<PAGE>
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
[_] Preliminary information statement
[X] Definitive information statement
McDermott Incorporated
------------------------------------------------
(Name of Registrant as Specified In Charter)
McDermott Incorporated
------------------------------------------
(Name of Person(s) Filing the Information Statement)
Payment of filing fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- - --------
*Set forth the amount on which the filing is calculated and state how it was
determined.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
Notes:
<PAGE>
MCDERMOTT INCORPORATED
1450 POYDRAS STREET
NEW ORLEANS, LOUISIANA 70112
----------------
NOTICE OF THE TAKING OF CORPORATE ACTION
WITHOUT A MEETING BY WRITTEN CONSENT
----------------
To the Stockholders of
McDERMOTT INCORPORATED:
In accordance with Section 228(d) of the Delaware Corporation Law, notice is
hereby given that McDermott International, Inc., as holder of approximately 92%
of the voting power of the shares of the outstanding capital stock of McDermott
Incorporated, a Delaware corporation, entitled to vote, shall on August 9, 1994
elect three (3) Directors to the Company's Board of Directors.
The accompanying information statement is furnished pursuant to Section 14(c)
of the Securities Exchange Act of 1934.
By Order of the Board of Directors,
LAWRENCE R. PURTELL
Secretary
Dated: July 15, 1994
WE ARE NOT ASKING FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
<PAGE>
MCDERMOTT INCORPORATED
1450 POYDRAS STREET
NEW ORLEANS, LOUISIANA 70112
----------------
INFORMATION STATEMENT
(PURSUANT TO SECTION 14(C) OF THE SECURITIES EXCHANGE ACT OF 1934)
----------------
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
This information statement is furnished in connection with the taking of
corporate action without a meeting by less than unanimous written consent.
McDermott International, Inc. ("International"), a Panama corporation, as
holder of all 3,000 shares of voting common stock is entitled, in the
aggregate, to 36,000,000 votes or approximately 92% of the voting power of the
shares of the outstanding capital stock of McDermott Incorporated (the
"Company") entitled to vote on matters presented to stockholders.
VOTING RIGHTS
Only stockholders of record at the close of business on June 30, 1994 will be
entitled to receive a copy of this Information Statement. There were
outstanding at the record date 3,000 shares of voting Common Stock held by
International; there were also outstanding 2,818,780 shares of Series A $2.20
Cumulative Convertible Preferred Stock ("Series A Preferred Stock") and
2,932,236 shares of Series B $2.60 Cumulative Preferred Stock ("Series B
Preferred Stock") of the Company (in each case exclusive of shares held by the
Company). The outstanding shares of Common Stock, as a class, are entitled to
36,000,000 votes and each outstanding share of Preferred Stock is entitled to
one-half vote. International, as holder of all 3,000 shares of Common Stock, or
approximately 92% of the voting power of the shares of outstanding capital
stock of the Company, intends to take corporate action without a meeting by
electing the nominees named below to the Board of Directors on August 9, 1994.
ELECTION OF DIRECTORS
Pursuant to this corporate action without a meeting, three (3) Directors are
to be elected to the Board of Directors, each to hold office for one year and
until his successor is elected and qualifies. If any nominee named below should
become unavailable for election, International intends to vote its shares for
such substitute nominee as may be proposed by the Board of Directors. No
circumstances are now known, however, that would prevent any of the nominees
from serving.
In the fiscal year ended March 31, 1994, there were thirty-five Board of
Director actions without meetings. The Board does not maintain standing audit,
compensation or nominating committees.
<PAGE>
The information appearing below with respect to the business experience of
each Director during the past five years, directorships held, and beneficial
ownership of the capital stock of the Company has been furnished by the
respective Directors individually as of July 10, 1994.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
---- --- --------
<S> <C> <C>
NOMINEES
Brock A. Hattox.................................................. 46 1993
Senior Vice President and Chief Financial Officer of the Company
and of McDermott International, Inc. since March 1991. During
the past five years, and before assuming his present position,
Mr. Hattox was Vice President, Controller and Planning, of the
Eaton Corporation (Manufacturer of engineered products for
automotive, industrial, commercial and defense markets); he is a
Director of McDermott International, Inc.
Robert E. Howson................................................. 62 1981
Chairman of the Board and Chief Executive Officer of the Company
and of McDermott International, Inc. since August 1988. Prior to
assuming this position, he was President and Chief Operating
Officer of the Company and of McDermott International, Inc. from
August 1987; he is a Director of McDermott International, Inc.
and Whitney Holding Corporation.
Lawrence R. Purtell.............................................. 47 1993
Senior Vice President and General Counsel and Corporate Secretary
of the Company and of McDermott International, Inc. since May
1993. During the past five years, and before assuming his
present position, Mr. Purtell was Vice President, General
Counsel and Secretary of Carrier Corporation, a United
Technologies Corporation subsidiary, from December 1992; and
prior to that he was Corporate Secretary and Associate General
Counsel of United Technologies Corporation from June 1989.
</TABLE>
The only individuals currently considered Executive Officers of the Company
not identified above are:
Daniel R. Gaubert, 45, Vice President and Controller, of the Company and of
International since February 1992. During the past five years, and before
assuming his present position, he was Corporate Controller of the Company
and of International from July 1991; and prior to that Group Controller,
Power Generation Group of Babcock & Wilcox Investment Company and of The
Babcock & Wilcox Company;
William L. Higgins, III, 51, Executive Vice President and Group Executive,
Engineering and Industrial Group of the Company and President and Chief
Operating Officer of McDermott Energy Services, Inc. since February 1993.
During the past five years, and before assuming his present position, Mr.
Higgins was Executive Vice President and Group Executive, Domestic and
Southeast Asia Operations of the Company and of International; Executive
Vice President and Group Executive, McDermott Marine Construction, and
Senior Vice President and Group Executive, McDermott Marine Construction;
2
<PAGE>
Joe J. Stewart, 56, President and Chief Operating Officer of Babcock &
Wilcox Investment Company and The Babcock & Wilcox Company since February
1993. During the past five years, and before assuming his present position,
Mr. Stewart was Executive Vice President and Group Executive, Power
Generation Group of Babcock & Wilcox Investment Company and of The Babcock
& Wilcox Company from August 1990; and prior to that, Senior Vice President
and Group Executive, Power Generation Group of Babcock & Wilcox Investment
Company and of The Babcock & Wilcox Company;
James J. Wildasin, 59, President and Chief Operating Officer of the
Company's McDermott Marine Construction Unit since February 1993. During
the last five years, and before assuming his present position, Mr. Wildasin
was Senior Vice President and Group Executive, North Sea, Middle East and
West Africa Operations of International from February, 1992; prior to that
he was Vice President and Group Executive, North Sea, Middle East and West
Africa Operations of International from July, 1991; prior to that he was
Vice President and General Manager, London Engineering of International;
and prior to that he was President and Co-Chief Executive Officer of
McDermott-ETPM, Inc.;
Edgar Allen Womack, Jr., 51, Senior Vice President and Chief Technical
Officer of the Company and of International since February 1993. During the
last five years, and before assuming his position, Mr. Womack was Senior
Vice President, Research and Development and Contract Research Divisions of
Babcock & Wilcox Investment Company and The Babcock & Wilcox Company from
August 1991; and prior to that Vice President, Research and Development and
Contract Research Divisions of Babcock & Wilcox Investment Company and The
Babcock & Wilcox Company; and
Richard E. Woolbert, 60, Senior Vice President and Chief Administrative
Officer of the Company and of International since August 1991. During the
past five years, and before assuming his present position, Mr. Woolbert was
Vice President and Chief Administrative Officer of the Company and of
International from November 1988.
The following table sets forth the number of shares of each class of voting
securities of the Company beneficially owned by all current Directors and the
named executive officers of the Company as a group (6 persons).
<TABLE>
<CAPTION>
SERIES A SERIES B
PREFERRED PREFERRED
STOCK STOCK COMMON STOCK PERCENT
BENEFICIALLY BENEFITIALLY BENEFICIALLY OF
NAME OF INDIVIDUAL OWNED OWNED OWNED CLASS
- - ------------------ ------------ ------------ ------------ -------
<S> <C> <C> <C> <C>
Brock A. Hattox.................. -0- -0- -0- *
Robert E. Howson................. -0- -0- -0- *
Lawrence R. Purtell.............. -0- -0- -0- *
Joe J. Stewart................... -0- -0- -0- *
James J. Wildasin................ -0- -0- -0- *
Richard E. Woolbert.............. 171 171 -0- *
</TABLE>
- - --------
* Denotes ownership of less than one percent of the class outstanding.
3
<PAGE>
BENEFICIAL OWNERS OF MORE THAN 5% OF ANY CLASS OF VOTING SECURITIES
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
TITLE OF CLASS BENEFITIAL OWNER OWNERSHIP CLASS
- - -------------- ------------------- ----------- ----------
<S> <C> <C> <C>
Common Stock............... McDermott International, Inc. 3,000 100.0%
1450 Poydras Street shares held
New Orleans, LA 70112 directly
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers, and persons who own more than 10% of the
Company's Common Stock, to file reports of ownership and changes in ownership
of such equity securities with the Securities and Exchange Commission ("SEC")
and the New York Stock Exchange, Inc. Directors, Executive Officers and greater
than 10% shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, or written representations that no forms were required, the Company
believes that its Directors, Executive Officers and greater than 10% beneficial
owners complied with all Section 16(a) filing requirements during the most
recent fiscal year.
4
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the annual and long-term compensation of the
Company's Chief Executive Officer and four highest paid executive officers
(collectively, the "named executive officers") for 1994, 1993 and 1992.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
-------------------------- --------------------------
AWARDS
OTHER ------------------ PAYOUTS ALL
FISCAL ANNUAL RESTRICTED STOCK LTIP OTHER
NAME PRINCIPLE POSITION YEAR SALARY BONUS COMP. STOCK(2) OPTIONS PAYOUTS COMP.(3)
---- ------------------ ------ -------- -------- -------- ---------- ------- ------- --------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
R.E. Howson. Chairman & Chief 1994 $729,210 $325,264 $ 41,496 $567,025 65,820 $ 0 $ 7,074
Executive Officer 1993 $665,420 $600,279 $ 21,166 $522,493 59,410 $ 0 $ 6,864
1992 $605,000 $555,087 $400,348 57,010 $ 0
B.A. Hattox. Senior VP & Chief 1994 $306,325 $ 92,008 $ 5,126 $178,756 18,860 $ 0 $27,074(5)
Financial Officer 1993 $285,275 $171,239 $ 5,683 $252,512 17,400 $ 0 $52,865(5)
1992 $258,625 $161,795 $135,188 17,490 $ 0
J.J. Stew- President & Chief 1994 $344,615 $119,849 $ 4,487 $217,838 24,060 $ 0 $ 7,074
art........
Operating Officer, 1993 $301,870 $224,724 $ 1,186 $301,517 20,770 $ 0 $ 6,861
Babcock & Wilcox 1992 $275,535 $208,050 $182,310 23,610 $ 0
J.J. President & Chief 1994 $103,508 $281,427(4) $182,919 20,200 $ 0 $ 7,074
Wildasin... $333,684
Operating Officer, 1993 $253,339 $189,054 $200,181(4) $273,611 14,160 $ 0 $ 6,866
McDermott Marine 1992 $215,870 $125,948 $102,356 13,260 $ 0
Construction
R. E. Senior VP & Chief 1994 $ 84,848 $ 13,569 $163,262 17,230 $ 0 $ 7,074
Woolbert... $280,085
Administrative 1993 $258,440 $156,441 $ 4,329 $152,460 15,750 $ 0 $ 6,865
Officer 1992 $227,410 $146,455 $210,699 15,390 $ 0
</TABLE>
- - --------
(1) Includes amounts earned in fiscal year, whether or not deferred.
(2) The total number of restricted shares and the aggregate market value at
March 31, 1994: Mr. Howson held 112,820 shares valued at $2,143,580; Mr.
Hattox held 29,860 shares valued at $567,340; Mr. Stewart held 43,845
shares valued at $833,055; Mr. Widasin held 31,420 shares valued at
$596,980; Mr. Woolbert held 29,240 shares valued at $555,560. The aggregate
market value at year end is based on the fair market value of International
stock on March 31, 1994 of $20.00. Dividends are paid on the restricted
shares at the same time and at the same rate as dividends paid to
shareholders of unrestricted shares. Grants of restricted stock generally
vest fifty percent in five years with the remaining fifty percent vesting
in three to ten years based on performance. In the event of a change of
control of International, the Compensation committee may cause all
restrictions to lapse.
(3) Relates to company matching contributions to Thrift/401(K) Plan.
(4) Includes commodities, services, housing, utilities, expenses and tax
equalization associated with Mr. Wildasin's international assignment.
(5) Includes $20,000 and $46,000, respectively, representing amounts paid to
Mr. Hattox as a signing bonus.
5
<PAGE>
OPTION GRANT TABLE
The following table shows, as to the named executive officers of the Company,
information about option grants of International's Common Stock in the last
fiscal year. Neither the Company nor International grant any Stock Appreciation
Rights and the Company does not grant options on any of its equity securities.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK APPRECIATION FOR 10
INDIVIDUAL GRANTS IN 1994 YEAR TERM(4)
----------------------------------------- ---------------------------
% OF TOTAL
OPTIONS 5% 10%
OPTIONS GRANTED TO EXERCISE EXPIRATION ------------ --------------
NAME GRANTED EMPLOYEES(2) PRICE(3) DATE DOLLAR GAINS DOLLAR GAINS
---- ------- ------------ -------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
R.E. Howson............. 65,820 10.16 $24.1250 2/07/04 $998,819 $2,530,450
B.A. Hattox............. 18,860 2.91 $24.1250 2/07/04 $286,201 $725,073
J.J. Stewart............ 24,060 3.72 $24.1250 2/07/04 $365,111 $924,987
J.J. Wildasin........... 20,200 3.12 $24.1250 2/07/04 $306,535 $776,589
R.E. Woolbert........... 17,230 2.66 $24.1250 2/07/04 $261,465 $662,407
All Shareholders........ (1) -- $24.1250 -- $812,537,287 $2,058,517,034
Named executive officers' gains as a % of all shareholder's
gains........................................................... 0.2730% 0.2730%
</TABLE>
- - --------
(1) Total dollar gains based on the assumed annual rates of appreciation shown
here and calculated on 53,544,467 outstanding International common shares
on March 31, 1994.
(2) Based on 647,640 options granted to all employees during the fiscal year
ended March 31, 1994. Options vest in equal installments of one-third
beginning on the first anniversary of the date of grant through the third
anniversary of the date of grant and expire ten years from date of grant.
(3) Fair market value on date of grant.
(4) At a five percent and ten percent annual rate of appreciation, the stock
price would be approximately $39.30 and $62.57, respectively, if the
assumed annual rates of stock price appreciation shown were to be achieved.
6
<PAGE>
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth information concerning each exercise of stock
options of International during fiscal year 1994 by each of the named executive
officers and the value at March 31, 1994 of unexercised options of
International held by such individuals. Options generally vest in equal
installments of one-third beginning on the first anniversary of the date of
grant through the third anniversary of the date of grant and expire ten years
from the date of grant. In general, vesting is contingent on continued
employment with International and/or its subsidiaries and affiliates. In the
event of a change in control of International, the Compensation Committee of
International may accelerate the exercisability of any options outstanding. The
value of unexercised options reflects the increase in market value of
International's Common Stock from the date of grant through March 31, 1994
(when the closing price of International's Common Stock was $20.00 per share.)
The value actually realized upon exercise of the options by the named executive
officers will depend upon the value of International's Common Stock at the time
of exercise.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES TABLE
<TABLE>
<CAPTION>
NUMBER
OF TOTAL NUMBER OF TOTAL VALUE OF
SHARES UNEXERCISED OPTIONS HELD UNEXERCISED, IN-THE-MONEY
ACQUIRED AT FISCAL YEAR END OPTIONS HELD AT FISCAL YEAR-END
ON VALUE ------------------------- -------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE(1)
---- -------- -------- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
R.E. Howson............. 52,530 $797,799 215,029 124,431 $267,436 $10,690
B.A. Hattox............. 0 $ 0 42,460 36,290 $ 6,559 $ 3,279
J.J. Stewart............ 21,540 $325,476 53,413 45,777 $ 40,031 $ 4,427
J.J. Wildasin........... 11,200 $174,300 29,460 34,060 $ 36,023 $ 2,486
R.E. Woolbert........... 2,485 $ 39,760 55,070 32,860 $ 88,639 $ 2,886
</TABLE>
- - --------
(1) Based on a fair market value of International stock on March 31, 1994 of
$20.875.
7
<PAGE>
VARIABLE SUPPLEMENTAL COMPENSATION PLAN
Under the Variable Supplemental Compensation Plan, based on the achievement of
certain performance standards for managerial and other key employees, including
officers, of the Company, International and its consolidated subsidiaries, the
Aggregate Amount Available for Award in respect of the 1994 fiscal year shall
equal the sum of 1% of that portion of Cash Flow for such year as would produce
a Cash Flow Return on Capital of no more than 14.5% plus 6% of Cash Flow in
excess of such portion. Cash Flow Return on Capital is defined as Cash Flow
divided by Capital (as those terms are defined in the Plan). Except on a
selected basis, no awards will be made in respect of a fiscal year during which
Cash Flow Return on Capital does not equal or exceed 14.5%. If an award is made
during a fiscal year when the Cash Flow Return on Capital requirement is not
achieved, then the award, generally, will be equal only to one-half of the
guideline amounts set forth below. Allocations of awards to eligible employees
are made in the discretion of the Compensation Committee, consisting of five
Directors of International, none of whom is in the employ of International or
its subsidiaries, which may use the following guidelines (expressed as a
percentage of salary):
<TABLE>
<CAPTION>
CLASS POSITION % OF SALARY
----- -------- -----------
<S> <C> <C>
1........................... Chief Executive Officer 70.0%
2........................... Chief Operating Officers 55.0%
3........................... Executive and Senior VPs 47.5%
4........................... VP and Group Executives 40.0%
5........................... Division Head and Staff VPs 35.0%
6........................... Other VPs and Controllers to COOs 30.0%
7........................... Major Department Heads 25.0%
8........................... Other Department Heads 20.0%
9........................... Others 15.0%
</TABLE>
Awards are payable to the recipients within thirty (30) days of the
Compensation Committee's determination, unless deferred by such recipients.
Awards may be deferred until termination of employment other than by retirement
or until up to fifteen (15) years after retirement and accrue interest,
compounded daily, at the minimum commercial lending rate of a designated bank,
until paid. The Plan is unfunded and no assets will be segregated to secure
payment of awards.
RETIREMENT PLANS
All officers and Directors of the Company who are employees of the Company or
certain of its subsidiaries or affiliates are covered under the McDermott
Retirement Plan. Officers and Directors who are employed by The Babcock &
Wilcox Company ("B&W"), a subsidiary of the Company, are covered under B&W's
Employee Retirement Plan. Employees do not contribute to either of the two
plans and Company contributions are funded on an actuarial basis. In order to
comply with the limitations prescribed by the Employee Retirement Income
Security Act of 1974, as amended, pension benefits will be paid directly by the
8
<PAGE>
Company, International or a subsidiary under the terms of the unfunded excess
benefit plans maintained by the Company and B&W (the "Excess Plans") when such
benefits are in excess of those permitted by such Act to be paid from federal
income tax qualified pension plans.
The following table shows the annual benefit under the McDermott Retirement
Plan payable at age 65 (the normal retirement age) to employees retiring in
1994 in accordance with the lifetime only method of payment and before profit
sharing plan offsets. Benefits are based on the formula of a specified
percentage (dependent on years of service) of average annual basic earnings
(exclusive of bonus and allowances) in the five consecutive years of the ten
years prior to retirement in which such earnings were highest ("Final Average
Earnings"). The average annual basic earnings and credited service under the
McDermott Retirement Plan at December 31, 1993 for Mr. Howson was $603,818, 22
years. Messrs. Hattox and Wildasin had less than three and five years,
respectively, of credited service under the McDermott Retirement Plan. Unless
elected otherwise by the employee, payment will be made in the form of a joint
and survivor annuity of equivalent actuarial value to the amount shown below.
MCDERMOTT RETIREMENT PLAN
<TABLE>
<CAPTION>
ANNUAL BENEFITS AT AGE 65
FOR YEARS OF SERVICE INDICATED
-------------------------------------------------------------
FINAL AVERAGE EARNINGS 10 15 20 25 30 35 40
- - ------------------------ ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
100,000................. $14,373 $ 21,559 $ 29,215 $ 38,954 $ 48,692 $ 56,807 $ 64,926
125,000................. 18,539 27,809 37,079 48,954 61,192 71,390 81,593
150,000................. 22,706 34,059 45,412 58,954 73,692 85,974 98,261
200,000................. 31,039 46,559 62,079 78,954 98,692 115,140 131,596
250,000................. 39,373 59,059 78,745 98,954 123,692 144,307 164,931
300,000................. 47,706 71,559 95,412 119,265 148,692 173,473 198,266
400,000................. 64,373 96,559 128,745 160,932 198,692 231,806 264,936
500,000................. 81,039 121,559 162,079 202,598 248,692 290,139 331,606
550,000................. 89,373 134,059 178,745 223,432 273,692 319,306 364,941
600,000................. 97,706 146,559 195,412 244,265 298,692 348,472 398,276
</TABLE>
The following table shows the annual benefit under the B&W Employee
Retirement Plan payable at age 65 (the normal retirement age) to employees
retiring in 1994 in accordance with the lifetime only method of payment.
Benefits are based on the formula of a specified percentage (dependent on the
level of wages subject to social security taxes during the employee's career)
of average annual earnings (inclusive of bonuses) in five consecutive years of
the ten years prior to retirement in which such earnings were highest ("Final
Average Earnings"). The average annual earnings and credited service under the
B&W Employee Retirement Plan at December 31, 1993 for Messrs. Stewart and
Woolbert were $369,325, 22 years; and $294,263, 38 years,
9
<PAGE>
respectively. Unless elected otherwise by the employee, payment will be made in
the form of a joint and survivor annuity of equivalent actuarial value to the
amount shown below.
BABCOCK & WILCOX RETIREMENT PLAN
<TABLE>
<CAPTION>
ANNUAL BENEFITS AT AGE 65
FOR YEARS OF SERVICE INDICATED
-------------------------------------------------------------
FINAL AVERAGE EARNINGS 10 15 20 25 30 35 40
- - ------------------------ ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
100,000................. $11,885 $ 17,828 $ 23,770 $ 29,713 $ 35,655 $ 41,598 $ 47,540
125,000................. 15,010 22,515 30,020 37,525 45,030 52,535 60,040
150,000................. 18,135 27,203 36,270 45,338 54,405 63,473 72,540
200,000................. 24,385 36,578 48,770 60,963 73,155 85,348 97,540
250,000................. 30,635 45,953 61,270 76,588 91,905 107,223 122,540
300,000................. 36,885 55,328 73,770 92,213 110,655 129,098 147,540
400,000................. 49,385 74,078 98,770 123,463 148,155 172,848 197,540
500,000................. 61,885 92,828 123,770 154,713 185,655 216,598 247,540
550,000................. 68,135 102,203 136,270 170,338 204,405 238,473 272,540
600,000................. 74,385 111,578 148,770 185,963 223,155 260,348 297,540
</TABLE>
An unfunded supplemental retirement plan called the Supplemental Executive
Retirement Plan (the "SERP Plan") was established in June of 1980 by the
Company and was amended to become a Plan of International in September of 1989.
The SERP Plan covers certain officers of International and other designated
companies, including the Company and B&W, and originally only provided benefits
to participants who elect to retire prior to normal retirement age. The 1989
amendment added participants and provided benefits to such participants upon
retirement at normal retirement age. Original participants, upon the request of
the Chief Executive Officer and/or the Board of Directors, may now elect to
retire at normal retirement age and, in such circumstances, will receive
benefits under the SERP Plan. Benefits are based upon a specified percentage
(determined by age, years of service and date of initial participation in the
SERP Plan) of final 3-year average cash compensation (salary plus supplemental
compensation for the highest three out of the last ten years of service) or 3-
year average cash compensation prior to SERP Plan scheduled retirement date,
whichever is greater; the maximum benefit shall not exceed 60-65% (dependent
upon date of initial participation in the SERP Plan) of such 3-year average
cash compensation. Payments under the SERP Plan will be reduced by an amount
equal to pension benefits payable under any other retirement plan maintained by
the Company, International, any of its subsidiary companies or any previous
employer. A death benefit is also provided under the SERP Plan. Before giving
effect to such reductions, the approximate annual benefit payable under the
SERP Plan to Messrs. Hattox, Howson, Stewart, Wildasin and Woolbert at
retirement age as stated in the SERP Plan is 60%, 65%, 60%, 31.75% and 65%,
respectively, of each such person's final 3-year average cash compensation.
International has caused the establishment of a trust (assets of the trust
constitute corporate assets) which is designed to ensure the payment of
benefits arising under the SERP Plan, the Excess Plans and certain other
contracts and arrangements (collectively, the "Plans") in the event of an
effective change in control of
10
<PAGE>
International. Although International would retain primary responsibility for
such payments, the trust would provide for payments to designated participants,
in the form of lump sum distributions, if certain events occur following an
effective change in control of International, including but not limited to
failure by International to make such payments and termination of a
participant's employment under certain specified circumstances. In addition,
with respect to benefits which otherwise would have been paid in the form of an
annuity, the trust provides for certain lump sum equalization payments which,
when added to the basic lump sum payments described above, would be sufficient,
after payment of all applicable taxes, to enable each active participant
receiving a lump sum distribution to purchase an annuity which would provide
such participant with the same net after-tax stream of annuity benefits that
such participant would have realized had he retired as of the date of the lump
sum distribution and commenced to receive annuity payments at that time under
the terms of the applicable Plan, based on salary and service factors at the
time of the effective change in control. With respect to designated
participants who retire prior to an effective change in control and who receive
a basic lump sum distribution under the circumstances described above, the
trust provides for similar lump sum equalization payments, based on salary and
service factors at the time of actual retirement.
AND OTHER MATTERS
No business other than that set forth in the accompanying Notice of the
taking of corporate action without a meeting is expected to be acted upon.
By Order of the Board of Directors,
LAWRENCE R. PURTELL
Secretary
Dated: July 15, 1994
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