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): March 1, 2018

 

 

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.)

4424 Sam Houston Parkway North

Houston, Texas

  77041
(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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On March 1, 2018, 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, each currently employed executive officer listed in the Summary Compensation Table in McDermott’s proxy statement for its 2017 Annual Meeting of Stockholders and each other currently employed executive officer expected to be listed in the Summary Compensation Table in McDermott’s proxy statement for its 2018 Annual Meeting of Stockholders (collectively, the “Named Executive Officers”).

2018 Annual Base Salaries . The Compensation Committee made no adjustments to annual base salaries for the Named Executive Officers at this time.

2018 Annual Cash Bonus . The Compensation Committee established 2018 annual target award opportunities for participants in McDermott’s Executive Incentive Compensation Plan (the “EICP”), including the Named Executive Officers, for the period beginning on January 1, 2018 through the last day of the month prior to the date the closing of the proposed combination (the “Combination”) of McDermott and Chicago Bridge & Iron Company N.V. occurs (the “Prorated Period”). For the Prorated Period, the target award opportunities for the Named Executive Officers are as follows:

 

Named Executive Officer

   Target EICP Award Opportunity
(as a percentage of base salary earned
through the Prorated Period)
 

David Dickson

     110

Stuart Spence

     75

Linh Austin

     60

Jonathan Kennefick

     50

Brian McLaughlin

     60

Scott Munro

     60

In connection with the 2018 EICP awards for the Prorated Period, the Compensation Committee approved financial metric performance goals based on McDermott’s consolidated adjusted operating income and adjusted free cash flow, weighted as set forth below. McDermott’s financial performance against the stated goals will determine the threshold (0.5x), target (1.0x) and maximum (2.0x) possible funding for each financial performance goal, with the weighted sum of each funding multiple determining the pool funding multiple for the Prorated Period (the “Pool Funding Multiple”):

 

Weight

 

Financial Metric Performance

Goals

 

Performance Level

 

Funding Multiple

50%

  Adjusted Operating Income   Threshold   0.5x
    Target   1.0x
    Maximum   2.0x

50%

  Adjusted Free Cash Flow   Threshold   0.5x
    Target   1.0x
    Maximum   2.0x

The Pool Funding Multiple will then be, for each participant in the EICP, multiplied by the product of such participant’s actual base salary earned during the Prorated Period times their respective Target EICP Award

 

2


Opportunity, and such amounts will be aggregated to determine the total amount of the EICP bonus pool for the Prorated Period (the “Prorated Period EICP Pool”). However, the Compensation Committee determined that the Prorated Period EICP Pool will not be less than 0.5x nor more than 2.0x the aggregate dollar amount of the participants’ target award opportunities for the Prorated Period.

In no event may any Named Executive Officer’s annual bonus exceed two times his or her respective Target EICP Award Opportunity, and no participant is guaranteed a minimum award under the EICP. The Compensation Committee has the discretion to increase or decrease the amount of any payout in its sole discretion.

A participant’s actual bonus award will be determined by achievement of the participant’s individual performance goals, in each case in accordance with objective measures required by the terms of the EICP and the exercise of the Compensation Committee’s discretion.

It is expected that, after the Combination, the Compensation Committee will determine the appropriate target EICP award opportunities, financial metrics and performance goals relating to 2018 EICP awards for the portion of 2018 following the Prorated Period.

2018 Long-Term Incentive . The Compensation Committee approved the type of grant and form of grant agreement to be used in connection with the 2018 annual long-term incentive awards. The 2018 awards being made at this time consist of, for each Named Executive Officer, a grant of restricted stock units in the approximate grant date fair value amount set forth below. The grants were made pursuant to the 2016 McDermott International, Inc. Long-Term Incentive Plan. The foregoing description of the grants of restricted stock units is a summary and is qualified in its entirety by reference to the form of the restricted stock unit grant agreement, which is included as Exhibit 10.1 to this report. It is expected that after the Combination, the Compensation Committee will consider and, if appropriate, make additional long-term incentive awards to participants in McDermott’s long-term incentive plans, which may include the Named Executive Officers.

 

Named Executive Officer

   Restricted Stock Units  

David Dickson

   $ 2,400,000  

Stuart Spence

   $ 750,000  

Linh Austin

   $ 200,000  

Jonathan Kennefick

   $ 100,000  

Brian McLaughlin

   $ 200,000  

Scott Munro

   $ 200,000  

Perquisite Program . The Compensation Committee approved a perquisite program for certain of our executive officers, including each of the Named Executive Officers. The perquisite program provides for financial planning services and an executive physical, to be reimbursed to the participant or paid directly to the participant’s provider of choice, in a combined amount not to exceed $20,000. No other perquisites are provided to executive officers, with the exception of company-required spousal travel for (1) the Chief Executive Officer, and (2) the remaining Named Executive Officers, as approved by the Chief Executive Officer.

Deferred Compensation Plan Company Contribution . The Compensation Committee approved a 2018 company contribution under the McDermott International, Inc. Director and Executive Officer Deferred Compensation Plan (the “Deferred Compensation Plan”) for certain of our executive officers, including the Named Executive Officers, in an amount equal to 5% of Compensation (as defined in the Deferred Compensation Plan) received from McDermott during 2017.

Recognition Program . The Compensation Committee approved the McDermott Recognition Program (the “Program”) for its executive officers, including the Named Executive Officers, to recognize the efforts associated with the Combination to date and to retain the executive officers for a period following the closing of the Combination. The Compensation Committee approved award amounts under the Program as set forth below:

 

Named Executive Officer

   Award Amount  

David Dickson

   $ 1,125,000  

Stuart Spence

   $ 637,500  

Linh Austin

   $ 385,000  

Jonathan Kennefick

   $ 431,250  

Brian McLaughlin

   $ 431,250  

Scott Munro

   $ 350,000  

 

3


Under the Program, 50% of the award amount is payable in cash within fifteen days following the date of the closing of the Combination. The remaining 50% of the award amount is payable in cash, if at all, within fifteen days following the first anniversary of the closing of the Combination, provided that at least $62.5 million in cost synergies relating to the Combination (the “Synergies Target”) has been achieved for any fiscal quarter ending after the closing date through the first anniversary of the closing date. If the Synergies Target has not been met as of the one-year anniversary of the closing of the Combination, then no payment will be made and any unpaid portion of the award will be forfeited. The foregoing description of the Program is a summary and is qualified in its entirety by reference to the form of the McDermott Recognition Program Award Agreement, which is included as Exhibit 10.2 to this report.

Amendment of 2016 and 2017 Performance Unit Award Agreements . The Compensation Committee approved amendments to the 2016 and 2017 form of Performance Unit Award Agreements (the “Award Agreements”) to provide that the target number of Performance Units will be converted into time-vested restricted stock units vesting on the third anniversary of the original grant date, subject to the other terms and conditions generally consistent with the existing Award Agreements. The foregoing description of the amendments is a summary and is qualified in its entirety by reference to the form of the Amended and Restated RSU Grant Agreement (Replacing 2016 Performance Unit Grant Agreements) and the Amended and Restated RSU Grant Agreement (Replacing 2017 Performance Unit Grant Agreements), which are included as Exhibits 10.3 and 10.4, respectively, to this report.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

EXHIBIT INDEX

 

10.1    Form of 2018 Restricted Stock Unit Grant Agreement.
10.2    Form of McDermott Recognition Program Award Agreement.
10.3    Form of Amended and Restated RSU Grant Agreement (Replacing 2016 Performance Unit Grant Agreements).
10.4    Form of Amended and Restated RSU Grant Agreement (Replacing 2017 Performance Unit Grant Agreements).

 

4


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.

 

McDERMOTT INTERNATIONAL, INC.
By:  

/s/ Stuart A. Spence

  Stuart A. Spence
  Executive Vice President and Chief Financial Officer

March 7, 2018

 

5

Exhibit 10.1

McDERMOTT INTERNATIONAL, INC.

Restricted Stock Unit Grant Agreement

(March 1, 2018)

The Compensation Committee of the Board of Directors (the “Committee”) of McDermott International, Inc. (“McDermott” or the “Company”) has selected you to receive a grant of Restricted Stock Units (“RSUs”) under the 2016 McDermott International, Inc. Long-Term Incentive Plan (the “Plan”) on March 1, 2018 (the “Date of Grant”). 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, successors, assigns, 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, successors, assigns, 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 Plan and the Company’s Clawback Policy, which is attached hereto as Exhibit A and is incorporated herein by reference. Capitalized terms not defined in this Agreement but that are defined in the Plan shall have the respective meanings ascribed to such terms in the Plan.

Restricted Stock Units

RSU Award . You have been awarded the number of RSUs shown on the Notice of Grant dated March 1, 2018, which is incorporated herein by reference (the “Award”). Each RSU represents a right to receive the value of one Share on the Vesting Date (as set forth in the “Vesting Requirements” paragraph below), provided the vesting requirements set forth in this Agreement shall have been satisfied. No Shares or cash amounts are awarded or issued to you hereunder on the Date of Grant.

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 that 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;

 

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    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 or (2) your Disability; and

 

    If a Change in Control of the Company occurs, Section 14 of the Plan will control, with “Cause” and “Good Reason” given the meanings described below.

On December 18, 2017, the Company, Chicago Bridge & Iron Company N.V. (“CB&I”) and certain of their affiliates executed a business combination agreement pursuant to which the Company and CB&I will combine through a series of transactions (the “Combination”). For purposes of this Agreement, the consummation of the Combination, either alone or in connection with another event, shall not be considered a Change in Control.

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 similarly situated employees, designates as a reduction in force.

For purposes of this Agreement “Cause” means: (i) your continued failure to perform substantially your duties with the Company (occasioned by reason other than your physical or mental illness, death or disability) after a written demand for substantial performance is delivered to you by the Committee which specifically identifies the manner in which the Committee or the Chief Executive Officer believes that you have not substantially performed your duties, after which you shall have 30 days to defend or remedy such failure to substantially perform your duties; (ii) the engaging by you in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company; or (iii) your conviction of, with no further possibility of appeal for, or plea of guilty or nolo contendere by you to, any felony. The cessation of your employment under items (i) and (ii) of this paragraph shall not be deemed to be for “Cause” unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Committee at a meeting of the Committee called and held for such purpose (after reasonable notice is provided to you and you are given an opportunity, together with counsel, to be heard before the Committee), finding that, in the good faith opinion of the Committee, you are guilty of the conduct described in items (i) or (ii) of this paragraph, and specifying the particulars thereof in detail.

For purposes of this Agreement “Good Reason” means any one or more of the following events which occurs following a Change in Control: (a) a material diminution in your duties or responsibilities of from those applicable immediately before the date on which a Change in Control occurs; (b) a material reduction in your annual salary as in effect on the Effective Date of this Agreement or as the same may be increased from time to time; (c) the failure by the Company to continue in effect any compensation plan in which you participate immediately before the Change in Control which is material to your total compensation, unless a comparable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than existed immediately before the Change in Control, unless the action by the Company applies to all similarly situated employees; (d) the failure by the Company to continue to provide you with material benefits in the aggregate that are substantially similar to those enjoyed by you under any of the Company’s pension, savings, life insurance, medical, health and accident, or disability plans in which you were participating immediately before the Change in Control if such benefits are material to your total compensation, the taking of any other action by the Company which would directly or indirectly materially reduce any of

 

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such benefits or deprive you of any fringe benefit enjoyed by you at the time of the Change in Control if such fringe benefit is material to your total compensation, unless the action by the Company applies to all similarly situated employees; or (e) a change in the location of your principal place of employment with the Company by more than 50 miles from the location where you were principally employed immediately before the Change in Control without your consent. If a Change in Control occurs and any of the events described above occurs prior to the third anniversary of such Change in Control (an “Event”), you shall give the Company written notice (the “Notice”) within 60 days following your knowledge of an Event that you intend to terminate employment as a result. The Company shall have 30 days following receipt of the Notice in which to cure the Event. If the Company does not take such action within that time, the Event shall constitute Good Reason. If you do not provide the Notice within 60 days as required above then the Event shall not constitute Good Reason, and thereafter, for purposes of determining whether you have Good Reason, your terms and conditions of employment after the occurrence of the Event shall be substituted for those terms and conditions of your employment in effect immediately prior to the date of this Agreement.

Forfeiture of RSUs . RSUs which are not and do not become vested upon 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) 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 any such matters.

Payment of RSUs . In the sole discretion of the Committee, RSUs shall be paid in (i) Shares, (ii) cash equal to the Fair Market Value of the Shares otherwise deliverable on the Vesting Date, or (iii) any combination thereof, which shall be distributed or paid as soon as administratively practicable, but in any event no later than 30 days, after the applicable Vesting Date.

Taxes

You will realize income in connection with this Award in accordance with the tax laws of the jurisdictions applicable to you. You are solely responsible for the taxes associated with the RSUs, and you should consult with and rely on your own tax advisor, accountant or legal advisor as to the tax consequences to you of this grant.

By acceptance of this Agreement, you agree that any amount which the Company withholds on your behalf, including PAYE, federal or state income tax and employee national insurance contributions or FICA withholding, or pursuant to applicable Company policy, in connection with income realized by you under this Agreement will be satisfied by withholding cash or whole Shares having an aggregate Fair Market Value equal to but not exceeding the amount (as determined by the Company) of such tax withholding, unless the Committee determines to cause the withholding obligation to be satisfied by another method permitted by the Plan. If you are a non-U.S. based taxpayer, the amount which the Company will withhold will be determined based on the tax laws of the jurisdiction applicable to you or applicable Company policy as determined on each applicable Vesting Date. If you are a U.S. based

 

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taxpayer, the amount which the Company will withhold is set forth below, with your grade level for purposes of this Agreement determined on each applicable Vesting Date:

 

    For Participants Grades 11 and Below : The Company will automatically withhold payment of cash or delivery of whole Shares having an aggregate Fair Market Value equal to but not exceeding the minimum withholding due for federal income taxes with respect to this Award. Under the current rules, the minimum withholding rate for U.S. federal income taxes applicable to this Award is 22%.

 

    For non-Executive Committee (“EXCOM”) Participants Grades 12 through 14 : The Company will automatically withhold payment of cash or delivery of whole Shares having an aggregate Fair Market Value equal to but not exceeding a federal income tax rate of 33% with respect to this Award (provided that 33% is higher than the minimum withholding rate then in effect).

 

    For EXCOM Participants : The Company will automatically withhold payment of cash or delivery of whole Shares having an aggregate Fair Market Value equal to but not exceeding the maximum withholding due for federal income taxes with respect to this Award. Under the current rules, the maximum withholding rate for U.S. federal income taxes applicable to this Award is 37%.

In each case above, the withholding amounts above are in addition to employment taxes (FICA and Medicare) as well as any applicable state withholding taxes that may be due. The Committee may, in its discretion, require or allow withholding of cash or Shares for taxes on a different basis than described above, on such terms and conditions as it may determine.

Regardless of the withholding method referred to above, you are liable to the Company for the amount of income tax and employee national insurance contributions or FICA withholding 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 (as determined by the Company), 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 a Section 16 insider, this type of transaction must be reported on a Form 4. 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 or telephone if you intend to reject this grant. Absent such notice of rejection, the Company intends to prepare and file the required Form 4 on your behalf (pursuant to your standing authorization for us to do so).

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.

 

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Other Information

Neither the action of the Company in establishing the Plan, nor any provision of the Plan, nor any action taken by the Company, your employer, the Committee or the Board of Directors under the Plan, nor any provision of this Agreement shall be construed as giving to 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.

 

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Exhibit A

POLICY NO. 1405-003 — EFFECTIVE DATE: 08/02/13

 

SUBJECT:

   Clawback Policy

AFFECTS:

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

PURPOSE:

   To govern the clawback of certain compensation awarded to executive officers of the Company.
POLICY:    If the consolidated financial statements of the Company and its subsidiaries are materially restated within three years of the first public release or filing with the U.S. Securities and Exchange Commission (the “SEC”) of such financial statements, and the Compensation Committee of the Board of Directors of the Company (the “Committee”) determines, in its reasonable discretion, that (1) any current or former executive officer (as defined in Rule 3b-7 promulgated by the SEC under the Securities Exchange Act of 1934, as amended) of the Company (an “Executive”) has engaged in intentional misconduct and (2) such misconduct caused or partially caused the need for such restatement, then the Committee may, within 12 months after such a material restatement, require that the executive forfeit and/or return to the Company all or a portion of the compensation vested, awarded or received under any bonus award (including pursuant to the Company’s Executive Incentive Compensation Plan), equity award (including any award of stock options, shares of restricted stock, deferred stock units or restricted stock units) or other award during the period subject to restatement and the 12-month period following the first public issuance or filing with the SEC of the financial statements that were restated (including, with respect to any such award that is subject to a multi-year vesting period, any compensation vested, awarded or received thereunder during such vesting period if such vesting period includes all or part of such 12-month period); provided, however, that any forfeiture and/or return of compensation by an Executive under this policy will, in any event, be limited to any portion thereof that the Executive would not have received if the consolidated financial statements of the Company and its subsidiaries had been reported properly at the time of first public release or filing with the SEC; provided, further, that this policy shall not apply with respect to any restatement of the consolidated financial statements of the Company and its subsidiaries as to which the need for restatement is determined following the occurrence of a Change in Control (as defined in the Company’s Director and Executive Officer Deferred Compensation Plan, as amended and restated November 8, 2010).
   The vesting, payment or other receipt of any rights or benefits awarded by the Company to an Executive which are subject to this policy may be suspended pending an investigation and final determination by the Committee with regard to any alleged misconduct that may be subject to a determination by the Committee under this policy.
   By accepting any award as to which this policy applies, each Executive must agree to the foregoing and agree to forfeit and/or return compensation to the Company as provided by this policy, as the same may be modified by, or superseded by a replacement policy adopted by, the Committee, as the Committee may deem necessary to comply with regulations issued by the SEC under the Dodd-Frank Wall Street Reform and Consumer

 

A-1


   Protection Act. The terms of this policy shall in no way limit the ability of the Company to pursue forfeiture or reclamation of amounts under applicable law as the Compensation Committee may consider appropriate in its reasonable discretion.

Interpretation Contact for the above policy is the Vice President, Human Resources and Senior Vice President, General Counsel and Corporate Secretary.

 

A-2

Exhibit 10.2

 

LOGO

McDermott Recognition Program Award Agreement

Dear [NAME]:

As you know, McDermott International, Inc. (together with its subsidiaries, “McDermott”) and Chicago Bridge & Iron Company, N.V. (“CBI”) have entered into an Business Combination Agreement, dated as of December 18, 2017 (as such may be amended from time to time, the “BCA”), pursuant to which McDermott and CB&I have agreed to combine their businesses (the “Proposed Combination”).

As a valued McDermott employee, McDermott hereby grants you a special cash incentive award (the “Award”) to recognize your contributions to date and reward your continued service during the critical period before and after the Proposed Combination. The Award is subject to the terms and conditions as set forth in this McDermott Recognition Program Award Agreement (the “Agreement”). This Agreement shall be subject to McDermott’s Clawback Policy, which is incorporated herein by reference.

Your aggregate Award is $[●]. The Award will be paid in cash on the dates referenced below, in each case (except as provided below) subject to your continued employment with McDermott or one of its subsidiaries through each applicable date referenced below:

 

    The First Payment Date: 50% of the Award will be paid within fifteen days following the date of the closing of the Proposed Combination (“Closing Date”);

 

    The Second Payment Date: 50% of the Award will be paid, if at all, within fifteen days following the one-year anniversary of the Closing Date, provided that $62.5 million in cost synergies relating to the Proposed Combination have been achieved for any fiscal quarter ending after the Closing Date through the one-year anniversary of the Closing Date, as independently verified by the Company’s Internal Audit department (the “Synergies Target”). If the Synergies Target has not been met as of the one-year anniversary of the Closing Date, then no payment will be made as of the Second Payment Date and any unpaid portion of the Award will be forfeited.

The Award will be subject to applicable taxes and withholding required by law. The Award is subject to the following additional terms and conditions:

 

    In the event your employment is involuntarily terminated by McDermott by reason of a Reduction in Force on or after the Closing Date, you will receive a prorated portion of any amount of the Award that remains unpaid as of the date of your termination, to be paid, if at all, on the Second Payment Date contingent on the achievement of the Synergies Target, with such proration based on the number of days you worked from the Closing Date through the date of your termination divided by 365.

 

    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 similarly situated employees, designates as a reduction in force.


    In the event of your death or Disability on or after the Closing Date, you (or your estate or legal representative) will receive any amount of the Award that remains unpaid as of the date of your death or Disability, to be paid within 30 days following such date.

 

    For purposes of this Agreement, “Disability” shall have the meaning assigned to such term in the 2016 McDermott International, Inc. Long-Term Incentive Plan, provided that such disability also constitutes a “disability” within the meaning of Section 409A of the Internal Revenue Code, as amended (“Section 409A”).

 

    In the event you voluntarily terminate your employment with McDermott for any reason, or are involuntarily terminated by McDermott for cause, you will forfeit any amount of the Award that remains unpaid as of the date of your termination.

 

    This Award will not be treated as salary or be taken into account for purposes of determining any other compensation or benefits that may be provided to you, including any severance benefits.

 

    This Agreement is between you and McDermott. You hereby agree that you will keep the terms of this Agreement confidential, and will not, except as required by law, disclose such terms to any person other than your immediate family or legal or financial advisers (who also must keep the terms of this Agreement confidential).

 

    Notwithstanding the foregoing, this Agreement will be null and void and of no further force or effect if the BCA is terminated prior to the closing of the Proposed Combination.

 

    This Agreement is intended to be in compliance with Section 409A, and will be construed and interpreted accordingly.

We thank you for your dedicated service and look forward to your continued service during this exciting time.

 

Very truly yours,
MCDERMOTT
By:  

                                                                       

  Name:
  Title:

 

Acknowledged and accepted:

 

[NAME]

 

2

Exhibit 10.3

McDERMOTT INTERNATIONAL, INC.

Amended and Restated RSU Grant Agreement

(Replacing Performance Unit Grant Agreement dated [ ], 2016)

The Compensation Committee of the Board of Directors (the “Committee”) of McDermott International, Inc. (“McDermott” or the “Company”) granted you an award of performance units (“Performance Units”) under the 2014 McDermott International, Inc. Long-Term Incentive Plan (the “Plan”) on [ ] , 2016 (the “Date of Grant”). The provisions of the Plan are incorporated herein by reference.

On December 18, 2017, the Company, Chicago Bridge & Iron Company N.V. (“CB&I”) and certain of their affiliates executed a business combination agreement pursuant to which the Company and CB&I will combine through a series of transactions (the “Combination”). Pursuant to its authority under the Plan, the Committee (as defined in the Plan) has determined that subject to and effective as of the closing of the Combination, each Performance Unit granted under your Performance Unit Grant Agreement dated February 26, 2016 (the “Original Agreement”) will be converted into a time-based restricted stock unit (“RSU”) and the Original Agreement will be amended and restated as follows:

Any reference or definition contained in this Amended and Restated 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, successors, assigns, 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, successors, assigns, 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 Plan and the Company’s Clawback Policy, which is attached hereto as Exhibit A and is incorporated herein by reference. Capitalized terms not defined in this Agreement but that are defined in the Plan shall have the respective meanings ascribed to such terms in the Plan.

Restricted Stock Units

RSU Award . You were awarded a grant of Performance Units shown on the Notice of Grant dated [ ] , 2016, which is incorporated herein by reference. Each Performance Unit awarded thereunder has been converted into an RSU and it represents a right to receive the value of one Share on the Vesting Date (as set forth in the “Vesting Requirements” paragraph below). No Shares or cash amounts are awarded or issued to you hereunder on the Date of Grant.

Vesting Requirements . Except as provided below, the RSUs do not provide you with any rights or interest therein until they become vested on the third anniversary of the Date of Grant (the “Vesting Date”), provided you are then still employed by the Company.

 

    Reduction in Force . In the event you terminate employment prior to the third anniversary of the Date of Grant due to a “Reduction in Force,” then: 66% of the RSUs will vest as of the date of such termination.

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,

 

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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 similarly situated employees, designates as a reduction in force.

 

    Death or Disability . 100% of the RSUs shall vest on the prior occurrence of either (1) the termination of your employment with the Company due to death or (2) your Disability.

 

    Change in Control .

 

    If a Change in Control of the Company occurs, and this award is not assumed or substituted with a Replacement Award by the surviving company as set forth below (“Assumed”), then the RSUs will vest as of the Change in Control.

 

    If a Change in Control of the Company occurs, this award is Assumed by the surviving company and, during the period following the Change in Control and prior to the end of the third anniversary of the Grant Date, (i) you terminate your employment for “Good Reason” (as defined below), (ii) you are involuntarily terminated for reasons other than for “Cause” (as defined below) or (iii) you die or suffer a Disability, then the RSUs will become fully vested as of such date.

For this purpose an assumed award qualifies as a “Replacement Award” if the following requirements are met: (a) it is of the same type as this award, (b) it has a value at least equal to the value of this award, (c) it relates to publicly traded equity securities of the Company or its successor in the Change in Control or another entity that is affiliated with the Company or its successor following the Change in Control, (d) if the Participant holding the this award is subject to U.S. federal income tax under the Code, the tax consequences to such Participant under the Code of the Replacement Award are not less favorable to such Participant than the tax consequences of this award, and (e) its other terms and conditions are not less favorable to the Participant holding the Replacement Award than the terms and conditions of this award (including the provisions that would apply in the event of a subsequent Change in Control). The determination of whether an award has been Assumed will be made in the discretion of the Committee as constituted immediately prior to the effective date of the Change in Control.

For this purpose “Cause” means: (i) your continued failure to perform substantially your duties with the Company (occasioned by reason other than your physical or mental illness, death or disability) after a written demand for substantial performance is delivered to you by the Committee which specifically identifies the manner in which the Committee or the Chief Executive Officer believes that you have not substantially performed your duties, after which you shall have 30 days to defend or remedy such failure to substantially perform your duties; (ii) the engaging by you in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company; or (iii) your conviction of, with no further possibility of appeal for, or plea of guilty or nolo contendere by you to, any felony. The cessation of your employment under items (i) and (ii) of this paragraph shall not be deemed to be for “Cause” unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Committee at a meeting of the Committee called and held for such purpose (after reasonable notice is provided to you and you are given an opportunity, together with counsel, to be heard before the Committee), finding that, in the good faith opinion of the Committee, you are guilty of the conduct described in items (i) or (ii) of this paragraph, and specifying the particulars thereof in detail.

For this purpose “Good Reason” means any one or more of the following events which occurs following a Change in Control: (a) a material diminution in your duties or responsibilities of

 

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from those applicable immediately before the date on which a Change in Control occurs; (b) a material reduction in your annual salary as in effect on the Effective Date of this Agreement or as the same may be increased from time to time; (c) the failure by the Company to continue in effect any compensation plan in which you participate immediately before the Change in Control which is material to your total compensation, unless a comparable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than existed immediately before the Change in Control, unless the action by the Company applies to all similarly situated employees; (d) the failure by the Company to continue to provide you with material benefits in the aggregate that are substantially similar to those enjoyed by you under any of the Company’s pension, savings, life insurance, medical, health and accident, or disability plans in which you were participating immediately before the Change in Control if such benefits are material to your total compensation, the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you of any fringe benefit enjoyed by you at the time of the Change in Control if such fringe benefit is material to your total compensation, unless the action by the Company applies to all similarly situated employees; or (e) a change in the location of your principal place of employment with the Company by more than 50 miles from the location where you were principally employed immediately before the Change in Control without your consent. If a Change in Control occurs and any of the events described above occurs prior to the third anniversary of such Change in Control (an “Event”), you shall give the Company written notice (the “Notice”) within 60 days following your knowledge of an Event that you intend to terminate employment as a result. The Company shall have 30 days following receipt of the Notice in which to cure the Event. If the Company does not take such action within that time, the Event shall constitute Good Reason. If you do not provide the Notice within 60 days as required above then the Event shall not constitute Good Reason, and thereafter, for purposes of determining whether you have Good Reason, your terms and conditions of employment after the occurrence of the Event shall be substituted for those terms and conditions of your employment in effect immediately prior to the date of this Agreement.

Forfeiture of RSUs . Except as provided above, RSUs which are not vested as of the date of 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) 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 any such matters.

Payment of RSUs . You (or your estate or beneficiaries, if applicable) will receive the value of one Share for each RSU that vests. In the sole discretion of the Committee, RSUs shall be paid in (i) Shares, (ii) cash equal to the Fair Market Value of the Shares otherwise deliverable, or (iii) any combination thereof, which shall be distributed or paid as soon as administratively practicable after the Vesting Date or the date vesting occurs as described above under “Reduction in Force”, “Death or Disability” or “Change in Control”, but in any event no later than 30 days thereafter.

 

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Taxes

You will realize income in connection with this grant of RSUs in accordance with the tax laws of the jurisdictions applicable to you. You are solely responsible for the taxes associated with the RSUs, and you should consult with and rely on your own tax advisor, accountant or legal advisor as to the tax consequences to you of this grant.

By acceptance of this Agreement, you agree that any amount which the Company is required to withhold on your behalf, including PAYE, federal or state income tax and employee national insurance contributions or FICA withholding, or pursuant to applicable Company policy, in connection with income realized by you under this Agreement will be satisfied by withholding cash or whole Shares having an aggregate Fair Market Value equal to but not exceeding the amount (as determined by the Company) of such required tax withholding, unless the Committee determines to cause the withholding obligation to be satisfied by another method permitted by the Plan. The Committee may, in its discretion, allow additional withholding of cash or Shares for taxes, on such terms and conditions as it may determine, provided that the Committee determines in good faith in consultation with its advisors that allowing such additional withholding will not result in adverse accounting consequences to the Company.    

Regardless of the withholding method referred to above, you are liable to the Company for the amount of income tax and employee national insurance contributions or FICA withholding 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 (as determined by the Company), 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 a Section 16 insider, this type of transaction must be reported on a Form 4. 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 or telephone if you intend to reject this grant. Absent such notice of rejection, the Company intends to prepare and file the required Form 4 on your behalf (pursuant to your standing authorization for us to do so).

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 provision of the Plan, nor any action taken by the Company, your employer, the Committee or the Board of Directors under the Plan, nor any provision of this Agreement shall be construed as giving to you the right to be retained in the employ of the Company or any of its subsidiaries or affiliates.

 

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This Agreement sets forth the entire agreement between the parties with respect to the subject matter hereof, and supersedes any and all prior agreements or understanding between you and the Company, whether written or oral, fully or partially performed relating to any or all matters covered by and contained or otherwise dealt with in this Agreement, including the Original Agreement.

This award is intended to comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and its implementing regulations (“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. Notwithstanding any provision of the award to the contrary, if you are a “specified employee” within the meaning of Section 409A as of the date of your termination of employment and the Company determines, in good faith, that immediate payments of any amounts or benefits would cause a violation of Section 409A, then any amounts or benefits which are payable under this award upon your “separation from service” within the meaning of Section 409A which (i) are subject to the provisions of Section 409A; (ii) are not otherwise excluded under Section 409A; and (iii) would otherwise be payable during the first six-month period following such separation from service shall be paid on the first business day next following the earlier of (1) the date that is six months and one day following the date of termination or (2) the date of the participant’s death. In addition, any payments to be made upon a Change in Control will only be made upon such event if such event qualifies as a “change in control event” within the meaning of Section 409A.

 

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Exhibit A

POLICY NO. 1405-003 — EFFECTIVE DATE: 08/02/13

 

SUBJECT:    Clawback Policy
AFFECTS:    McDermott International, Inc. and its subsidiaries and affiliated companies (hereinafter referred to as “the Company”)
PURPOSE:    To govern the clawback of certain compensation awarded to executive officers of the Company.
POLICY:    If the consolidated financial statements of the Company and its subsidiaries are materially restated within three years of the first public release or filing with the U.S. Securities and Exchange Commission (the “SEC”) of such financial statements, and the Compensation Committee of the Board of Directors of the Company (the “Committee”) determines, in its reasonable discretion, that (1) any current or former executive officer (as defined in Rule 3b-7 promulgated by the SEC under the Securities Exchange Act of 1934, as amended) of the Company (an “Executive”) has engaged in intentional misconduct and (2) such misconduct caused or partially caused the need for such restatement, then the Committee may, within 12 months after such a material restatement, require that the executive forfeit and/or return to the Company all or a portion of the compensation vested, awarded or received under any bonus award (including pursuant to the Company’s Executive Incentive Compensation Plan), equity award (including any award of stock options, shares of restricted stock, deferred stock units or restricted stock units) or other award during the period subject to restatement and the 12-month period following the first public issuance or filing with the SEC of the financial statements that were restated (including, with respect to any such award that is subject to a multi-year vesting period, any compensation vested, awarded or received thereunder during such vesting period if such vesting period includes all or part of such 12-month period); provided, however, that any forfeiture and/or return of compensation by an Executive under this policy will, in any event, be limited to any portion thereof that the Executive would not have received if the consolidated financial statements of the Company and its subsidiaries had been reported properly at the time of first public release or filing with the SEC; provided, further, that this policy shall not apply with respect to any restatement of the consolidated financial statements of the Company and its subsidiaries as to which the need for restatement is determined following the occurrence of a Change in Control (as defined in the Company’s Director and Executive Officer Deferred Compensation Plan, as amended and restated November 8, 2010).
   The vesting, payment or other receipt of any rights or benefits awarded by the Company to an Executive which are subject to this policy may be suspended pending an investigation and final determination by the Committee with regard to any alleged misconduct that may be subject to a determination by the Committee under this policy.
   By accepting any award as to which this policy applies, each Executive must agree to the foregoing and agree to forfeit and/or return compensation to the Company as provided by

 

Exhibit A-1


   this policy, as the same may be modified by, or superseded by a replacement policy adopted by, the Committee, as the Committee may deem necessary to comply with regulations issued by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The terms of this policy shall in no way limit the ability of the Company to pursue forfeiture or reclamation of amounts under applicable law as the Compensation Committee may consider appropriate in its reasonable discretion.

Interpretation Contact for the above policy is the Vice President, Human Resources and Senior Vice President, General Counsel and Corporate Secretary.

 

Exhibit A-2

Exhibit 10.4

McDERMOTT INTERNATIONAL, INC.

Amended and Restated RSU Grant Agreement

(Replacing Performance Unit Grant Agreement dated [ ], 2017)

The Compensation Committee of the Board of Directors (the “Committee”) of McDermott International, Inc. (“McDermott” or the “Company”) granted you an award of performance units (“Performance Units”) under the 2016 McDermott International, Inc. Long-Term Incentive Plan (the “Plan”) on [ ] , 2017 (the “Date of Grant”). The provisions of the Plan are incorporated herein by reference.

On December 18, 2017, the Company, Chicago Bridge & Iron Company N.V. (“CB&I”) and certain of their affiliates executed a business combination agreement pursuant to which the Company and CB&I will combine through a series of transactions (the “Combination”). Pursuant to its authority under the Plan, the Committee (as defined in the Plan) has determined that subject to and effective as of the closing of the Combination, each Performance Unit granted under your Performance Unit Grant Agreement dated February 26, 2016 (the “Original Agreement”) will be converted into a time-based restricted stock unit (“RSU”) and the Original Agreement will be amended and restated as follows:

Any reference or definition contained in this Amended and Restated 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, successors, assigns, 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, successors, assigns, 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 Plan and the Company’s Clawback Policy, which is attached hereto as Exhibit A and is incorporated herein by reference. Capitalized terms not defined in this Agreement but that are defined in the Plan shall have the respective meanings ascribed to such terms in the Plan.

Restricted Stock Units

RSU Award . You were awarded a grant of Performance Units shown on the Notice of Grant dated [ ] , 2017, which is incorporated herein by reference (the “Award”). Each Performance Unit awarded thereunder has been converted into an RSU and each RSU represents a right to receive the value of one Share on the Vesting Date (as set forth in the “Vesting Requirements” paragraph below). No Shares or cash amounts are awarded or issued to you hereunder on the Date of Grant.

Vesting Requirements . Except as provided below, the RSUs do not provide you with any rights or interest therein until they become vested on the third anniversary of the Date of Grant (the “Vesting Date”), provided you are then still employed by the Company.

 

    Reduction in Force . In the event you terminate employment prior to the third anniversary of the Date of Grant due to a “Reduction in Force,” then: 33% of the RSUs will vest as of the date of such termination, provided your termination date is on or after the first anniversary of the Date of Grant; and 66% of the RSUs will vest as of the date of such termination, provided your termination date is on or after the second anniversary of the Date of Grant.

 

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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 similarly situated employees, designates as a reduction in force.

 

    Death or Disability . 100% of the RSUs shall vest on the prior occurrence of either (1) the termination of your employment with the Company due to death or (2) your Disability.

 

    Change in Control . If a Change in Control of the Company occurs, Section 14 of the Plan will control, with “Cause” and “Good Reason” given the meanings described below.

For this purpose “Cause” means: (i) your continued failure to perform substantially your duties with the Company (occasioned by reason other than your physical or mental illness, death or disability) after a written demand for substantial performance is delivered to you by the Committee which specifically identifies the manner in which the Committee or the Chief Executive Officer believes that you have not substantially performed your duties, after which you shall have 30 days to defend or remedy such failure to substantially perform your duties; (ii) the engaging by you in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company; or (iii) your conviction of, with no further possibility of appeal for, or plea of guilty or nolo contendere by you to, any felony. The cessation of your employment under items (i) and (ii) of this paragraph shall not be deemed to be for “Cause” unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Committee at a meeting of the Committee called and held for such purpose (after reasonable notice is provided to you and you are given an opportunity, together with counsel, to be heard before the Committee), finding that, in the good faith opinion of the Committee, you are guilty of the conduct described in items (i) or (ii) of this paragraph, and specifying the particulars thereof in detail.

For this purpose “Good Reason” means any one or more of the following events which occurs following a Change in Control: (a) a material diminution in your duties or responsibilities of from those applicable immediately before the date on which a Change in Control occurs; (b) a material reduction in your annual salary as in effect on the Effective Date of this Agreement or as the same may be increased from time to time; (c) the failure by the Company to continue in effect any compensation plan in which you participate immediately before the Change in Control which is material to your total compensation, unless a comparable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than existed immediately before the Change in Control, unless the action by the Company applies to all similarly situated employees; (d) the failure by the Company to continue to provide you with material benefits in the aggregate that are substantially similar to those enjoyed by you under any of the Company’s pension, savings, life insurance, medical, health and accident, or disability plans in which you were participating immediately before the Change in Control if such benefits are material to your total compensation, the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you of any fringe benefit enjoyed by you at the time of the Change in Control if such fringe benefit is material to your total compensation, unless the action by the Company applies to all similarly situated employees; or (e) a change in the location of your principal place of employment with the Company by more than 50 miles from the location where you were principally employed immediately before the Change in Control without your consent.

 

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If a Change in Control occurs and any of the events described above occurs prior to the third anniversary of such Change in Control (an “Event”), you shall give the Company written notice (the “Notice”) within 60 days following your knowledge of an Event that you intend to terminate employment as a result. The Company shall have 30 days following receipt of the Notice in which to cure the Event. If the Company does not take such action within that time, the Event shall constitute Good Reason. If you do not provide the Notice within 60 days as required above then the Event shall not constitute Good Reason, and thereafter, for purposes of determining whether you have Good Reason, your terms and conditions of employment after the occurrence of the Event shall be substituted for those terms and conditions of your employment in effect immediately prior to the date of this Agreement.

Forfeiture of RSUs . Except as provided above, RSUs which are not vested as of the date of 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) 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 any such matters.

Payment of RSUs . You (or your estate or beneficiaries, if applicable) will receive the value of one Share for each RSU that vests. In the sole discretion of the Committee, RSUs shall be paid in (i) Shares, (ii) cash equal to the Fair Market Value of the Shares otherwise deliverable, or (iii) any combination thereof, which shall be distributed or paid as soon as administratively practicable after the Vesting Date or the date vesting occurs as described above under “Reduction in Force”, “Death or Disability” or “Change in Control” , but in any event no later than 30 days thereafter.

Taxes

You will realize income in connection with this grant of RSUs in accordance with the tax laws of the jurisdictions applicable to you. You are solely responsible for the taxes associated with the RSUs, and you should consult with and rely on your own tax advisor, accountant or legal advisor as to the tax consequences to you of this grant.

By acceptance of this Agreement, you agree that any amount which the Company withholds on your behalf, including PAYE, federal or state income tax and employee national insurance contributions or FICA withholding, or pursuant to applicable Company policy, in connection with income realized by you under this Agreement will be satisfied by withholding cash or whole Shares having an aggregate Fair Market Value equal to but not exceeding the amount (as determined by the Company) of such tax withholding, unless the Committee determines to cause the withholding obligation to be satisfied by another method permitted by the Plan. If you are a non-U.S. based taxpayer, the amount which the Company will withhold will be determined based on the tax laws of the jurisdiction applicable to you or applicable Company policy as determined on the Vesting Date or the date vesting otherwise occurs. If you are a U.S. based taxpayer, the amount which the Company will withhold is set forth below, with your

 

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grade level for purposes of this Agreement determined on each applicable Vesting Date or the date vesting otherwise occurs:

 

    For Participants Grades 11 and Below : The Company will automatically withhold payment of cash or delivery of whole Shares having an aggregate Fair Market Value equal to but not exceeding the minimum withholding due for federal income taxes with respect to this Award. Under the current rules, the minimum withholding rate for U.S. federal income taxes applicable to this Award is 22%.

 

    For non-Executive Committee (“EXCOM”) Participants Grades 12 through 14 : The Company will automatically withhold payment of cash or delivery of whole Shares having an aggregate Fair Market Value equal to but not exceeding a federal income tax rate of 33% with respect to this Award (provided that 33% is higher than the minimum withholding rate then in effect).

 

    For EXCOM Participants : The Company will automatically withhold payment of cash or delivery of whole Shares having an aggregate Fair Market Value equal to but not exceeding the maximum withholding due for federal income taxes with respect to this Award. Under the current rules, the maximum withholding rate for U.S. federal income taxes applicable to this Award is 37%.

In each case above, the withholding amounts above are in addition to employment taxes (FICA and Medicare) as well as any applicable state withholding taxes that may be due. The Committee may, in its discretion, require or allow withholding of cash or Shares for taxes on a different basis than described above, on such terms and conditions as it may determine.

Regardless of the withholding method referred to above, you are liable to the Company for the amount of income tax and employee national insurance contributions or FICA withholding 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 (as determined by the Company), 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 a Section 16 insider, this type of transaction must be reported on a Form 4. 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 or telephone if you intend to reject this grant. Absent such notice of rejection, the Company intends to prepare and file the required Form 4 on your behalf (pursuant to your standing authorization for us to do so).

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.

 

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Other Information

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

This Agreement sets forth the entire agreement between the parties with respect to the subject matter hereof, and supersedes any and all prior agreements or understanding between you and the Company, whether written or oral, fully or partially performed relating to any or all matters covered by and contained or otherwise dealt with in this Agreement, including the Original Agreement.

This award is intended to comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and its implementing regulations (“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. Notwithstanding any provision of the award to the contrary, if you are a “specified employee” within the meaning of Section 409A as of the date of your termination of employment and the Company determines, in good faith, that immediate payments of any amounts or benefits would cause a violation of Section 409A, then any amounts or benefits which are payable under this award upon your “separation from service” within the meaning of Section 409A which (i) are subject to the provisions of Section 409A; (ii) are not otherwise excluded under Section 409A; and (iii) would otherwise be payable during the first six-month period following such separation from service shall be paid on the first business day next following the earlier of (1) the date that is six months and one day following the date of termination or (2) the date of the participant’s death. In addition, any payments to be made upon a Change in Control will only be made upon such event if such event qualifies as a “change in control event” within the meaning of Section 409A.

 

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Exhibit A

POLICY NO. 1405-003 — EFFECTIVE DATE: 08/02/13

 

SUBJECT:    Clawback Policy
AFFECTS:    McDermott International, Inc. and its subsidiaries and affiliated companies (hereinafter referred to as “the Company”)
PURPOSE:    To govern the clawback of certain compensation awarded to executive officers of the Company.
POLICY:    If the consolidated financial statements of the Company and its subsidiaries are materially restated within three years of the first public release or filing with the U.S. Securities and Exchange Commission (the “SEC”) of such financial statements, and the Compensation Committee of the Board of Directors of the Company (the “Committee”) determines, in its reasonable discretion, that (1) any current or former executive officer (as defined in Rule 3b-7 promulgated by the SEC under the Securities Exchange Act of 1934, as amended) of the Company (an “Executive”) has engaged in intentional misconduct and (2) such misconduct caused or partially caused the need for such restatement, then the Committee may, within 12 months after such a material restatement, require that the executive forfeit and/or return to the Company all or a portion of the compensation vested, awarded or received under any bonus award (including pursuant to the Company’s Executive Incentive Compensation Plan), equity award (including any award of stock options, shares of restricted stock, deferred stock units or restricted stock units) or other award during the period subject to restatement and the 12-month period following the first public issuance or filing with the SEC of the financial statements that were restated (including, with respect to any such award that is subject to a multi-year vesting period, any compensation vested, awarded or received thereunder during such vesting period if such vesting period includes all or part of such 12-month period); provided, however, that any forfeiture and/or return of compensation by an Executive under this policy will, in any event, be limited to any portion thereof that the Executive would not have received if the consolidated financial statements of the Company and its subsidiaries had been reported properly at the time of first public release or filing with the SEC; provided, further, that this policy shall not apply with respect to any restatement of the consolidated financial statements of the Company and its subsidiaries as to which the need for restatement is determined following the occurrence of a Change in Control (as defined in the Company’s Director and Executive Officer Deferred Compensation Plan, as amended and restated November 8, 2010).
   The vesting, payment or other receipt of any rights or benefits awarded by the Company to an Executive which are subject to this policy may be suspended pending an investigation and final determination by the Committee with regard to any alleged misconduct that may be subject to a determination by the Committee under this policy.
   By accepting any award as to which this policy applies, each Executive must agree to the foregoing and agree to forfeit and/or return compensation to the Company as provided by

 

Exhibit A-1


   this policy, as the same may be modified by, or superseded by a replacement policy adopted by, the Committee, as the Committee may deem necessary to comply with regulations issued by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The terms of this policy shall in no way limit the ability of the Company to pursue forfeiture or reclamation of amounts under applicable law as the Compensation Committee may consider appropriate in its reasonable discretion.

Interpretation Contact for the above policy is the Vice President, Human Resources and Senior Vice President, General Counsel and Corporate Secretary.

 

Exhibit A-2