<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] No fee required.
[_] 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.:
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(3) Filing Party:
--------------------------------------------------------------------------
(4) Date Filed:
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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 93% of the voting power of the outstanding shares of capital
stock of McDermott Incorporated, a Delaware corporation (the "Company"), shall
on September 2, 1997 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,
/S/ S. WAYNE MURPHY
S. WAYNE MURPHY
Secretary
Dated: July 28, 1997
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 28, 1997, 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 93% 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 September
2, 1997 by electing the nominees named below to the Company's Board of
Directors. On July 24, 1997, there were outstanding 2,818,679 shares of Series
A Preferred Stock and 3,508,085 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, 1997 ("fiscal year 1997"), there were
26 Board of Director actions taken without meetings. The Board does not
maintain audit, compensation or directors nominating & governance committees.
Set forth below is certain information (ages as of September 2, 1997) with
respect to each nominee for election as a director.
NOMINEES
<TABLE>
<CAPTION>
DIRECTOR
NAME AND PRINCIPAL OCCUPATION AGE SINCE
- ----------------------------- --- --------
<S> <C> <C>
S. Wayne Murphy.................................................. 62 1996
Senior Vice President, General Counsel and Corporate Secretary of
the Company and MII since February 1997. Before assuming this
position, he was Vice President, General Counsel and Corporate
Secretary of the Company and MII from June 1996; Acting General
Counsel and Acting Corporate Secretary of the Company and MII
from February 1996; Associate General Counsel of the Company and
MII from August 1993; and prior thereto, an Assistant General
Counsel of the Company from 1991. He has also been Acting
General Counsel and Acting Corporate Secretary of J. Ray
McDermott, S.A., a publicly traded subsidiary of MII ("J. Ray
McDermott") since February 1996.
Roger E. Tetrault................................................ 55 1997
Chairman of the Board since June 1, 1997 and Chief Executive
Officer since March 1, 1997 of the Company, MII and J. Ray
McDermott. Prior thereto, Mr. Tetrault was a Senior Vice
President of General Dynamics Corporation (a supplier of weapons
systems and services to the U.S. government and its allies) and
President of its Land Systems Division from April 1993; Vice
President of General Dynamics Corporation and President of its
Electric Boat Division from August 1992 until April 1993; Vice
President and General Manager of General Dynamics Corporation's
Electric Boat Division from August 1991 until August 1992; and
prior to that, he served as a Vice President and Group Executive
of the Company's subsidiary The Babcock & Wilcox Company since
1990. He is also a director of Handy & Harman.
Richard E. Woolbert.............................................. 63 1996
Executive Vice President and Chief Administrative Officer of the
Company and MII since February 1995 and MII's Compliance
Director since June 1997. He also has been Executive Vice
President and Chief Administrative Officer of J. Ray McDermott
since February 1995. Before assuming these positions, Mr.
Woolbert was Senior Vice President and Chief Administrative
Officer of the Company and MII from August 1991.
</TABLE>
2
<PAGE>
EXECUTIVE OFFICERS
Set forth below is the age (as of September 2, 1997), positions held with
the Company and certain affiliated companies, and certain other business
experience information for each of the Company's executive officers who are
not Directors.
Daniel. R. Gaubert, 48, Senior Vice President and Chief Financial Officer of
the Company and MII since February 1997, prior to which, he was Vice President
and Chief Financial Officer of the Company and MII from September 1996. He has
also been Vice President, Finance of J. Ray McDermott since August 1995. Prior
to assuming these positions, he was Vice President, Finance and Controller of
the Company and MII from February 1995; Vice President and Controller of the
Company and MII from February 1992; and prior thereto, Corporate Controller of
the Company and MII from July 1991.
Joe J. Stewart, 59, President of BWX Technologies, Inc. (formerly the
Company's Babcock & Wilcox Government Group) since July 1, 1997 and Executive
Vice President of MII since February 1995. Mr. Stewart has also been
President, Government Group, of Babcock & Wilcox Investment Company and The
Babcock & Wilcox Company since February 1995; prior to which, he was President
and Chief Operating Officer of Babcock & Wilcox Investment Company and The
Babcock & Wilcox Company from February 1993, and Executive Vice President and
Group Executive, Power Generation Group, of Babcock & Wilcox Investment
Company and The Babcock & Wilcox Company from August 1990.
E. Allen Womack, Jr., 54, Senior Vice President and Chief Technical Officer
of the Company and MII since February 1993. Also Senior Vice President and
Group Executive, Industrial Group, of the Company since September 1996, prior
to which, he was Senior Vice President and Group Executive, Shipbuilding and
Industrial Group, of the Company from August 1995. Before assuming these
positions, 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.
James F. Wood, 55, President, Power Generation Group, of Babcock & Wilcox
Investment Company and The Babcock & Wilcox Company and Executive Vice
President of MII since October 1996, prior to which, he was Vice President and
General Manager, Global Ventures and Power, Power Generation Group, of such
companies from June 1996. Prior thereto, he was President of WTI International
Energy Inc. ("WTI"), a subsidiary of Wheelabrator Technologies, Inc., from
June 1993 to December 1996 and Senior Vice President and General Manager of
Wheelabrator Environmental Systems, Inc. from May 1993 to December 1995. From
1988 to April 1993, he was Vice President of Plant Operations of WTI. Prior to
then, he worked for The Babcock & Wilcox Company for 24 years in various
supervisory and managerial capacities.
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 nominee as a Director,
each Named Executive Officer, as defined in "COMPENSATION OF EXECUTIVE
OFFICERS", and all nominees as a Director and executive officers of the
Company as a group, as of June 6, 1997, except as otherwise noted. No Director
or executive officer beneficially owned, as of June 6, 1997, 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>
James L. Dutt.................................... 0 0 105,750
Daniel E. Gaubert................................ 0 0 43,459
Robert E. Howson................................. 0 0 500,950
S. Wayne Murphy.................................. 0 0 14,673
Joe J. Stewart................................... 0 0 179,072
Roger E. Tetrault................................ 0 0 20,988
E. Allen Womack.................................. 4 4 88,782
Richard E. Woolbert.............................. 171 164.673 148,878
All Directors and executive officers as a group
(9 persons)..................................... 175 168.673 1,102,816
</TABLE>
- --------
* With respect to Messrs. Dutt, Gaubert, Howson, Murphy, Stewart, Womack and
Woolbert, includes 103,150, 28,324, 439,450, 11,917, 113,722, 50,195 and
95,185 shares, respectively, of MII Common stock that may be acquired
within 60 days of June 6, 1997 upon the exercise of stock options. With
respect to Messrs. Gaubert, Howson, Murphy, Stewart, Tetrault, Womack and
Woolbert, also includes 13,170, 50,000, 2,400, 53,235, 18,900, 27,625 and
37,350 restricted shares, respectively, of MII Common Stock, as to which
such individuals have sole voting power but no dispositive power. With
respect to Messrs. Gaubert, Murphy, Stewart, Tetrault, Womack and Woolbert,
also includes the equivalent of 680, 331, 1,335, 63, 1,750 and 1,423
shares, respectively, of MII Common Stock held in such individuals'
accounts in The Thrift Plan for Employees of McDermott Incorporated and
Participating Subsidiary and Affiliated Companies (the "McDermott Thrift
Plan") as of March 31, 1997.
Total shares beneficially owned in all cases constituted less than one
percent of the outstanding shares of the applicable security, except that the
1,102,816 shares of MII Common Stock beneficially owned by all Directors and
executive officers as a group constituted approximately 2% of the outstanding
MII Common Stock on June 6, 1997, less shares held by the Company, plus those
shares deemed to be outstanding pursuant to Rule 13d-3(d)(1) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
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 6, 1997:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL 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 93% 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 ("CEO"), two former CEOs and the four
highest paid executive officers other than CEOs (collectively, the "Named
Executive Officers") for fiscal years 1997, 1996 and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
------------------------------ -----------------------------
AWARDS PAYOUTS
--------------------- -------
SECURITIES
OTHER UNDERLYING ALL
PRINCIPAL FISCAL ANNUAL RESTRICTED STOCK LTIP OTHER
NAME POSITION YEAR SALARY BONUS COMP.(2) STOCK(3) OPTIONS(4) PAYOUTS COMP.(5)
- ---- ----------------- ------ -------- -------- -------- ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
J.L. Dutt(6)............ Interim Chairman 1997 $693,864 $350,000(7) $-- $ 2,869 100,300 $ 0 $ 64,750
& Chief Executive
Officer (retired)
D.R. Gaubert............ Senior VP & 1997 $242,280 $0 $-- $0 14,550 $ 0 $ 4,614
Chief Financial 1996 $190,150 $ 27,488 $-- $ 72,878 10,100 $0 $ 4,974
Officer 1995 $165,305 $ 35,504 $-- $ 64,571 6,840 $0 $ 4,850
R.E. Howson(8).......... Chairman & Chief 1997 $390,775 $0 $ 99,665 $0 0 $ 0 $628,179
Executive Officer 1996 $902,335 $218,388 $123,656 $ 746,515 100,470 $ 0 $ 30,705
(retired) 1995 $814,301 $294,977 $ 48,630 $1,870,833 385,450 $ 0 $ 27,078
J.J. Stewart............ Executive VP 1997 $408,360 $285,852 $-- $0 34,390 $ 0 $ 6,930
1996 $383,885 $ 77,663 $ 39,143 $ 218,705 23,710 $ 0 $ 9,162
1995 $364,995 $ 93,868 $-- $ 172,358 15,870 $ 0 $ 9,162
R.E. Tetrault(9)........ Chairman & Chief 1997 $ 45,000 $336,000(10) $-- $ 401,625 314,240 $ 0 $ 1,413
Executive Officer
E.A. Womack, Jr......... Senior VP & Chief 1997 $300,315 $0 $ 32,530 $0 17,290 $ 0 $ 5,594
Technical Officer 1996 $265,820 $ 47,096 $-- $ 126,203 16,410 $ 0 $ 4,619
1995 $223,690 $ 56,820 $ 31,534 $ 104,520 12,300 $ 0 $ 4,850
R.E. Woolbert........... Executive VP & 1997 $373,410 $0 $-- $0 20,780 $ 0 $ 7,956
Chief Adminis- 1996 $344,945 $ 59,559 $ 44,724 $ 224,910 24,505 $ 0 $ 9,905
trative Officer 1995 $301,685 $ 76,948 $-- $ 191,674 14,400 $ 0 $ 9,905
</TABLE>
- --------
(1) Includes amounts earned in the fiscal year, whether or not deferred.
(2) The aggregate value of perquisites and other personal benefits are not
included if they do not exceed the lesser of $50,000 or 10 percent of the
total amount of annual salary and bonus for the applicable fiscal year.
For fiscal year 1997, with respect to Mr. Howson, includes $58,604 for
cost of personal use of Company aircraft; with respect to Mr. Womack,
includes $20,439 for cost of personal use of Company aircraft. For fiscal
year 1996, with respect to Mr. Howson, includes $78,551 for cost of
personal use of Company aircraft;
6
<PAGE>
with respect to Mr. Stewart, includes $31,805 for relocation expenses; and
with respect to Mr. Woolbert, includes $43,584 for cost of personal use of
Company aircraft. For fiscal year 1995, with respect to Mr. Womack,
includes $13,782 for relocation expenses and $17,752 for cost of personal
use of Company aircraft.
(3) Restricted stock awards are valued at the closing market price of MII
Common Stock on the date of grant less any amounts paid by the executive
officers for such awards. For the fiscal years indicated, restricted stock
awards, if any, were granted in June of the following fiscal year. No
restricted stock awards were granted to officers of the Company for fiscal
year 1997. Mr. Tetrault, however, received a grant of 18,900 shares of MII
Common Stock in connection with his election as Vice Chairman of the Board
and CEO of the Company and MII in accordance with the terms of his
employment agreement. Additionally, Mr. Dutt received a grant of 150
shares in his capacity as a Director of MII prior to his election as
interim Chairman and CEO. As of March 31, 1997, the total number of
restricted shares of MII Common Stock held by the Named Executive Officers
and their market values (based upon closing market prices on March 31,
1997 of $21.375) are as follows: Mr. Dutt held 750 shares of MII Common
Stock valued at $16,031; Mr. Gaubert held 13,170 shares of MII Common
Stock valued at $281,509; Mr. Howson held 50,000 shares of MII Common
Stock valued at $1,068,750; Mr. Stewart held 52,235 shares of MII Common
Stock valued at $1,116,523; Mr. Tetrault held 18,900 shares of MII Common
Stock valued at $403,988; Mr. Womack held 27,625 shares of MII Common
Stock valued at $582,789; Mr. Woolbert held 37,350 shares of MII Common
Stock valued at $798,356. Dividends are paid on restricted shares at the
same time and at the same rate as dividends paid to all stockholders.
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.
(4) With respect to Mr. Dutt, includes 300 options to purchase MII Common
Stock granted to him in his capacity as a Director of MII during fiscal
year 1997 prior to his election as interim Chairman and CEO.
(5) Amounts shown for fiscal year 1997 include (a) company matching
contributions to the McDermott Thrift Plan in the amount of (i) $4,500 for
each of Messers. Gaubert, Stewart, Womack and Woolbert, (ii) $1,875 for
Mr. Howson and (iii) $1,350 for Mr. Tetrault; (b) the value of insurance
premiums paid by the Company for Messrs. Gaubert, Howson, Stewart,
Tetrault, Womack and Woolbert in the amounts of $114, $39,540, $2,430,
$63, $1,094 and $3,456, respectively; and (c) $64,750 in Director's
retainer and meeting fees paid to Mr. Dutt prior to his election as the
Company's interim Chairman and CEO. With respect to Mr. Howson, also
includes a $39,679 payment at termination of employment for untaken
vacation time and monthly payments totalling $547,085 paid during fiscal
year 1997 pursuant to his severance agreement.
(6) Mr. Dutt served, on an interim basis, as the Chairman of the Board and CEO
of the Company and MII from September 1, 1996 until February 28, 1997,
after which he served as Chairman of the Board until May 31, 1997.
(7) Performance bonus paid to Mr. Dutt in June 1997 based upon service during
fiscal year 1997, pursuant to the terms of a settlement agreement.
(8) Mr. Howson, who had been Chairman of the Board and CEO of the Company and
MII for eight years, retired effective September 1, 1996.
(9) Mr. Tetrault was elected as Vice Chairman of the Board and CEO of the
Company and MII on March 1, 1997. Effective June 1, 1997, he was also
elected as Chairman of the Board of the Company and MII.
(10) Bonus paid in June 1997 to Mr. Tetrault in connection with his election
as Vice Chairman of the Board and CEO of the Company and MII on March 1,
1997.
7
<PAGE>
OPTION GRANT TABLE
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 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 1997. Neither the Company nor MII granted any stock
appreciation rights to its executive officers during fiscal year 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(1)
--------------------------------------------- -----------------------------------
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> <C> <C>
J.L. Dutt
MII Common Stock....... 100,000(4) 11.06 $ 21.50 09/12/06 $ 1,352,000 $ 3,427,000
MII Common Stock....... 300(5) .03 $19.5625 08/06/06 $ 3,691 $ 9,353
D.R. Gaubert
MII Common Stock....... 14,550 1.61 $ 21.375 02/07/07 $ 195,625 $ 495,646
R.E. Howson
MII Common Stock....... 0 0 $ -- -- $ -- $ --
J.J. Stewart
MII Common Stock....... 34,390 3.8 $ 21.375 02/07/07 $ 462,374 $ 1,171,495
R.E. Tetrault
MII Common Stock....... 314,240 34.77 $ 22.125 03/03/07 $ 4,372,650 $ 11,080,417
E.A. Womack, Jr.
MII Common Stock....... 17,290 1.91 $ 21.375 02/07/07 $ 232,464 $ 588,984
R.E. Woolbert
MII Common Stock....... 20,780 2.3 $ 21.375 02/07/07 $ 279,387 $ 707,871
All Stockholders (6)
MII Common Stock....... -- -- $ 21.375 -- $739,971,873 $1,874,833,906
</TABLE>
- --------
(1) Potential Realizable Value is based on the assumed annual growth rates for
each of the grants shown over their ten-year option term. For example, if
the exercise price is $21.375, a 5% annual growth rate over ten years
results in a stock price of $34.82 per share and a 10% rate results in a
price of $55.44 per share. Actual gains, if any, on stock option exercises
are dependent on the future performance of the stock. Zero percent
appreciation in stock price will result in no gain.
(2) Based on options to acquire 903,870 of MII Common Stock granted to all
employees of the Company and MII during fiscal year 1997.
(3) Fair market value on date of grant.
(4) Vested and became exercisable on June 1, 1997.
(5) These shares were granted to Mr. Dutt in his capacity as a Director of MII
and became exercisable in February 1997, six months after the date of
grant.
(6) Total dollar gains based on the assumed annual rates of appreciation shown
here and calculated on 55,036,956 outstanding shares of MII Common Stock
on March 31, 1997. The Named Executive Officers' gains as a percentage of
the total dollar gains shown for all stockholders is .93% for MII Common
Stock.
8
<PAGE>
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table provides information concerning the exercise of stock
options during fiscal year 1997 by each of the Named Executive Officers and
the value at March 31, 1997 of unexercised options held by such individuals.
The value of unexercised options reflects the increase in market value of MII
Common Stock from the date of grant through March 31, 1997 (when the fair
market value of MII Common Stock was $21.375 per share). The value actually
realized upon exercise of the options by the Named Executive Officers will
depend on the value of the MII Common Stock at the time of exercise.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF TOTAL NUMBER OF TOTAL VALUE OF UNEXERCISED,
SHARES UNEXERCISED OPTIONS HELD IN-THE-MONEY OPTIONS HELD
ACQUIRED AT FISCAL YEAR-END AT FISCAL YEAR-END
ON VALUE -------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- -------- ----------- ------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
J.L. Dutt
Common Stock........... 0 -- 3,150 125,000(1) $ 825 $ 0
D.R. Gaubert
Common Stock........... 0 -- 28,324 25,255 $ 9,839 $ 17,377
R.E. Howson
Common Stock........... 0 -- 470,380(2) 325,000 $ 473,045 $ 0
J.J. Stewart
Common Stock........... 0 -- 113,722 34,390 $ 71,299 $ 40,751
R.E. Tetrault
Common Stock........... 0 -- 0 314,240 $ 0 $ 0
E.A. Womack, Jr.
Common Stock........... 0 -- 55,007(2) 35,065 $ 35,539 $ 28,205
R.E. Woolbert
Common Stock........... 0 -- 95,185 46,000 $ 102,042 $ 19,429
</TABLE>
- --------
(1) These options vested and became exercisable on June 1, 1997.
(2) Messrs. Howson and Womack exercised options for 30,930 and 4,812 shares of
MII Common Stock, respectively, during the period from March 31, 1997 to
June 6, 1997.
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
9
<PAGE>
"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. An employee must
be employed by the Company or B&W or certain of its subsidiaries or affiliates
for one year prior to participating in the plans and must have five years of
continuous service to vest in any accrued benefits under the plans. To the
extent that benefits payable under these qualified plans are limited by
Section 415(b) or 401(a)(17) of the Internal Revenue Code, 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").
The following table shows the annual benefit payable under the McDermott
Retirement Plan at age 65 (the normal retirement age) to employees retiring in
1997 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 60 consecutive months 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. As of March 31, 1997, Mr. Gaubert had Final Average Earnings of
$178,390 and 25.5 years of credited service under the McDermott Retirement
Plan. As of the date of his retirement, Mr. Dutt had not accrued enough years
of service to vest under the plan; therefore, he is not entitled to any
benefits under such plan. He, however, is entitled to benefits under MII's
Retirement Plan for Non-Management Directors. At the time of his retirement on
September 1, 1996, Mr. Howson had Final Average Earnings of $772,608 and 24.6
years of credited service under the 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 $14,057 $21,085 $28,113 $35,142 $42,170 $49,198 $56,227
150,000 22,390 33,585 44,780 55,975 67,170 78,365 89,560
200,000 30,723 46,085 61,447 76,808 92,170 107,532 122,893
250,000 39,057 58,585 78,113 97,642 117,170 136,698 156,227
300,000 47,390 71,085 94,780 118,475 142,170 165,865 189,560
400,000 64,057 96,085 128,113 160,142 192,170 224,198 256,227
500,000 80,723 121,085 161,447 201,808 242,170 282,532 322,893
600,000 97,390 146,085 194,780 243,475 292,170 340,865 389,560
700,000 114,057 171,085 228,113 285,142 342,170 399,198 456,227
800,000 130,723 196,085 261,447 326,808 392,170 457,532 522,893
</TABLE>
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<PAGE>
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
1997 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 60 consecutive
months 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 March 31, 1997 for Messrs.
Stewart, Tetrault, Womack and Woolbert were $505,576 and 25 years, $134,738
and 21.5 years, $301,227 and 21.5 years, and $416,563 and 41.7 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 $11,765 $17,648 $23,530 $29,413 $35,295 $41,178 $47,060
125,000 14,890 22,335 29,780 37,225 44,670 52,115 59,560
150,000 18,015 27,023 36,030 45,038 54,045 63,053 72,060
200,000 24,265 36,398 48,530 60,663 72,795 84,928 97,060
250,000 30,515 45,773 61,030 76,288 91,545 106,803 122,060
300,000 36,765 55,148 73,530 91,913 110,295 128,678 147,060
400,000 49,265 73,898 98,530 123,163 147,795 172,428 197,060
500,000 61,765 92,648 123,530 154,413 185,295 216,178 247,060
550,000 68,015 102,023 136,030 170,038 204,045 238,053 272,060
</TABLE>
Supplemental Executive Retirement Plan. MII maintains an unfunded
Supplemental Executive Retirement Plan (the "SERP"). The SERP covers certain
officers of the Company and other designated companies, including 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 the SERP scheduled retirement date, whichever is
greater. Except for the benefit payable to Mr. Howson, the maximum benefit may
not exceed 60-65% (dependent upon date of initial participation in the SERP)
of such 3-year average cash compensation. Under an employment agreement, the
maximum benefit payable to Mr. Howson is 73% of his final 3-year average cash
compensation. Payments under the SERP will be reduced by an amount equal to
pension benefits payable under any other retirement plan maintained by MII,
any of its subsidiary companies 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. Gaubert, Stewart,
Tetrault and Womack at retirement age as stated in the SERP is 60% of each
such person's final 3-year average cash compensation. At such retirement age,
Mr. Woolbert would receive an annual benefit of 65% of his final 3-year
11
<PAGE>
average cash compensation. As a result of his retirement on September 1, 1996,
Mr. Howson was eligible to receive, beginning September 1, 1998, an annual
benefit equal to 73% of his final 3-year average cash compensation or a lump
sum distribution equivalent to such benefits. Pursuant to a severance
agreement that he entered into with MII, MII agreed to pay him approximately
two-thirds of such lump sum distribution, on an actuarially discounted basis,
on November 1, 1996. Mr. Howson will receive all remaining amounts due to him
under the SERP on September 1, 1998. Mr. Dutt is not entitled to any benefits
under the SERP.
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 the 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.
CERTAIN TRANSACTIONS
As an approximately 93% owned (based upon voting power) subsidiary of MII,
the Company and its subsidiaries and MII and its other subsidiaries, from time
to time, provide various services and products to, and engage in various
transactions with, each other, substantially all of which the Company deems to
have been effected on an arms length basis.
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 fiscal year 1997.
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<PAGE>
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,
/s/ S. WAYNE MURPHY
S. WAYNE MURPHY
Secretary
Dated: July 28, 1997
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