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 September 27, 2017, Franks International N.V. (the
Company
) announced the appointment by the board of managing
directors (the
Management Board
) and the board of supervisory directors (the
Supervisory Board
) of Michael C. Kearney to serve as President and Chief Executive Officer, succeeding Douglas G. Stephens, effective
September 26, 2017 (the
Effective Date
). Mr. Kearney will also continue to serve as Chairman of the Supervisory Board.
Mr. Kearney, age 68, has served as a member of the Supervisory Board since 2013 and has over 25 years of upstream energy executive and
Board experience, principally in the oil services sector. Mr. Kearney was appointed to the Supervisory Board in 2013 and was Lead Supervisory Director from May 2014 until December 31, 2015, when he was named Chairman. In addition, he has
served on the Audit Committee since 2013 and the Compensation Committee from 2014 until 2016.
Mr. Kearney previously served as
President and Chief Executive Officer of DeepFlex Inc., a privately held oil service company which was engaged in the manufacture of flexible composite pipe used in offshore oil and gas production, from September 2009 until June 2013, and had served
as the Chief Financial Officer of DeepFlex Inc. from January 2008 until September 2009. Mr. Kearney served as Executive Vice President and Chief Financial Officer of Tesco Corporation from October 2004 to January 2007. From 1998 until 2004,
Mr. Kearney served as the Chief Financial Officer and Vice PresidentAdministration of Hydril Company.
In addition to his
executive experience, Mr. Kearneys oil service experience extends to serving on the Board of Core Laboratories from 2004 until 2017, most recently as its Lead Director, and currently serving on the Board and Audit Committee of Fairmount
Santrol since 2015. Mr. Kearney received a Bachelor of Business Administration degree from Texas A&M University, as well as a Master of Science degree in Accountancy from the University of Houston.
Pursuant to an offer letter agreement between Mr. Kearney and the Company (the
Offer Letter
), Mr. Kearney will be
paid an annual base salary of $750,000 and will be eligible for an annual incentive bonus based on performance criteria determined by the Supervisory Board or a committee thereof with an expected target bonus opportunity equal to 100% of his base
salary. For 2017, any annual incentive bonus will be
pro-rated
to reflect the length of time between the Effective Date and December 31, 2017. Mr. Kearney will be eligible to receive, pursuant to the
Companys long-term incentive plan, annual grants of equity-based incentive awards equal to 350% of his annual base salary. For the annual grants made in 2018, the grant made to Mr. Kearney will be
pro-rated
to reflect the length of time between the Effective Date and the grant date of such award. In addition, Mr. Kearney will receive an initial grant of restricted stock units with a grant date
value of $2,625,000 (the
Initial Grant
).
One-half
of the Initial Grant will be time-based and vest 1/3 per year on each of the first, second, and third anniversaries of the grant date, and
one-half
will be performance-based and vest following the end of a
3-year
performance period, based on the Companys achievement of specified performance metrics
throughout the performance period, in both cases subject to continuous employment through the applicable vesting date.
The Offer Letter
provides that Mr. Kearney will be eligible to participate in the Companys benefit plans and programs generally available to the Companys senior executives, except that in lieu of participation in the Companys Executive Change
in Control Severance Plan, the Offer Letter provides that should Mr. Kearneys employment with the Company be terminated by the Company without Cause or by him for Good Reason (both terms as defined in the Offer Letter) on or within 24
months following a Change in Control (as such term is defined in the Companys long-term incentive plan), Mr. Kearney will be entitled to (1) a lump sum cash severance payment equal to (a) 1.0x his then-current annual base salary if
such termination occurs prior to the first anniversary of the Effective Date, or (b) 0.5x his then-current salary if such termination occurs on or after the first anniversary of the Effective Date but prior to the second anniversary of the Effective
Date, and (2) 18 months of continued coverage under the Companys group health plan on the same basis as similarly situated active employees. If Mr. Kearneys employment is involuntarily terminated by the Company without Cause or by
him for Good Reason at any time, he will also be entitled to a
pro-rated
annual bonus payment for the year of his termination based on the target bonus amount, but
pro-rated
to reflect his period of service during the year. These severance benefits are subject to the executives timely execution and
non-revocation
of a waiver
and release of claims against the Company and its affiliates and related parties. In connection with his employment, Mr. Kearney will be expected to agree to certain restrictive covenants generally applicable to other executive officers of the
Company, including
non-competition
and
non-solicitation
provisions and customary
non-disclosure
and confidentiality provisions. He will also enter
into an indemnification agreement for his service as an officer, consistent with the form of indemnity agreement entered into by other executive officers and directors of the Company, as previously disclosed by the Company. The Offer Letter also
provides for reimbursement of up to $10,000 in attorney fees incurred by Mr. Kearney in the negotiation of his Offer Letter.
The
foregoing description of the Offer Letter is qualified by reference to the full text of the Offer Letter, a copy of which will be filed as an exhibit to the Companys Quarterly Report on Form
10-Q
for the
quarter ended September 30, 2017.
There are no other understandings or arrangements between Mr. Kearney and any other person
pursuant to which Mr. Kearney was selected to serve as principal executive officer. Mr. Kearney does not have any relationships requiring disclosure under Item 401(d) of Regulation
S-K
or any
interests requiring disclosure under Item 404(a) of Regulation
S-K.
In connection with
Mr. Stephenss separation from the Company, he was offered the option to choose whether to receive (i) payments and benefits pursuant to a Separation Agreement entered into following his separation from service (
Option
A
); or (ii) the compensation and benefits due to him pursuant to the terms of various previously-existing agreements and understandings and a special vesting agreement (
Option B
). Under Option A, Mr. Stephens
and the Company would enter into a separation agreement (the
Separation Agreement
) pursuant to which Mr. Stephens would be entitled to certain severance payments and benefits that are contingent on his execution and
non-revocation
of certain releases, which waive and release claims against the Company and related parties for any liability relating to his employment, and his compliance with certain restrictive covenants,
including customary confidentiality provisions and
non-competition
and
non-solicitation
restrictions. Such payments and benefits under Option A include the following:
(i) a
lump-sum
cash payment equal to $651,000, which represents an amount equal to (A) six (6) months of Mr. Stephenss annual base salary, plus (B) a prorated bonus of $326,000
relating to Mr. Stephenss short-term incentive award for 2017; (ii) accelerated vesting of
one-third
of Mr. Stephenss outstanding equity awards under the Companys long-term
incentive plan (with vesting of performance-based awards applied to target performance thereunder), with the remaining
two-thirds
of such outstanding equity awards being forfeited to the Company without
consideration; (iii) outplacement benefits during the twelve months following the Effective Date, provided that the total cost of such outplacement benefits will not exceed $15,000; and (iv) for up to 18 months following his separation,
continued health coverage and reimbursement of premium costs under the Companys group health plan to effectuate the same premium rate paid by active senior executive employees of the Company. Under Option B,
Mr. Stephens would be entitled to continued vesting of his outstanding equity awards under the Companys long-term incentive plan pursuant to the terms of such awards and the terms of the special vesting agreement, provided
Mr. Stephens satisfies certain restrictive covenants throughout the vesting period.
The foregoing description of Option A, if
selected by Mr. Stephens, is qualified by reference to the full text of the Separation Agreement, a copy of which is expected to be filed as an exhibit to the Companys Quarterly Report on Form
10-Q
for the quarter ended September 30, 2017 to the extent such agreement is executed between the parties and such filing is required by applicable law. The foregoing description of Option B is qualified by reference to the
full text of the previously-filed award agreements evidencing the outstanding equity awards.