CHANGE IN CONTROL
AGREEMENT
THIS AGREEMENT is made as of the 14th day of March, 2005 by and between
McDermott International, Inc., a corporation duly organized under the laws of
the Republic of Panama (the "Company") and John T. Nesser III ("Executive".)
In consideration of the mutual covenants and agreements contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby expressly acknowledged, the parties hereto agree as follows:
I. Obligations of the Company Upon Termination of Executive After Change In
Control. Following the Effective Date of a Change In Control, in the event
Executive's employment by the Company is terminated before the one-year
anniversary of the Effective Date of a Change In Control either (i) by the
Company for any reason other than Cause, or (ii) by the Executive for Good
Reason, then subject to the provisions of paragraph (b) below, the Company
shall:
(a) Pay to the Executive within thirty days after the date of
termination of Executive's employment (or such earlier time as
may be required by law) the Accrued Benefits;
(b) In the event that a bonus is paid after the date of
Executive's termination of employment under the Company's
Executive Incentive Compensation Plan ("EICP") for the year
prior to the year in which the termination takes place (the
"Measurement Period"), pay to the Executive in a lump sum, at
the same time such bonus is paid to other EICP participants, a
cash bonus equal to the product of the multiplier used for
Executive Vice Presidents and Executive's annual base salary
for the Measurement Period.
(c) Pay to Executive in a lump sum in cash within thirty days
after the date of termination of Executives employment a
payment equal to the product of Executive's target bonus under
EICP for the year in which the termination takes place and a
fraction, the numerator of which is the number of days that
have elapsed in the year in which the termination takes place
through the date of termination of Executive's employment and
the denominator of which is 365.
(d) Pay to Executive in a lump sum in cash as soon as
administratively practicable after the date of termination of
Executive's employment 200% of the sum of (1) Executive's
annual base salary as in effect immediately prior to the date
of termination of Executive's employment, and (2) Executive's
target bonus under EICP for the year in which the termination
takes place.
(e) In the event that it is determined that any payment or
distribution of any type to or for the benefit of the
Executive made by the Company, by any of its affiliates, by
any person who acquires ownership or effective control or
ownership of a substantial portion of the Company's assets
(within the meaning of section 280G of the Internal Revenue
Code of 1986, as amended, and the regulations thereunder (the
"Code")) or by any affiliate of such person, whether paid or
payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise (the "Total Payments") would be
subject to the excise tax imposed by Section 4999 of the Code
(the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (an "Excise Tax Restoration
Payment") in an amount that shall fund the payment by the
Executive of any Excise Tax on the Total Payments as well as
all income taxes imposed on the Excise Tax Restoration
Payment, and any Excise Tax imposed on the Excise Tax
Restoration Payment.
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II. Participation In Other Company Programs.
Nothing in this Agreement shall prevent or limit Executive's continuing or
future participation in any plan, program, policy or practice provided by
the Company for which Executive may qualify, nor, subject to paragraph (d)
of Section X, shall anything herein limit or otherwise affect such rights
as Executive may have under any contract or agreement with the Company.
Amounts which are vested benefits or which Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract
or agreement with the Company at or subsequent to the date of termination
of Executive's employment shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement. Notwithstanding the foregoing, it is expressly
understood and acknowledged by Executive that any payment by the Company
under Section I hereof shall be in lieu of any obligation on the part of
the Company for payment of severance benefits under the Severance Plan for
Employees of McDermott Incorporated and Participating Subsidiary and
Affiliated Companies or any successor thereto or any other plan, policy or
agreement of the Company in the event of termination of Executive's
employment as provided in Section I hereof with the Company during the
one-year period following the Effective Date of a Change In Control.
III. Confidential and Proprietary Information.
Executive acknowledges and agrees that any and all non-public information
regarding the Company, any of its Subsidiaries and its or their customers
(including but not limited to any and all information relating to its or
their business practices, products, services, finances, management,
strategy, profits and overhead) is confidential and the unauthorized
disclosure of such confidential information will result in irreparable
harm to the Company. Executive shall not, during his employment by the
Company or any of its Subsidiaries and for a period of five years after
termination of such employment (or such shorter period as may be required
by law), disclose or permit the
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disclosure of any such confidential information to any person other than
an employee of the Company or its Subsidiaries or an individual engaged by
the Company or its Subsidiaries to render professional services to the
Company or its Subsidiaries under circumstances that require such person
to maintain the confidentiality of such information, except as such
disclosure may be required by law. The provisions of this Section III
shall survive any termination of this Agreement. For purposes of this
Section III, the term "confidential information" shall not include
information that was or becomes generally available to the public other
than as a result of disclosure by Executive. Executive acknowledges that
the execution of this Agreement and the payments described in Section I
herein constitute consideration for the limitations on activities set
forth in this Section III, the adequacy of which is hereby expressly
acknowledged by Executive. Executive understands and agrees that the
Company shall suffer irreparable harm if Executive breaches Section III
hereof, and that monetary damages shall be inadequate to address any such
breach. Accordingly, Executive agrees that the Company shall have the
right, to the extent permitted by applicable law, and in addition to any
other rights or remedies it may have, to obtain from any court of
competent jurisdiction, injunctive relief to restrain any breach or
threatened breach hereof or otherwise to specifically enforce the
provisions hereof.
IV. Notices.
All notices and other communications provided for by this Agreement shall
be in writing and shall be deemed to have been duly given when (a)
delivered by hand, (b) sent by facsimile or email to the facsimile number
or email address given below, provided that a copy is also sent by a
nationally recognized overnight delivery service, (c) the day after being
sent by a nationally recognized overnight delivery service, or (d) three
days after being mailed by United States Certified Mail, return receipt
requested, postage prepaid, addressed as follows:
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If to Executive: John T. Nesser III
11400 Dunbeath
Houston, TX 77024
Email: jtnesser@mcdermott.com
Facsimile: 281-870-5015
If to the Company:
McDermott International, Inc.
c/o Louis J. Sannino
Executive Vice President, Human Resources
757 N. Eldridge Parkway
Houston, TX 77079
Email: ljsannino@mcdermott.com
Facsimile: 281-870-5095
or to such other address as any party may have furnished to the other in
writing in accordance with this Agreement.
V. Governing Law.
The provisions of this Agreement shall be interpreted and construed in
accordance with, and enforcement may be made under, the law of the State
of Texas without reference to principles of conflict of laws.
VI. Successors and Assigns.
(a) This Agreement is personal to Executive and, without the prior
written consent of the Company, shall not be assignable by Executive
otherwise than by will or the laws of descent and distribution.
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(b) This Agreement shall be binding upon and shall inure to the benefit
of the Company and its successors and assigns.
(c) The Company will require that any successor to all or substantially
all of its business and/or assets (whether such successor acquires
such business and/or assets directly or indirectly, and whether by
purchase, merger, consolidation or otherwise) expressly assume and
agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company"
shall mean the Company as herein defined and any successor to its
business and/or assets.
VII. Employment by Subsidiaries.
If Executive is not employed by McDermott International, Inc., but is only
employed by one or more Subsidiaries of McDermott International, Inc.,
then (a) the "Company" as defined herein shall be deemed to include such
Subsidiary or Subsidiaries, and (b) termination of employment shall be
determined with reference to Executive's employment by all such
Subsidiaries. Further, the Company agrees that it will perform its
obligations hereunder without regard to whether Executive is employed by
the Company or by a Subsidiary or Subsidiaries of the Company.
VIII. Severability.
If any provision or portion of this Agreement shall be determined to be
invalid or unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full force and
effect to the fullest extent permitted by applicable law.
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IX. Entire Agreement; Amendment.
This Agreement sets forth the entire Agreement of the parties hereto and
supersedes all prior agreements, understandings and covenants between the
parties with respect to the subject matter hereof. Except as provided in
Section X, paragraphs (d) and (f) or Section XI, this Agreement may be
amended or terminated only by mutual agreement of the parties in writing.
X. Miscellaneous.
(a) The captions and headings of this Agreement are not part of the
provisions hereof and shall have no force or effect.
(b) The Company shall be entitled to withhold from any amounts payable
under this Agreement such Federal, state, local, foreign or excise
taxes as shall be required or permitted to be withheld pursuant to
any applicable law or regulation.
(c) Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right Executive or the Company may have hereunder,
including, without limitation, the right of Executive to terminate
employment for Good Reason pursuant to paragraph (g) of Section XII
of this Agreement, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this
Agreement.
(d) Executive and the Company acknowledge that, except as may otherwise
be provided under any other written agreement between Executive and
the Company, the employment of Executive by the Company is "at will"
and, subject to the last sentence of paragraph (f) of Section XII
hereof, Executive's employment may be terminated by either Executive
or the Company at any time prior to the Effective Date of a Change
In Control, in which case this
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Agreement shall terminate as provided in Section XI below and
Executive shall have no further rights under this Agreement.
(e) For purposes of this Agreement, the date of termination of
Executive's employment shall be: (i) if Executive's employment is
terminated by the Company for Cause, the date on which the Company
delivers to Executive the resolution referred to in the last
sentence of Section XII, paragraph (c), or, with respect to a
termination under Section XII, paragraph (c)(iii), the date on which
the Company notifies Executive of such termination, (ii) if
Executive's employment is terminated by the Company because of
Executive's Disability or for a reason other than Cause or
Executive's death or Disability, the date on which the Company
notifies Executive of such termination, (iii) if executive's
employment is terminated by Executive for Good Reason, the date on
which Executive notifies the Company of such termination (after
having given the Company notice and a thirty-day cure period), or
(iv) if Executive's employment is terminated by reason of death, the
date of death of executive.
(f) The Company may terminate this Agreement at any time prior to a
Change In Control upon giving Executive written notice of such
termination at least thirty days prior to the date of termination if
either of the following circumstances take place: (i) Executive's
position with the Company is changed so that he ceases to be an
officer of the Company, or (ii) Executive ceases to be a fulltime
employee; provided that if a Change In Control is announced or
occurs during such thirty-day period, the termination shall not be
effective.
(g) This Agreement may be executed in two counterparts, each of which
shall be deemed an original and together shall constitute one and
the same agreement, with one counterpart being delivered to each
party hereto.
(h) In the event the Executive's employment is terminated following the
Effective Date of a Change In Control and before the one-year
anniversary of the
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Effective Date of a Change In Control (i) by the Company for Cause
or an a result of Executive's death or disability, or (ii) by
Executive without Good Reason, Executive shall not be entitled to
the payments described in Section 1 hereof.
XI. Term.
This Agreement shall terminate on the earliest to occur of (i) termination
by the Company in accordance with Section X, paragraph (f) above, (ii) the
date one year after the Effective Date of a Change or Control, or (iii)
the date on which Executive's employment with the Company is terminated
(subject to the last sentence of Section XII, paragraph (g)); provided,
however, that if Executive's employment with the Company is terminated
under any of the circumstances described in Section I hereof, Executive's
rights hereunder shall continue following the termination of his/her
employment with the Company until all benefits to which Executive is
entitled hereunder has been paid and the Company's rights hereunder shall
continue until all obligations owed to it hereunder have been satisfied.
XII. Definitions.
For purposes of this Agreement, the following terms shall have the
meanings given them in this Section XII.
(a) "Accrued Benefits" shall mean:
(i) Any portion of Executive's Annual Base Salary earned through
the date of termination of Executive's employment and not yet
paid;
(ii) Reimbursement for any and all amounts advanced in connection
with Executive's employment for reasonable and necessary
expenses incurred by Executive through the date of termination
of Executive's
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employment in accordance with the Company's policies and
procedures on reimbursement of expenses;
(iii) Any earned vacation pay not theretofore used or paid in
accordance with the Company's policy for payment of earned and
unused vacation time; and
(iv) All other payments and benefits to which Executive may be
entitled under the terms of any applicable compensation
arrangement or benefit plan or program of the Company that do
not specify the time of distribution; provided that Accrued
Benefits shall not include any entitlement to severance under
any severance policy of the Company generally applicable to
the salaried employees of the Company.
(b) "Annual Base Salary" shall mean Executive's annual rate of pay
excluding all other elements of compensation such as, without
limitation, bonuses, perquisites, expatriate or hardship premiums,
restricted stock awards, stock options and retirement and welfare
benefits.
(c) "Cause" shall mean:
(i) the willful and continued failure of Executive to perform
substantially his/her duties with the Company (occasioned by
reason other than physical or mental illness or disability of
Executive) after a written demand for substantial performance
is delivered to Executive by the Compensation Committee of the
Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Compensation
Committee of the Board or the Chief Executive Officer believes
that Executive has not substantially performed his/her duties,
after which Executive shall have thirty days to defend or
remedy such failure to substantially perform his/her duties:
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(ii) the willful engaging by Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to
the Company; or
(iii) the conviction of Executive with no further possibility of
appeal or, or plea of nolo contendere by Executive to, any
felony.
The cessation of employment of Executive under subparagraph (i) and
(ii) above shall not be deemed to be for "Cause" unless and until
there shall have been delivered a Executive 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 Compensation Committee of the
Board at a meeting of such Committee called and held for such
purpose (after reasonable notice is provided to Executive and
Executive is given an opportunity, together with counsel, to be
heard before the Compensation Committee of the Board), finding that,
in the good faith opinion of the Compensation Committee of the
Board, Executive is guilty of the conduct described in subparagraph
(i) or (ii) above, and specifying the particulars thereof in detail.
(d) "Change In Control" shall be deemed to occur if:
(i) When any "person" or "group" of persons (as such terms are
used in Section 13 and 14 of the Securities Exchange Act of
1934, as amended from time to time (the "Exchange Act")),
other than the Company or any employee benefit plan sponsored
by the Company, becomes the "beneficial owner" (as such term
is used in Section 13 of the Exchange Act) of 25 percent or
more of the total number of the Company's common shares at the
time outstanding; or
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(ii) of the approval by the vote of the Company's stockholders
holding at least 50 percent (or such greater percentage as may
be required by the Certificate of Incorporation or Bylaws of
the Company or by law) of the voting stock of the Company of
any merger, consolidation, sales of assets, liquidation or
reorganization in which the Company will not survive as a
publicly owned corporation or;
(iii) when the individuals who, at the beginning of any period of
two years or less, constituted the Board of Directors of the
Company cease, for any reason, to constitute at least a
majority thereof, unless the election or nomination for
election of each new director was approved by the vote of at
least a majority of the directors then still in office who
were directors at the beginning of such period.
A Change In Control shall not result from any transaction
precipitated by the Company's insolvency, appointment of a
conservator or determination by a regulatory agency that the Company
is insolvent.
(e) "Disability" shall mean circumstances that qualify Executive for
long-term disability benefits under the Company's Long-Term
Disability Plan as in effect immediately prior to the Change In
Control.
(f) "Effective Date" with respect to a Change In Control for purposes of
this Agreement shall be the earliest to occur of (i) the date on
which the Company receives a copy of a Schedule 13D disclosing
beneficial ownership of shares in accordance with Section XII,
paragraph (d)(i) above; (ii) the effective date of the consummation
of a merger, consolidation, share exchange or similar form of
corporate transaction or liquidation or reorganization in accordance
with Section XII, paragraph (d)(ii); or (iii) the date of the annual
or special meeting of shareholders at which the last director
necessary to meet the requirements of Section XII, paragraph
(d)(iii) is elected. Upon the occurrence of the Effective
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Date of a Change In Control, the Board of Directors or its designee
shall, within thirty days thereof, provide written notice to
Executive of the Effective Date of the Change In Control.
Notwithstanding anything to the contrary in this Agreement, if a
Change In Control occurs and if Executive's employment with the
Company is terminated within the ninety days prior to the Effective
Date of the Change In Control as determined in accordance with the
first sentence of this paragraph (f), and if it is reasonably
demonstrated by Executive that such termination of employment was at
the request of a third party who has taken steps reasonably
calculated to effect a Change In Control, or otherwise arose in
connection with or in anticipation of a Change In Control, then for
all purposes of this Agreement, the "Effective Date" of the Change
In Control shall mean the date immediately prior to the date of such
termination of employment.
(g) "Good Reason" shall mean:
(i) the assignment to Executive of duties that are materially
inconsistent with Executive's position, authority, duties or
responsibilities immediately prior to the Change In Control,
or any other action by the Company which results in a material
diminution in such position, authority, duties or
responsibilities;
(ii) requiring Executive, without his consent, to be based at any
office or location other than the office or location a which
Executive was employed immediately prior to the Change In
Control; provided, however, that any such relocation requests
shall not be grounds for resignation with Good Reason if such
relocation is within a twenty-mile radius of the location at
which Executive was based prior to the Effective Date of a
Change In Control;
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(iii) a reduction in Executive's Annual Base Salary in effect
immediately prior to the Change In Control or a reduction in
the target multiplier used to calculate the annual bonus
awarded to Executive below the target multiplier used to
calculate the bonus paid to Executive under the EICP
immediately prior to the Change In Control, provided, however
that in either case a reduction in the Annual Base Salary or
the target bonus multiplier shall not be considered "Good
Reason" with respect to any year for which such reduction is
part of a reduction uniformly applicable to all similarly
situated employees;
(iv) a change in Executive's eligibility to participate in
incentive compensation plans as in effect immediately prior to
the Change In Control; or
(v) any material breach of this Agreement by the Company,
excluding for this purpose an isolated, insubstantial or
inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice
thereof given by Executive.
Upon the occurrence of any of the events described above, Executive
shall give the Company written notice that such event constitutes
Good Reason and the Company shall thereafter have thirty days in
which to cure. If the Company has not cured in that time, the event
shall constitute Good Reason.
(h) "Subsidiaries" shall mean every, limited liability company,
partnership or other entity of which 50% or more of the total
combined voting power of all classes of voting securities or other
equity interests is owned, directly or indirectly, by McDermott
International, Inc.
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XIII. Arbitration
Any controversy or claim arising out of or relating to this Agreement (or
the breach thereof) shall be settled by final and binding arbitration in
Houston, Texas by one arbitrator selected in accordance with the
Commercial Arbitration Rules (the "Rules") of the American Arbitration
Association (the "Association") then in effect. Subject to the following
provisions, the arbitration shall be conducted in accordance with the
Rules then in effect. Any award entered by the arbitrator shall be final
and binding, and judgment may be entered thereon by any party hereto in
any court of law having competent jurisdiction. This arbitration provision
shall be specifically enforceable. The Company and the Executive shall
each pay half of the administrative fees of the Association and the
compensation of the arbitrator and shall each be responsible for its or
his/her own attorney's fees and expenses relating to the conduct of the
arbitration.
IN WITHNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
McDERMOTT INTERNATIONAL, INC.
By: ___________________________________
Printed Name: Bruce W. Wilkinson
Title: Chief Executive Officer
Date: ___________________________________
Executive: _________________________________
Date: __________________________________
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