EXHIBIT 10.1
May 14, 2004
Mr. Bruce W. Wilkinson
McDermott International, Inc.
757 N. Eldridge Parkway
Houston, TX 77079-4411
PERSONAL & CONFIDENTIAL
Re: Key Executive Retention Program
Dear Mr. Wilkinson:
In order to retain and solidify the dedication and continued efforts of key
executives during this difficult period, the Compensation Committee (the
"Committee") of the Board of Directors of McDermott International, Inc. (the
"Company") has approved the implementation of a Key Executive Retention Program.
I am pleased to advise you that you have been selected for participation in this
program.
The program is designed to provide periodic vesting over the next twelve months
of shares of restricted stock ("Restricted Stock") granted under the 2001
Directors & Officers Long-Term Incentive Plan (the "LTIP") and periodic payments
of cash over that same twelve-month period, provided that you continue to be
employed by the Company or a subsidiary of the Company on each of the applicable
vesting dates.
I. The Cash Retention Payments
You will receive periodic cash retention payments which, in the
aggregate, equal 25% of your annualized base salary on January 1, 2004,
provided you are employed by the Company or a subsidiary of the Company
on each of the applicable "Cash Vesting Dates". Each periodic cash
retention payment shall be paid on or about the applicable Vesting
Date, in the following gross amounts:
Retention Payment as a Percentage
Vesting Date of annualized 1/1/04 Base Salary
- ------------ --------------------------------
May 15, 2004 5%
August 15, 2004 5%
November 15, 2004 7.5%
March 1, 2005 7.5%
In addition, you may receive a cash retention payment equal to 25% of
your annualized base salary on January 1, 2004, provided you are
employed by the Company or a subsidiary of the Company on March 1, 2005
and the performance measures as shown on the attached Exhibit are met
(the "Performance-Related Cash Payment"). If the performance measures
are met, payment will be made as soon as administratively possible
after March 1, 2005.
II. The Restricted Stock Retention Award
Effective as of May 13, 2004 (the "Grant Date"), the Committee awarded
to you a grant of 37,143 shares of Restricted Stock under the LTIP.
Restrictions on 20% of the stock award will be removed on August 15,
2004, 15% on November 15, 2004 and 15% on March 1, 2005 (the
"Restricted Stock Vesting Dates"), in each case provided that you are
employed by the Company or a subsidiary of the Company on the
applicable Restricted Stock Vesting Date.
Restrictions on the remaining 50% of the stock award will be removed on
March 1, 2005, provided that the performance measures as shown on the
attached Exhibit are met and you continue to be employed by the Company
or a subsidiary of the Company on that date (the "Performance-Related
Stock Award"). If the restrictions on the Performance-Related Stock
Award are not removed because either or both of those conditions are
not met, all of the shares of Restricted Stock comprising the
Performance-Related stock Award shall be immediately forfeited.
On the Grant Date, you will have the right to be issued the total
number of shares of common stock of the Company shown above.
Certificates evidencing such shares will be issued in your name,
subject to the terms and conditions of the LTIP. Beginning on the Grant
Date, you will have full voting rights with respect to the shares of
Restricted Stock granted in connection with this award, and you will
receive cash dividends paid, if any, with respect to those shares (in
each case, until you forfeit those shares as provided in this Letter
Agreement or sell those shares after the applicable Restricted Stock
Vesting Date).
III. Termination of Employment Prior to Vesting
Except as provided below, if you terminate employment with the Company
and all subsidiaries of the Company prior to March 1, 2005, all
unvested cash retention payments and all unvested shares of Restricted
Stock issued to you on the Grant Date shall be immediately forfeited.
If your employment with the Company and all subsidiaries of the Company
is involuntarily terminated for reasons other than "cause", you will
continue to be entitled to receive the cash retention payment that
would have vested on the Cash Vesting Date immediately following your
termination of employment, payable at the same time and on the same
basis as if you had remained an employee. In addition, you will vest in
the shares of Restricted Stock that would have vested on the Restricted
Stock Vesting Date immediately following your termination of
employment, at the same time and on the same basis as if you had
remained an employee. All other unvested cash retention payments and
unvested shares of Restricted Stock shall be forfeited immediately upon
such termination of employment. Whether or not a termination of
employment is for "cause" shall be determined by the Committee, in its
sole discretion.
Notwithstanding any other provision of this program, in no event will
any portion of the Performance-Related Cash Payment or the
Performance-Related Stock Award be payable if you are not employed by
the Company or a subsidiary of the Company on March 1, 2005.
If a Change in Control of the Company occurs (as defined in the LTIP),
all unvested shares of restricted stock granted hereunder shall
immediately vest and be freely transferable, and all Cash Vesting Dates
shall be accelerated and such Cash Retention Payments shall be
immediately payable.
IV. Tax Consequences
Restricted Stock. The Company has been advised that for U.S. federal
income tax purposes, in the opinion of counsel, as of each Restricted
Stock Vesting Date, you will be treated as receiving compensation
taxable as ordinary income equal to the fair market value of the shares
that vest on that date. Alternatively, you may elect to have the Fair
Market Value of all of the Restricted Stock included in your taxable
income and reported on IRS Form W-2 as of the Grant Date.
In addition, all dividends paid, if any, to you in respect to shares of
Restricted Stock during the Period of Restriction shall be considered
wages paid to you by your employer and, therefore, shall be included in
your taxable income and reported on IRS Form W-2 in the year in which
the restrictions lapse.
By acceptance of this letter, you agree that upon the lapse of the
restrictions with respect to the shares of Restricted Stock issued to
you, you will promptly pay to the Company the amount of income tax
which the Company is required to withhold in connection with the income
realized by you as a result of such lapse of the restrictions (unless
you have previously made the election, and paid the tax, referred to
above). Please note that the Committee has determined that no request
for the payment of taxes by share withholding will be approved in
connection with shares of Restricted Stock granted hereunder.
Cash Retention Payments. For U. S. federal income tax purposes, each
cash retention payment is taxable to you as wages and reported on IRS
Form W-2 in the year received.
V. Securities and Exchange Commission Requirements
If you are a Section 16 insider, Restricted Stock granted to you
hereunder must be reported on a Form 4 before the end of the second
business day following the Grant Date.
If Section 16 applies to you, you are also subject to Rule 144. This
Rule is applicable only when the shares are sold, so you need not take
any action under Rule 144 at this time.
If you are covered by these requirements, you have already been advised
of your status. If you become a Section 16 insider at some future date,
reporting will be required at that time.
Other Information. If you have any questions concerning any of the
information set forth above, please do not hesitate to contact L. J.
Sannino at 281/870-5016.
Neither the action of the Company in establishing the Key Executive
Retention Program, nor any action taken by it, by the Committee or the
Board of Directors in connection with this program, nor any provision
of this Letter Agreement shall be construed as giving to you the right
to be retained in the employ of the Company.
Please acknowledge receipt and acceptance of all of the above by
signing both this letter and the enclosed copy thereof and returning
such signed copy to the Company at Post Office Box 61961, New Orleans,
Louisiana 70161-1961, attention of L. J. Sannino, and marked "Personal
and Confidential" within 30 days from the date hereof.
Very truly yours,
McDERMOTT INTERNATIONAL, INC.
/s/ Louis J. Sannino
Louis J. Sannino
Senior Vice President, Human Resources and
Corporate Compliance Officer
LJS/kap
Attachment
ACCEPTED:
____________________ ___________
Bruce W. Wilkinson Date