CHANGE IN CONTROL
AGREEMENT
Exhibit 10.1
THIS AGREEMENT is made as of the 29th day of March, 2007 by and between
McDermott International, Inc., a corporation duly organized under the laws of
the Republic of Panama (the "Company") and Michael S. Taff ("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's position 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 disclosure of any such confidential information to
any person other than an employee or director of the Company or its
Subsidiaries or any successor thereto or an individual engaged by the
Company or its Subsidiaries or any successor thereto 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.
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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: Michael S. Taff
13814 Woodthorpe Lane
Houston, Texas 77079
Email: mstaff@mcdermott.com
Facsimile: 281-870-5046
If to the Company:
McDermott International, Inc.
c/o Louis J. Sannino
Executive Vice President, Human Resources
777 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 Agreement shall terminate as provided in
Section XI below and Executive shall have no further rights under this
Agreement.
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(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 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.
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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 employment in accordance with the Company's policies
and procedures on reimbursement of expenses;
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(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
ss.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 ss.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.
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(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 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 WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
McDERMOTT INTERNATIONAL, INC.
By:__________________________________
Printed Name:________________________
Title:_______________________________
Date:________________________________
Executive:___________________________
Date:________________________________
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