary;

•

25% of the then-remaining outstanding RSUs if your employment with the Company is involuntarily terminated by reason of a Reduction in Force on or after the first anniversary and prior to the second anniversary of the Date of Grant;

•

50% of the then-remaining outstanding RSUs if your employment with the Company is involuntarily terminated by reason of a Reduction in Force on or after the second anniversary and prior to the third anniversary of the Date of Grant; and

•

100% of the then-remaining outstanding RSUs on the earliest to occur prior to the third anniversary of the Date of Grant of: (1) the date of termination of your employment from the Company due to death, (2) your disability (as defined in the Plan), or (3) the date a Change in Control (as defined in the Plan) occurs.

For purposes of this Agreement, a “Reduction in Force” shall mean a termination of employment with the Company due to elimination of a previously required position or previously required services, or due to the consolidation of departments, abandonment of facilities or offices, technological change or declining business activities, where such termination is intended to be permanent; or under other circumstances which the Compensation Committee, in accordance with standards uniformly applied with respect to all similarly situated employees, designates as a reduction in force.

Forfeiture of RSUs . RSUs which are not and do not become vested upon your termination of employment with the Company shall, coincident therewith, terminate and be of no force or effect.

In the event that while you are employed by the Company or are performing services for or on behalf of the Company under any consulting agreement, (a) you are convicted of (i) a felony or (ii) a misdemeanor involving fraud, dishonesty or moral turpitude, or (b) you engage in conduct that adversely affects or may reasonably be expected to adversely affect the business reputation or economic interests of the Company, as determined in the sole judgment of the Committee, then all RSUs and all rights or benefits awarded to you under this Agreement shall be forfeited, terminated and withdrawn immediately upon (1) notice to the Committee of such conviction pursuant to (a) above or (2) final determination pursuant to (b) above by the Committee. The Committee shall have the right to suspend any and all rights or benefits awarded to you hereunder pending its investigation and final determination with regard to such matters.

Payment of RSUs . RSUs shall be paid in shares of Company common stock, which shares shall be distributed as soon as administratively practicable, but in no event later than 30 days, after the applicable Vesting Date.

Taxes

You will realize income in connection with this grant of RSUs in accordance with the tax laws of the jurisdictions applicable to you.

By acceptance of this Agreement, you agree that any amount which the Company is required to withhold on your behalf, including state income tax and FICA withholding, in connection with income realized by you under this Agreement will be satisfied by withholding whole units or shares having an aggregate fair market value as equal in value but not exceeding the amount of such required tax withholding, unless the Committee determines to satisfy the statutory minimum withholding obligation by another method permitted by the Plan.

Regardless of the withholding method referred to above, you are liable to the Company for the amount of income tax which the Company is required to withhold in connection with the income

realized by you in connection with this Agreement and you hereby authorize the Company to withhold such amount, in whole or in part, from subsequent salary payments, without further notice to you if the withholding method referred to above is not utilized or does not completely cover such required tax withholding.

Transferability

RSUs granted hereunder are non-transferable other than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order.

Securities and Exchange Commission Requirements

If you are currently subject to these requirements you will have already been advised of your status. If you become a Section 16 insider at some future date, reporting will be required in the same manner noted above.

Other Information

This award in intended to comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and ambiguous provisions, if any, shall be construed in a manner that is compliant with or exempt from the application of Section 409A, as appropriate.

Exhibit A

POLICY & PROCEDURE NO. 1405-003 -------- EFFECTIVE DATE: 03/01/11


SUBJECT:		Clawback Policy

AFFECTS:		McDermott International, Inc. and its subsidiaries and affiliated companies (hereinafter referred to as “the Company”)

PURPOSE:		To comply with the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) or any other “clawback” provision required by law or the New York Stock Exchange.

GENERAL:		On July 21, 2010, the Dodd-Frank Act was signed into law, which requires the Securities and Exchange Commission to issue final rules which require issuers to develop and implement a policy providing for the “clawback” of certain compensation. This policy expresses the Company’s intent to comply with the Dodd-Frank Act or any other “clawback” provision required by applicable law or regulation.

POLICY:		The Company shall seek to recover any incentive-based award granted to any executive officer of the Company as required by the provisions of the Dodd-Frank Act or any other “clawback” provision required by law or the listing standards of the New York Stock Exchange. The Company may amend this policy at any time as necessary.

Interpretation Contact for the above policy is the Senior Vice President, Chief Administration Officer and Senior Vice President, General Counsel and Corporate Secretary.

Exhibit 10.3

Stock Option Grant Agreement

2009 McDermott International, Inc. Long-Term Incentive Plan

On March 5, 2012 (the “Date of Grant”) the Compensation Committee of the Board of Directors (the “Committee”) of McDermott International, Inc. (the “Company”) selected you to receive a grant of Non-Qualified Stock Options (the “Option”) under the Company’s 2009 McDermott International, Inc. Long-Term Incentive Plan (the “Plan”). The provisions of the Plan are incorporated herein by reference.

Any reference or definition contained in this Stock Option Grant Agreement (this “Agreement”) shall, except as otherwise specified, be construed in accordance with the terms and conditions of the Plan and all determinations and interpretations made by the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive on you and your beneficiaries, estate or personal representatives. The term “Company” as used in this Agreement with reference to employment shall include subsidiaries of McDermott. Whenever the words “you” or “your” are used in any provision of this Agreement under circumstances where the provision should logically be construed to apply to any beneficiary, estate, or personal representative to whom any rights under this Agreement may be transferred by will or by the laws of descent and distribution they shall be deemed to include any such person or estate. This Agreement shall be subject to the Company’s Clawback Policy, which is attached hereto as Exhibit A and is incorporated herein by reference.

Subject to the provisions of the Plan, the terms and conditions of this grant are as follows:

Number and Price of Option . The Company grants to you the option to purchase from the Company at the price of $14.44 per share up to, but not exceeding in the aggregate, the number of shares of the McDermott’s Common Stock (the “Common Stock”), as shown on the Notice of Grant dated March 5, 2012, which is incorporated herein by reference, and as explained hereinafter and in the Plan.

2.	Option Term . The Option has a term of seven (7) years from the Date of Grant (the “Option Term”).

Vesting of Option . Subject to the “Forfeiture of Option” paragraph below, the Option does not provide you with any rights or interest therein until it vests and becomes exercisable in one-third (1/3) increments on the first, second and third anniversaries of the Date of Grant. The portion of the Option which is or becomes exercisable at the time of termination of employment with the Company continues to be exercisable until terminated in accordance with Paragraph 6 below.

Prior to the third anniversary of the Date of Grant, any unvested portion of the Option shall become vested and exercisable on the earliest to occur of: (1) the date of termination of your employment with the Company due to death, (2) your disability (as defined in the Plan) or (3) the date a change in control (as defined in the Plan) occurs.

If your employment is terminated prior to the third anniversary of the Date of Grant due to an involuntary termination of employment with the Company due to a Reduction in Force, 25% of the then-unvested portion of the Option will become vested and exercisable provided your termination date is on or after the first anniversary of the Date of Grant, or 50% of the-then unvested portion of the Option will become vested and exercisable provided your termination date is on or after the second anniversary of the Date of Grant. For purposes of this Agreement, a “Reduction in Force” shall mean a termination of employment with the Company due to elimination of a previously required position or previously required services, or due to the consolidation of departments, abandonment of facilities or offices, technological change or declining business activities, where such termination is intended to be permanent; or under other circumstances which the Committee, in accordance with standards uniformly applied with respect to all similarly situated employees, designates as a reduction in force.

4.	Forfeiture of Option . Any portion of the Option which is not and does not vest and become exercisable at your termination of employment with the Company for any reason shall, coincident therewith, terminate and be of no further force or effect.

In the event that, while you are employed by the Company or are performing services for or on behalf of the Company under any consulting agreement, (a) you are convicted of (i) a felony or (ii) misdemeanor involving fraud, dishonesty or moral turpitude, or (b) you engage in conduct that adversely effects or may reasonably be expected to adversely affect the business reputation or economic interests of the Company, as determined in the sole judgment of the Committee, then the then unexercised portion of the Option awarded to you under this Agreement shall terminate and shall have no further force or effect immediately upon (1) notice to the Committee of a conviction pursuant to (a) above or (2) final determination by the Committee pursuant to (b) above. In addition, your right to exercise the Option may be suspended during any inquiry regarding any such acts pending a final determination by the Committee.

5.	How to Exercise . Charles Schwab & Co., Inc. (“Schwab”) currently administers the Company’s stock plans and you must exercise your Option with Schwab. You have two ways to exercise your Option through Schwab:

Online – http://equityawardcenter.schwab.com; or

Telephone – 1-800-654-2593.

Certain restrictions apply if you are a Section 16 insider or are a Person Subject to the Window Period as defined in the Company’s Insider Trading Policy (Policy No. 0201-008). The Committee may change Plan administrators or exercise procedures from time to time. You will be notified of such changes, as applicable.

6.	Termination of Option . The Option, which shall become exercisable as provided in paragraphs 3 and 4 above, shall terminate and be of no further force or effect as follows:

(a)

If your employment with the Company terminates during the Option Term by reason of a Reduction in Force or disability (as defined in the Plan), the then unexercised portion of the Option shall terminate and have no further force or effect upon the expiration of the Option Term;

(b)

If your employment with the Company terminates during the Option Term by reason of death, the then unexercised portion of the Option shall terminate and have no further force or effect three (3) years after the date of death, or upon the expiration of the Option Term, whichever occurs first;

(c)

If your employment with the Company terminates during the Option Term for any other reason, the then unexercised portion of the Option shall terminate and have no further force or effect upon the expiration of twelve (12) months after your termination of employment or the expiration of the Option Term, whichever occurs first;

(d)

If you continue in the employ of the Company through the Option Term, the then unexercised portion of the Option shall terminate and have no further force or effect upon the expiration of the Option Term.

Who Can Exercise . During your lifetime, the Option shall be exercisable only by you. No assignment or transfer of the Option, whether voluntary or involuntary, by operation of law or otherwise, except by will or the laws of descent and distribution or pursuant to a Qualified Domestic Relations Order, shall vest in the assignee or transferee any interest whatsoever.

Securities and Exchange Commission Requirements . If you are a Section 16 insider, this type of transaction must be reported on a Form 4 before the end of the second (2 ^nd ) business day following the Date of Grant. Please be aware that if you intend to reject the grant, you should do so immediately after the Date of Grant to avoid potential Section 16 liability. Please advise Dennis Edge and Kim Wolford immediately by e-mail, fax or telephone call if you intend to reject this grant. Absent such notice of rejection, the Company will prepare and file the required Form 4 on your behalf within the required two (2) business day deadline. If Section 16 applies to you, you are also subject to Rule 144. This Rule is applicable only when the shares are sold, so you need not take any action under Rule 144 at this time.

9.	Taxes . You will recognize income upon the exercise of the Option in accordance with the tax laws of the jurisdiction that is applicable to you. You agree to promptly pay to the

Company the amount of income tax which the Company is required to withhold in connection with the income realized by you in connection with this grant and, unless prohibited by applicable law, that you hereby authorize the Company to withhold such amount, in whole or in part, from subsequent salary payments, without further notice to you. State income tax and FICA withholding may also be required and will be withheld in the same manner. From time to time, the Committee may, in its sole discretion, determine to satisfy any statutory minimum withholding obligation by another method permitted by the Plan.

10.	Other . Neither the action of the Company in establishing the Plan, nor any action taken by it, by the Committee or the Board of Directors under this Plan nor any provisions of this Agreement shall be construed as giving to you the right to be retained in the employ of the Company.

Exhibit A

POLICY & PROCEDURE NO. 1405-003 -------- EFFECTIVE DATE: 03/01/11


SUBJECT:		Clawback Policy

AFFECTS:		McDermott International, Inc. and its subsidiaries and affiliated companies (hereinafter referred to as “the Company”)

PURPOSE:		To comply with the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) or any other “clawback” provision required by law or the New York Stock Exchange.

GENERAL:		On July 21, 2010, the Dodd-Frank Act was signed into law, which requires the Securities and Exchange Commission to issue final rules which require issuers to develop and implement a policy providing for the “clawback” of certain compensation. This policy expresses the Company’s intent to comply with the Dodd-Frank Act or any other “clawback” provision required by applicable law or regulation.

POLICY:		The Company shall seek to recover any incentive-based award granted to any executive officer of the Company as required by the provisions of the Dodd-Frank Act or any other “clawback” provision required by law or the listing standards of the New York Stock Exchange.

		The Company may amend this policy at any time as necessary.

Interpretation Contact for the above policy is the Senior Vice President, Chief Administration Officer and Senior Vice President, General Counsel and Corporate Secretary.

Exhibit 10.4

McDERMOTT INTERNATIONAL, INC.

Summary of

Named Executive Officer

2012 Base Salary and

Target EICP Compensation


Named Executive Officer	Base Salary		Target EICP Award (as a % of 2012 base salary earned)
Stephen M. Johnson President and Chief Executive Officer	$	950,000		100	%
Perry L. Elders Senior Vice President and Chief Financial Officer	$	485,000		70	%
Gary L. Carlson Senior Vice President and Chief Administration Officer	$	336,000		70	%
Liane K. Hinrichs Senior Vice President, General Counsel and Corporate Secretary	$	440,000		70	%
John T. McCormack Executive Vice President, Chief Operating Officer	$	500,000		80	%