<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 [_] Confidential, for Use of the
Commission Only (as permitted
by Rule 14c-5(d)(2))
[X] Definitive Information Statement
McDERMOTT INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Charter)
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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] 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
P. O. BOX 60035
NEW ORLEANS, LOUISIANA 70160-0035
----------------
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 General Corporation Law,
notice is hereby given that McDermott International, Inc., as holder of
approximately 92% of the voting power of the outstanding shares of capital
stock of McDermott Incorporated, a Delaware corporation (the "Company"), shall
on August 8, 1995 elect three 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, as amended.
By Order of the Board of Directors,
LAWRENCE R. PURTELL
Secretary
Dated: July 12, 1995
We are not asking for a Proxy
and you are requested not to send us a Proxy
<PAGE>
McDERMOTT INCORPORATED
1450 POYDRAS STREET
P. O. BOX 60035
NEW ORLEANS, LOUISIANA 70160-0035
----------------
INFORMATION STATEMENT
(PURSUANT TO SECTION 14(C) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED)
----------------
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
This Information Statement, which is first being mailed to stockholders on or
about July 12, 1995, is furnished by McDermott Incorporated (the "Company") in
connection with the taking of corporate action without a meeting by less than
unanimous written consent.
CORPORATE ACTION AND NOTICE
Subject to special voting rights granted to holders of the Company's
Preferred Stock, holders of the Company's Voting Common Stock, $1.00 par value
per share ("Voting Common Stock"), Series A $2.20 Cumulative Convertible
Preferred Stock, $1.00 par value per share ("Series A Preferred Stock"), and
Series B $2.60 Cumulative Preferred Stock, $1.00 par value per share ("Series B
Preferred Stock"), are entitled to vote as a single class on matters presented
to the Company's stockholders for approval. In that regard, each share of
Voting Common Stock entitles the holder thereof to 12,000 votes, and each share
of Series A Preferred Stock and each share of Series B Preferred Stock entitles
the holder thereof to one-half of a vote. McDermott International, Inc.
("MII"), as holder of all of the outstanding 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 outstanding shares of capital stock of the Company
entitled to vote on matters presented to its stockholders. MII, as holder of
all of the outstanding 3,000 shares of Voting Common Stock, intends to take
corporate action without a meeting on August 8, 1995 by electing the nominees
named below to the Company's Board of Directors. On June 28, 1995, there were
outstanding 2,817,604 shares of Series A Preferred Stock and 2,916,059 shares
of Series B Preferred Stock. Only holders of record of such Preferred Stock at
the close of business on such date will be entitled to receive a copy of this
Information Statement.
ELECTION OF DIRECTORS
Pursuant to such corporate action without a meeting by less than unanimous
written consent, three Directors are to be elected to the Company's Board of
Directors, each to hold office for one year and until his successor is elected
and qualified. If any nominee named below should become unavailable for
election, MII 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.
<PAGE>
During the fiscal year ended March 31, 1995, there were thirty Board of
Director actions taken without meetings. The Board does not maintain audit,
compensation or directors nominating committees.
The information appearing below with respect to the business experience of
each Director and other directorships held, has been furnished by each such
Director as of the date hereof.
<TABLE>
<CAPTION>
Director
Name Age Since
---- --- --------
Nominees
<S> <C> <C>
Brock A. Hattox................................................... 47 1993
Executive Vice President and Chief Financial Officer, and
President of the Engineering and Construction Group, of the
Company, and Executive Vice President and Chief Financial Officer
of MII since February 1995. Prior to assuming these positions, he
was Senior Vice President and Chief Financial Officer of the
Company and MII from March 1991; and prior to that, Vice
President, Controller and Planning of the Eaton Corporation (a
manufacturer of engineered products for automotive, industrial,
commercial and defense markets). He is also a director of MII and
J. Ray McDermott, S.A., a publicly traded subsidiary of MII ("J.
Ray McDermott").
Robert E. Howson.................................................. 63 1981
Chairman of the Board and Chief Executive Officer of the Company
and MII since August 1988 and Chairman of the Board and Chief
Executive Officer of J. Ray McDermott since January 31, 1995.
Prior to assuming these positions, he was President and Chief
Operating Officer of the Company and MII from August 1987. He is
also a director of The Louisiana Land and Exploration Company,
MII, J. Ray McDermott and Whitney Holding Corporation.
Lawrence R. Purtell............................................... 48 1993
Senior Vice President and General Counsel and Corporate Secretary
of the Company and MII since May 1993 and Senior Vice President
and General Counsel and Corporate Secretary of J. Ray McDermott
since January 31, 1995. Before assuming his present positions,
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>
2
<PAGE>
EXECUTIVE OFFICERS
Set forth below is the age, positions held with the Company and affiliated
companies and certain business experience information for each of the Company's
executive officers who are not Directors.
Walter E. Boomer, 56, President, Babcock & Wilcox Power Generation Group, of
Babcock & Wilcox Investment Company and The Babcock & Wilcox Company and
Executive Vice President of MII since February 1995. Before assuming his
present position, Mr. Boomer was Senior Vice President and Chief Project
Management Officer of MII from August 1994; and prior to that, he was a General
of the U.S. Marine Corps from 1986.
Daniel R. Gaubert, 46, Vice President, Finance, and Controller of the Company
and MII since February 1995. During the past five years and before assuming his
present position, he was Vice President and Controller of the Company and MII
from February 1992; Corporate Controller of the Company and MII from July 1991;
and prior to that, Group Controller, Power Generation Group, of Babcock &
Wilcox Investment Company and The Babcock & Wilcox Company.
Joe J. Stewart, 57, President, Babcock & Wilcox Government Group, of Babcock
& Wilcox Investment Company and The Babcock & Wilcox Company and Executive Vice
President and Chief Project Management Officer of MII since February 1995.
Before assuming his present position, Mr. Stewart was President and Chief
Operating Officer of Babcock & Wilcox Investment Company and The Babcock &
Wilcox Company from February 1993; and prior to that, Executive Vice President
and Group Executive, Power Generation Group, of Babcock & Wilcox Investment
Company and The Babcock & Wilcox Company from August 1990.
Edgar Allen Womack, Jr., 52, Senior Vice President and Chief Technical
Officer of the Company and MII since February 1993. Before assuming his present
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.
Richard E. Woolbert, 61, Executive Vice President and Chief Administrative
Officer of the Company and MII since February 1995. Before assuming his present
position, Mr. Woolbert was Senior Vice President and Chief Administrative
Officer of the Company and MII from August 1991; and prior to that, Vice
President and Chief Administrative Officer of the Company and MII from November
1988.
3
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of Series A Preferred
Stock, Series B Preferred Stock and MII's Common Stock, par value $1.00 per
share ("MII Common Stock"), beneficially owned by each Director, each Named
Executive Officer, as defined in "COMPENSATION OF EXECUTIVE OFFICERS", and all
Directors and executive officers of the Company as a group, as of June 20,
1995, except as otherwise noted. No Director or executive officer beneficially
owned, as of June 20, 1995, any other equity security of the Company or of its
parent or subsidiaries.
<TABLE>
<CAPTION>
Series A Series B MII
Preferred Preferred Common
NAME Stock Stock Stock
- ---- --------- --------- -------
<S> <C> <C> <C>
Walter E. Boomer(1)................................ 0 0 10,220
Brock A. Hattox(1)(2).............................. 0 0 98,999
Robert E. Howson(1)(2)............................. 0 0 486,556
Lawrence R. Purtell(1)(2).......................... 0 0 30,883
Joe J. Stewart(1)(2)............................... 0 0 132,927
Richard E. Woolbert(1)(2).......................... 171 164.673 80,592
All Directors and executive officers as a group (8
persons)........................................... 175 168.673 964,354
</TABLE>
- --------
(1) With respect to Messrs. Boomer, Hattox, Howson, Purtell, Stewart and
Woolbert, includes 10,220, 37,790, 201,500, 16,390, 55,820 and 39,130
shares, respectively, of MII Common Stock that were acquired as restricted
stock awards under MII's 1987 Long-Term Performance Incentive Compensation
Program or 1992 Officer Stock Incentive Program.
(2) With respect to Messrs. Hattox, Howson, Purtell, Stewart and Woolbert,
includes 60,377, 275,776, 14,284, 76,226 and 71,194 shares, respectively,
of MII Common Stock that are issuable upon the exercise of certain stock
options, currently exercisable, granted under MII's 1983 and 1987 Long-Term
Performance Incentive Compensation Programs or 1992 Officer Stock Incentive
Program. With respect to Messrs. Hattox, Howson, Purtell, Stewart and
Woolbert, includes the equivalent of 832, 780, 209, 881 and 909 shares,
respectively, of MII Common Stock held for such individuals accounts in The
Thrift Plan for Employees of McDermott Incorporated and Participating
Subsidiary and Affiliated Companies (the "McDermott Thrift Plan") as of
April 30, 1995.
Shares beneficially owned in all cases constituted less than one percent of
the outstanding shares of the applicable security, except that the 964,354
shares of MII Common Stock beneficially owned by all Directors and executive
officers as a group constituted approximately 1.78% of the outstanding MII
Common Stock.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table furnishes information concerning all persons known to the
Company to beneficially own 5% or more of any class of voting stock of the
Company as of June 20, 1995:
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address of Beneficial Percent of
Title of Class Beneficial Owner Ownership Class
- -------------- ----------------------------- ---------- ----------
<S> <C> <C> <C>
Voting Common Stock(1)...... McDermott International, Inc. 3,000(2) 100%
1450 Poydras Street
New Orleans, LA 70112
</TABLE>
- --------
(1) Entitles the holder thereof to 12,000 votes per share, voting as a single
class with holders of the Series A Preferred Stock and the Series B
Preferred Stock, each share of which entitles the holder thereof to one-
half of a vote. Accordingly, MII holds approximately 92% of the voting
power of the outstanding capital stock of the Company.
(2) Sole voting and investment power.
5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
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 1995, 1994 and 1993:
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation(1) Long-Term Compensation
------------------------- --------------------------------
Awards
------------------------
Securities
Other Underlying Payouts All
Fiscal Annual Restricted Stock LTIP Other
Name Principal Position Year Salary Bonus Comp. Stock(2) Options Payouts Comp.(3)
---- -------------------- ------ -------- -------- ------- ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
R.E. Howson........... Chairman & Chief 1995 $814,301 $294,977 $48,630 $1,870,833(4) 385,450 $ 0 $27,078
Executive Officer 1994 $729,210 $325,264 $41,496 $ 567,025 65,820 $ 0 $29,652
1993 $665,420 $600,279 $21,166 $ 522,493 59,410 $ 0 $29,442
W.E. Boomer(5)........ Executive Vice 1995 $154,677 $ 64,562 $ 91 $ 252,309(6) 29,870 $ 0 $ 2,525
President
B.A. Hattox........... Executive VP & 1995 $326,335 $ 83,440 $10,549 $ 199,241 15,870 $ 0 $ 5,424
Chief Financial 1994 $306,325 $ 92,008 $ 5,126 $ 178,756 18,860 $ 0 $27,980(7)
Officer 1993 $285,275 $171,239 $ 5,683 $ 252,512 17,400 $ 0 $53,056(7)
J.J. Stewart.......... Executive VP & 1995 $364,995 $ 93,868 $10,772 $ 172,358 15,870 $ 0 $ 9,162
Chief Project 1994 $344,615 $119,849 $ 4,487 $ 217,838 24,060 $ 0 $ 9,913
Management 1993 $301,870 $224,724 $ 1,186 $ 301,517 20,770 $ 0 $ 8,382
Officer
R.E. Woolbert......... Executive VP & 1995 $301,685 $ 76,948 $ 4,335 $ 191,674 14,400 $ 0 $ 9,905
Chief Administrative 1994 $280,085 $ 84,848 $13,569 $ 163,262 17,230 $ 0 $10,605
Officer 1993 $258,440 $156,441 $ 4,329 $ 152,460 15,750 $ 0 $ 8,861
</TABLE>
- --------
(1) Includes amounts earned in fiscal year, whether or not deferred.
(2) Restricted stock awards in MII Common Stock for fiscal year 1995 are valued
at the closing price on the date of grant. All such awards, other than the
50,000 and 5,500 restricted shares of MII Common Stock awarded to Mr.
Howson and Mr. Boomer as described in footnotes 4 and 6, respectively, were
made on June 9, 1995. The total number of shares of MII Common Stock held
as of March 31, 1995 and the aggregate market value at such date (based
upon the closing market price on that date of $27.375 per share) is as
follows: Mr. Howson held 201,430 shares valued at $5,312,716; Mr. Hattox
held 35,760 shares valued at $943,170; Mr. Stewart held 55,800 shares
valued at $1,471,725; Mr. Boomer held 5,500 shares valued at $145,063; Mr.
Woolbert held 39,110 shares valued at $1,031,526. Dividends are paid on
restricted shares at the same time and at the same rate as dividends paid
to stockholders of unrestricted
6
<PAGE>
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 MII, the Compensation
Committee of MII may cause all restrictions to lapse.
(3) Amounts shown for 1995 relate to company matching contributions to the
McDermott Thrift Plan for each of the Named Executive Officers (other than
Mr. Boomer) in the amount of $4,500; and the value of insurance premiums
paid by the Company for Messrs. Boomer, Howson, Hattox, Stewart and
Woolbert in the amounts of $2,525, $22,578, $910, $4,662 and $5,405,
respectively.
(4) Includes 50,000 restricted shares of MII Common Stock awarded under an
employment agreement between MII and Mr. Howson, which shares will vest
less than three years from the date of the grant if MII's Board of
Directors approves a successor to Mr. Howson as Chairman of the Board and
Chief Executive Officer of MII during such time.
(5) Only includes amounts paid to or received by Mr. Boomer for the period from
August 1994, when he became employed as an executive officer of the
Company, through the end of fiscal year 1995.
(6) Includes 5,500 restricted shares of MII Common Stock awarded to Mr. Boomer
as a signing bonus.
(7) Includes $20,000 and $46,000 for fiscal years 1993 and 1994, respectively,
representing amounts paid to Mr. Hattox as a signing bonus.
7
<PAGE>
Option Grant Table
Executive officers of the Company are granted options to acquire MII Common
Stock. Options to acquire shares of MII Common Stock 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 continuing
employment with the Company or MII. In the event of a change in control of MII,
the Compensation Committee of MII may accelerate the exercisability of any
outstanding options. The following table provides information about option
grants to the Named Executive Officers during fiscal year 1995. Neither the
Company nor MII granted any stock appreciation rights to the Company's
executive officers during fiscal year 1995.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(4)
------------------------------------------- -----------------------------------
Number of
Securities % of Total
Underlying 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
MII Common Stock....... 325,000 40.18 $25.125 08/09/04 $ 5,136,625 $ 13,014,625
MII Common Stock....... 60,450 7.47 25.500 02/06/05 969,425 2,456,714
W.E. Boomer
MII Common Stock....... 14,000 1.73 25.313 08/22/04 222,805 564,782
MII Common Stock....... 15,870 1.96 25.500 02/06/05 254,555 644,956
B.A. Hattox
MII Common Stock....... 15,870 1.96 25.500 02/06/05 254,555 644,956
J.J. Stewart
MII Common Stock....... 15,870 1.96 25.500 02/06/05 254,555 644,956
R.E. Woolbert
MII Common Stock....... 14,400 1.78 25.500 02/06/05 230,976 585,216
All Stockholders(1)
MII Common Stock....... -- -- 25.500 -- 868,173,013 2,200,120,870
Named Executive Officers' gains as a % of all stockholders' gains... .84% .84%
</TABLE>
- --------
(1) Total dollar gains based on the assumed annual rates of appreciation shown
here and calculated on 54,059,598 outstanding shares of MII Common Stock on
March 31, 1995.
(2) Based on 808,930 options granted to all employees of MII and its
subsidiaries, including the Company, during the fiscal year ended March 31,
1995.
(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 $41.54 and $66.14 per share of MII Common
Stock, respectively, if the assumed annual rates of stock price
appreciation shown were to be achieved over a ten year option term.
8
<PAGE>
Option Exercises and Year-End Value Table
The following table provides information concerning the exercise of options
to acquire MII Common Stock during fiscal year 1995 by each of the Named
Executive Officers and the value at March 31, 1995 of such unexercised options
held by such individuals. The value of unexercised options reflects the
increase in market value of MII's Common Stock from the date of grant through
March 31, 1995 (when the fair market value of MII's Common Stock was $27.1875
per share). The value actually realized upon exercise of the options by the
Named Executive Officers will depend on the value of MII's Common Stock at the
time of exercise.
Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number Total Number of Total Value of
of Shares Unexercised Options Held Unexercised, In-the-Money
Acqired at Fiscal Year-End Options Held at Fiscal Year-End
on Value ------------------------- --------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------- -------- ----------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
R.E. Howson
MII Common Stock....... 0 $ 0 275,776 449,134 $ 1,560,169 $ 976,018
W.E. Boomer
MII Common Stock....... 0 $ 0 0 29,870 $ 0 $ 53,031
B.A. Hattox
MII Common Stock....... 0 $ 0 60,377 34,243 $ 180,098 $ 85,585
J.J. Stewart
MII Common Stock....... 0 $ 0 76,226 38,834 $ 384,548 $ 100,137
R.E. Woolbert
MII Common Stock....... 0 $ 0 71,194 31,136 $ 432,140 $ 77,851
</TABLE>
Variable Supplemental Compensation Plan
MII has a Variable Supplemental Compensation Plan based on the achievement of
certain performance standards for managerial and other key employees, including
officers of the Company and its consolidated subsidiaries. Under the plan, the
aggregate amount available for award in respect of the 1996 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 16% 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 16%. 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
established guideline amounts. Allocations of awards to eligible employees are
made at the discretion of MII's Compensation Committee, based upon a percentage
of salary. For fiscal year 1996, the Chief Executive Officer of the Company may
receive a maximum award of 70% of his salary under the plan.
9
<PAGE>
Awards are payable to the recipients within 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 for up to
15 years after retirement. In case of deferral, awards 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
Pension Plans. MII maintains several funded retirement plans covering
substantially all regular full-time employees, except certain non-resident
alien employees who are not citizens of a European Community country or who do
not earn income in the United States, Canada or the United Kingdom. All
officers who are employees of the Company are covered under The Retirement Plan
for Employees of McDermott Incorporated (the "McDermott Retirement Plan").
Officers who are employed by The Babcock & Wilcox Company ("B&W") or certain of
its subsidiaries or affiliates are covered under The Employee Retirement Plan
of The Babcock & Wilcox Company (the "B&W Retirement Plan"). Employees do not
contribute to either plan and company contributions are determined 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 applicable company or a subsidiary under the terms
of the unfunded excess benefit plans maintained by them (the "Excess Plans")
when such benefits are limited by Section 415(b) or 401(a)(17) of the Internal
Revenue Code of 1986.
The following table shows the annual benefit payable under the McDermott
Retirement Plan at age 65 (the normal retirement age) to employees retiring in
1995 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) during the five consecutive years out of
the ten years prior to retirement in which such earnings were highest ("Final
Average Earnings") less a specified percentage of anticipated social security
benefits. Final Average Earnings and credited service under the McDermott
Retirement Plan at December 31, 1994 for Messrs. Howson and Hattox were
$659,852 and 23 years, and $290,625 and 4 years, respectively. As of April 1,
1995, Mr. Boomer
10
<PAGE>
had no entitlement to any benefit from 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>
Final Annual Benefits at Age 65 For Years of Service Indicated
Average -------------------------------------------------------------
Earnings 10 15 20 25 30 35 40
-------- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
100,000 $14,267 $ 21,400 $ 28,533 $ 36,623 $ 45,885 $ 53,913 $ 61,631
125,000 18,433 27,650 36,867 46,087 57,731 67,821 77,524
150,000 22,600 33,900 45,200 56,500 69,576 81,730 93,417
200,000 30,933 46,400 61,867 77,333 93,266 109,548 125,202
250,000 39,267 58,900 78,533 98,167 117,800 137,433 157,067
300,000 47,600 71,400 95,200 119,000 142,800 166,600 190,400
400,000 64,267 96,400 128,533 160,667 192,800 224,933 257,067
500,000 80,933 121,400 161,867 202,333 242,800 283,267 323,733
550,000 89,267 133,900 178,533 223,167 267,800 312,433 357,067
600,000 97,600 146,400 195,200 244,000 292,800 341,600 390,400
</TABLE>
The following table shows the annual benefit payable under the B&W Retirement
Plan at age 65 (the normal retirement age) to employees retiring in 1995 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) during the five consecutive years out of the ten years
prior to retirement in which such earnings were highest ("B&W Final Average
Earnings"). B&W Final Average Earnings and credited service under the B&W
Retirement Plan at December 31, 1994 for Messrs. Stewart and Woolbert were
$426,345 and 23 years, and $336,886 and 39 years, 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>
B&W
Final Annual Benefits at Age 65 For Years of Service Indicated
Average -------------------------------------------------------------
Earnings 10 15 20 25 30 35 40
-------- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
100,000 $11,855 $ 17,783 $ 23,710 $ 29,638 $ 35,565 $ 41,493 $ 47,420
125,000 14,980 22,470 29,960 37,450 44,940 52,430 59,920
150,000 18,105 27,158 36,210 45,263 54,315 63,368 72,420
200,000 24,355 36,533 48,710 60,888 73,065 85,243 97,420
250,000 30,605 45,908 61,210 76,513 91,815 107,118 122,420
300,000 36,855 55,283 73,710 92,138 110,565 128,993 147,420
400,000 49,355 74,033 98,710 123,388 148,065 172,743 197,420
500,000 61,855 92,783 123,710 154,638 185,565 216,493 247,420
550,000 68,105 102,158 136,210 170,263 204,315 238,368 272,420
600,000 74,355 111,533 148,710 185,888 223,065 260,243 297,420
</TABLE>
11
<PAGE>
Supplemental Executive Retirement Plan. An unfunded supplemental retirement
plan called the Supplemental Executive Retirement Plan (the "SERP") was
established in June of 1980 by the Company and was amended to become a plan of
MII in September of 1989. The SERP covers certain officers of MII and other
designated companies, including the Company and B&W. Generally, benefits are
based upon a specified percentage (determined by age, years of service and date
of initial participation in the SERP) 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
scheduled retirement date, whichever is greater. Except for the benefit payable
to Mr. Howson, the maximum benefit shall not exceed 60-65% (dependent upon date
of initial participation in the SERP) of such 3-year average cash compensation.
Under an employment agreement between Mr. Howson and MII, the maximum benefit
payable to Mr. Howson is 73% of his final 3-year average cash compensation
(based upon his highest three years, consecutive or nonconsecutive, of base
salary and bonus during the last ten years of his employment). Payments under
the SERP will be reduced by an amount equal to pension benefits payable under
any other retirement plan maintained by MII or any of its subsidiaries,
including the Company, or any previous employer. A death benefit is also
provided under the SERP. Before giving effect to such reductions, the
approximate annual benefit payable under the SERP to Messrs. Boomer, Hattox,
Howson and Stewart, and Woolbert at retirement age as stated in the SERP is
27%, 60%, 73%, 60% and 65%, respectively, of each such person's applicable
final 3-year average cash compensation.
A trust (assets of the trust constitute corporate assets) has been
established which is designed to ensure the payment of benefits arising under
the SERP, the Excess Plans and certain other contracts and arrangements
(collectively, the "Plans") in the event of an effective change in control of
MII. Although MII 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 MII, including but not limited to failure by MII 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.
12
<PAGE>
CERTAIN TRANSACTIONS
In connection with the merger of Offshore Pipelines, Inc. into a merger
subsidiary of J. Ray McDermott and the related contribution by MII of its
marine construction services business to J. Ray McDermott, the Company sold
substantially all of its marine construction services assets to MII for
approximately $221,000,000 of marketable securities. Such consideration was
determined based upon the fair market value of such assets as determined by an
independent appraiser in accordance with certain covenants contained in public
debt instruments to which the Company is a party that require transactions
between the Company and its affiliates, including MII, to be on terms no less
favorable to the Company than might be obtained at the time of such transaction
with a non-affiliate.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own 10% or more of the Company's voting
stock to file reports of ownership and changes in ownership of the Company's
equity securities with the Securities and Exchange Commission ("SEC") and the
New York Stock Exchange. Directors, executive officers and 10% or more
stockholders 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 10% or more stockholders
complied with all Section 16(a) filing requirements during the most recent
fiscal year.
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 12, 1995
13
