Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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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 McDermotts chief executive officer, chief financial officer, each currently employed executive officer listed in the Summary
Compensation Table in McDermotts 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 McDermotts 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
McDermotts 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:
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Named Executive Officer
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Target EICP Award Opportunity
(as a percentage of base salary earned
through the Prorated
Period)
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David Dickson
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110
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%
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Stuart Spence
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75
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%
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Linh Austin
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60
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%
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Jonathan Kennefick
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50
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%
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Brian McLaughlin
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60
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%
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Scott Munro
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60
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%
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In connection with the 2018 EICP awards for the Prorated Period, the Compensation Committee approved financial
metric performance goals based on McDermotts consolidated adjusted operating income and adjusted free cash flow, weighted as set forth below. McDermotts 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):
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Weight
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Financial Metric Performance
Goals
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Performance Level
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Funding Multiple
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50%
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Adjusted Operating Income
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Threshold
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0.5x
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Target
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1.0x
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Maximum
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2.0x
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50%
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Adjusted Free Cash Flow
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Threshold
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0.5x
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Target
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1.0x
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Maximum
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2.0x
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The Pool Funding Multiple will then be, for each participant in the EICP, multiplied by the product of such
participants actual base salary earned during the Prorated Period times their respective Target EICP Award
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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 Officers 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 participants actual bonus award will be determined by achievement of the participants individual performance goals, in each case
in accordance with objective measures required by the terms of the EICP and the exercise of the Compensation Committees 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 McDermotts long-term incentive plans, which may include the Named Executive Officers.
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Named Executive Officer
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Restricted Stock Units
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David Dickson
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$
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2,400,000
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Stuart Spence
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$
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750,000
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Linh Austin
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$
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200,000
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Jonathan Kennefick
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$
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100,000
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Brian McLaughlin
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$
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200,000
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Scott Munro
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$
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200,000
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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 participants provider of
choice, in a combined amount not to exceed $20,000. No other perquisites are provided to executive officers, with the exception of company-required spousal travel for (1) the Chief Executive Officer, and (2) the remaining Named Executive
Officers, as approved by the Chief Executive Officer.
Deferred Compensation Plan Company Contribution
. The Compensation
Committee approved a 2018 company contribution under the McDermott International, Inc. Director and Executive Officer Deferred Compensation Plan (the Deferred Compensation Plan) for certain of our executive officers, including the Named
Executive Officers, in an amount equal to 5% of Compensation (as defined in the Deferred Compensation Plan) received from McDermott during 2017.
Recognition Program
. The Compensation Committee approved the McDermott Recognition Program (the Program) for its
executive officers, including the Named Executive Officers, to recognize the efforts associated with the Combination to date and to retain the executive officers for a period following the closing of the Combination. The Compensation Committee
approved award amounts under the Program as set forth below:
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Named Executive Officer
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Award Amount
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David Dickson
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$
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1,125,000
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Stuart Spence
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$
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637,500
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Linh Austin
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$
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385,000
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Jonathan Kennefick
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$
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431,250
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Brian McLaughlin
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$
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431,250
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Scott Munro
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$
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350,000
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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.