<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
McDermott International, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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 INTERNATIONAL, INC.
-----------------------------------------------------------
[LOGO OF McDERMOTT R. E. Tetrault 1450 Poydras Street
INTERNATIONAL, INC. Chairman of the Board and P.O. Box 61961
APPEARS HERE] Chief Executive Officer New Orleans, Louisiana
70161-1961
(504) 587-5682
July 6, 1998
Dear Stockholder:
You are cordially invited to the Company's Annual Meeting of Stockholders to
be held on Tuesday, August 11, 1998, in Cabildo A and B of the Hyatt Regency
New Orleans, Poydras Street at Loyola Avenue, New Orleans, Louisiana,
commencing at 9:30 a.m. local time. The notice of meeting and proxy statement
following this letter describe the matters to be acted upon at the meeting.
Whether or not you personally plan to attend, please take a few minutes now
to mark, sign and date the enclosed proxy card and return it in the enclosed
postage-paid envelope so that your shares are represented and voted at the
meeting. Beginning this year, you also have the option of voting by calling a
toll-free telephone number or using the Internet. If you vote by telephone or
via the Internet, a PIN or control number has been assigned to you on the
proxy card to safeguard your vote.
Regardless of the number of shares you may own, your vote is important.
Thank you for your interest in our Company.
Sincerely yours,
/s/ R. E. Tetrault
---------------------------
R. E. TETRAULT
<PAGE>
MCDERMOTT INTERNATIONAL, INC.
1450 POYDRAS STREET
P.O. BOX 61961
NEW ORLEANS, LOUISIANA 70161-1961
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 11, 1998
----------------
To the Stockholders of
McDERMOTT INTERNATIONAL, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
McDermott International, Inc., a Panama corporation (the "Company"), for the
fiscal year ended March 31, 1998 will be held in Cabildo A and B of the Hyatt
Regency New Orleans, Poydras Street at Loyola Avenue, New Orleans, Louisiana,
on Tuesday, August 11, 1998, at 9:30 a.m. local time, for the following
purposes:
(1) To elect three Directors; and
(2) To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on July 2, 1998 as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting and at any adjournment(s) thereof.
PLEASE INDICATE YOUR VOTE AS TO THE MATTERS TO BE ACTED UPON AT THE MEETING
(A) BY MARKING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND PROMPTLY
RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES OR (B) BY CALLING THE TOLL-FREE TELEPHONE
NUMBER OR BY USING THE INTERNET, AS DESCRIBED IN THE ENCLOSED PROXY CARD. THIS
WILL ENSURE THAT YOUR VOTE IS COUNTED, WHETHER OR NOT YOU ATTEND THE MEETING.
IF YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON AT
THAT TIME.
By Order of the Board of Directors,
/s/ S. Wayne Murphy
---------------------------------
S. WAYNE MURPHY
Secretary
Dated: July 6, 1998
<PAGE>
MCDERMOTT INTERNATIONAL, INC.
1450 POYDRAS STREET
P. O. BOX 61961
NEW ORLEANS, LOUISIANA 70161-1961
----------------
PROXY STATEMENT FOR ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD AUGUST 11, 1998
----------------
GENERAL INFORMATION
This Proxy Statement is being furnished and the accompanying proxy card
("Proxy") is being solicited by the Board of Directors of McDermott
International, Inc. (the "Company"). The Company will bear all expenses
incurred in connection with such solicitation, which is expected to be
primarily by mail. Morrow & Co., Inc. has been engaged to assist in the
solicitation of Proxies for a fee of $6,500, plus out-of-pocket expenses. In
addition to solicitation by mail and by such proxy soliciting firm, officers
and regular employees of the Company may solicit Proxies by personal
interview, telephone and facsimile transmission, for which they will receive
no additional compensation. Brokerage houses, banks and other custodians,
nominees and fiduciaries will be reimbursed for their customary out-of-pocket
and reasonable expenses incurred in forwarding proxy materials to their
clients who are beneficial owners of shares. You are urged to sign and date
the enclosed Proxy and return it as promptly as possible in the envelope
enclosed for that purpose. You also have the option of voting by calling a
toll-free telephone number or by using the Internet. The telephone and
Internet voting procedures are designed to authenticate your identity, to
allow you to give your voting instructions and to confirm that your
instructions have been recorded properly. Instructions for voting by telephone
or over the Internet are set forth in the enclosed Proxy.
You may revoke your Proxy at any time prior to its exercise by written
notice to the Secretary of the Company, by submission of a later dated Proxy
or by voting in person at the meeting. This Proxy Statement is first being
mailed to stockholders on or about July 6, 1998.
VOTING AT MEETING
Only holders of record of the Company's Common Stock, par value $1.00 per
share ("Common Stock"), at the close of business on July 2, 1998 (the "Record
Date"), will be entitled to notice of, and to vote at, the Annual Meeting.
There were 60,202,674 shares of Common Stock outstanding on the Record Date,
each of which is entitled to one vote per share. On the Record Date, 100,000
shares of Common Stock were held by McDermott Incorporated, a subsidiary of
the Company ("McDermott"), with its address at 1450 Poydras Street, New
Orleans, Louisiana 70160-0035. The Company has been informed by McDermott that
it will not vote its shares of Common Stock at the meeting.
The presence in person or by proxy of a majority of the outstanding shares
of Common Stock will constitute a quorum at the meeting. Directors are elected
by the affirmative vote of a majority of the shares of Common Stock
represented at the meeting. The Company's Board of Directors has designated
each of those persons named in the enclosed Proxy, with full power of
substitution, to represent and vote at the meeting those shares represented by
valid Proxies. All shares represented by valid Proxies will be voted in
accordance with the choice made by the stockholder as to the election of
Directors. If a choice is not made, the Proxy will be voted FOR the election
of Directors as described under "ELECTION OF DIRECTORS". We do not know of any
other matters to be presented at or acted upon at the meeting, but should any
other matters requiring a vote arise, including a question of adjourning the
meeting, the persons named as proxies in the enclosed Proxy will vote thereon
in accordance with their judgment.
<PAGE>
ANNUAL REPORT
Securities and Exchange Commission ("SEC") rules require that an annual
report precede or accompany proxy materials. More than one annual report need
not be sent to the same address if the recipient agrees. If more than one
annual report is being sent to your address, the mailing of duplicate copies
will be discontinued if you so request. You may so request by marking the
appropriate box on the Proxy (or by telephone or over the Internet) for any
account for which you do not wish to receive an annual report.
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide for the classification of
the Board of Directors into three classes, as nearly equal in number as
possible, with the term of office for each class expiring on the date of the
third annual stockholders' meeting for the election of directors following the
most recent election of directors for such class.
The term of office of the Company's Class I Directors, Philip J. Burguieres,
Bruce DeMars and John W. Johnstone, Jr., will expire at this year's Annual
Meeting. Upon the nomination of the Board of Directors at its meeting on June
5, 1998, Messrs. Burguieres, DeMars and Johnstone are standing for re-election
as Class I Directors at this year's Annual Meeting. If elected, each of
Messrs. Burguieres, DeMars and Johnstone will hold office until the Company's
Annual Meeting in 2001 and until his successor is elected and qualified.
Unless otherwise directed, the persons named as proxies in the enclosed
Proxy intend to vote FOR the election of the nominees. If any nominee should
become unavailable for election, the shares will be voted 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. Set forth
below under "Class II Directors" and "Class III Directors" are the names of
the other Directors of the Company currently in office. Class II Directors
will continue to serve until the Company's Annual Meeting of Stockholders in
1999 and Class III Directors will continue to serve until the Company's Annual
Meeting of Stockholders in 2000. All Directors have been elected previously as
Directors by the stockholders or are standing for election as Directors at
this year's Annual Meeting.
2
<PAGE>
Set forth below is certain information (ages as of August 11, 1998) with
respect to each nominee for election as a director and each Director of the
Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND PRINCIPAL OCCUPATION AGE SINCE
- ----------------------------- --- --------
CLASS I NOMINEES
<S> <C> <C>
Philip J. Burguieres............................................. 54 1990
Chairman of the Board of Weatherford Enterra, Inc. (a diversified
international energy services and manufacturing company) from
December 1992 until its merger with EVI, Inc. in May 1998. From
April 1991 to October 1996, he also served as Weatherford
Enterra, Inc.'s President and Chief Executive Officer. He is a
director of EVI Weatherford, Inc., Chase Bank of Texas, N.A.,
Denali Incorporated and Newfield Exploration Company.
Bruce DeMars..................................................... 63 1997
Admiral, United States Navy (retired). From 1988 until his
retirement in October 1996, he was Director, Naval Nuclear
Propulsion, a joint Department of the Navy/Department of Energy
program responsible for the design, construction, maintenance,
operation and final disposal of reactor plants for the United
States Navy. He is also a director of Unicom Corporation,
Commonwealth Edison Corporation and Draper Laboratories.
John W. Johnstone, Jr. .......................................... 65 1995
Chairman of the Board from 1988 and Chief Executive Officer from
1987 of Olin Corporation (a manufacturer and supplier of
chemicals, metals, defense related products and services, and
ammunition) until his retirement in May 1996. He is a director
of Olin Corporation, American Brands, Inc., Phoenix Home Mutual
Life Insurance Company and Research Corporation Technologies,
Inc.
CLASS II DIRECTORS
Theodore H. Black................................................ 69 1993
Chairman of the Board and Chief Executive Officer of Ingersoll-
Rand Company (a manufacturer of heavy equipment) from 1988 until
his retirement in October 1993. He is also a director of CPC
International, Inc. and General Public Utilities Corporation.
William McCollam, Jr. ........................................... 73 1990
Energy management consultant, and President Emeritus of Edison
Electric Institute (an electric utility company association)
since May 1990. From April 1978 to May 1990, he was President of
Edison Electric Institute.
Richard E. Woolbert.............................................. 64 1996
Executive Vice President and Chief Administrative Officer of the
Company and McDermott since February 1995, and the Company's
Compliance Director from June 1997 to November 1997. He has also
been Executive Vice President and Chief Administrative Officer
of J. Ray McDermott since February 1995. Before assuming his
current positions, Mr. Woolbert was Senior Vice President and
Chief Administrative Officer of the Company and McDermott from
August 1991. He is also a director of J. Ray McDermott, S.A., a
publicly traded subsidiary of the Company ("J. Ray McDermott").
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AND PRINCIPAL OCCUPATION AGE SINCE
- ----------------------------- --- --------
CLASS III DIRECTORS
<S> <C> <C>
Robert L. Howard................................................. 62 1997
Until his retirement in March 1995, he was Vice President
Domestic Operations, Exploration and Production, of Shell Oil
Company ("Shell Oil") and President of Shell Western Exploration
and Production Inc., a Shell Oil subsidiary, from 1992, and
President of Shell Offshore Inc., another Shell Oil subsidiary,
from 1985. He is also a director of J. Ray McDermott, Camco
International, Inc., Southwest Energy Company and Ocean Energy,
Inc.
Roger E. Tetrault................................................ 56 1997
Chairman of the Board since June 1997 and Chief Executive Officer
since March 1997 of the Company, McDermott 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.
John N. Turner................................................... 69 1993
Partner, Miller Thomson (barristers & solicitors), Toronto,
Canada since 1990. Prior thereto, he was Leader of Opposition of
the Parliament of Canada from 1984. He is also a director of E-L
Financial Corporation, The Loewen Group Inc., Noranda Forest
Inc. and Triple Crown Electronics Inc.
</TABLE>
BOARD OF DIRECTORS AND ITS COMMITTEES
General Information. The Board of Directors of the Company has several
standing committees, including an Audit Committee, a Directors Nominating &
Governance Committee and a Compensation Committee.
Audit Committee. The Audit Committee is currently composed of Messrs.
McCollam (Chairman), Burguieres, Howard and Turner. During the Company's
fiscal year ended March 31, 1998 ("fiscal year 1998"), the Audit Committee met
four times. The functions of the Audit Committee include (i) reviewing the
accounting principles and practices employed by the Company and, to the extent
the Audit Committee deems appropriate, by the Company's subsidiaries; (ii)
meeting with the Company's independent auditors to review their report on
their examination of the Company's accounts, their comments on the internal
controls of the Company and the actions taken by management with regard to
such comments; (iii) approving professional services, including non-audit
services, rendered by such independent auditors; and (iv) recommending
annually to the Board of Directors the appointment of the Company's
independent auditors.
Directors Nominating & Governance Committee. The Directors Nominating &
Governance Committee is currently composed of Messrs. Burguieres (Chairman),
Black and Johnstone. During fiscal year 1998, the Directors Nominating &
Governance Committee met once. The function of such committee is to recommend
to the Company's Board of Directors (i) for approval and adoption, the
qualifications, term limits and nomination and election procedures relating to
the Company's directors, and (ii) nominees for election to the Company's Board
of Directors. The committee will also consider qualified nominees recommended
by stockholders for election as directors. Any such recommendation, together
with the nominee's qualifications and consent to be considered as a nominee,
should be sent to the Secretary of the Company.
Compensation Committee. The Compensation Committee is currently composed of
Messrs. Black (Chairman), DeMars, Howard and Johnstone. During fiscal year
1998, the Compensation Committee met four times. The Compensation Committee
(i) determines the salaries of all of the Company's officers elected to their
4
<PAGE>
positions by the Board, and also reviews and makes recommendations regarding
the salaries of officers of the Company's subsidiaries; (ii) administers and
makes awards under the Company's stock, incentive compensation and
supplemental compensation plans and programs, and (iii) monitors and makes
recommendations with respect to the Company's and its subsidiaries' various
employee benefit plans, such as retirement and pension plans, thrift plans,
health and medical plans, and life, accident and disability insurance plans.
DIRECTORS' ATTENDANCE AND COMPENSATION
Directors' Attendance and Fees; Insurance. During fiscal year 1998, there
were thirteen meetings of the Board of Directors of the Company. Each
incumbent Director attended 75% or more of the aggregate number of meetings of
the Board and of the committees on which he served, other than Mr. Johnstone,
who attended approximately 74% of all such meetings and attended all regularly
scheduled Board meetings. No Director who is also an employee of the Company
or any of its subsidiaries is paid by the Company for his services as a
Director or as a member of any committee of the Board. All other Directors
receive an annual stipend of $28,000 plus a fee of $2,500 for each Board
meeting attended and a fee of $1,000 for each telephonic Board meeting in
which such Director participates. Additionally, the Chairman of the Audit
Committee receives an annual fee of $3,000 and each other member of the Audit
Committee receives an annual fee of $2,000; and the Chairman of each of the
Compensation Committee, the Directors Nominating & Governance Committee and
other committees of the Board receives an annual fee of $2,500 and each other
member of such committees receives an annual fee of $1,750. Each committee
member also receives a fee of $1,650 for each committee meeting attended and a
fee of $1,000 for each telephonic committee meeting in which such Director
participates.
The Company also provides travel accident insurance and health care benefits
to non-employee Directors under the same terms and conditions applicable to
employees.
Director Stock Program. The Company has a 1997 Director Stock Program, which
is administered by a committee comprised of those members of the Board of
Directors that are employees of the Company (the "Committee"). Under the
program, the Committee may grant to Directors who are not employees of the
Company or any of its subsidiaries stock options and rights to purchase
restricted stock in an aggregate of up to 100,000 shares of Common Stock.
Pursuant to the program, each eligible Director is granted options to
purchase at fair market value 900, 300 and 300 shares of Common Stock on the
first day of the first, second and third years, respectively, of such
Director's term. The options are granted at no less than 100% of the fair
market value on the date of grant. Generally, options become exercisable in
full six months after the date of grant, and remain exercisable for not more
than ten years and one day after the date of grant. Pursuant to the program,
each eligible Director also is granted rights to purchase 450, 150 and 150
restricted shares of Common Stock on the first day of the first, second and
third years, respectively, of such Director's term at a purchase price per
share equal to the par value of the Common Stock ($1.00 per share). Shares of
restricted stock purchased under grants made during a Director's term are
subject to transfer restrictions and forfeiture provisions, which generally
lapse at the end of such term. In the event of a change in control of the
Company, all such restrictions and forfeiture provisions will lapse and the
exercisability of any outstanding options will be accelerated.
During fiscal year 1998, options to acquire 3,700 shares of Common Stock
were granted, and 1,850 shares of restricted stock were issued, under the 1997
Director Stock Program.
5
<PAGE>
EXECUTIVE OFFICERS
Set forth below is the age (as of August 11, 1998), positions held with the
Company and certain subsidiaries, and certain other business experience
information for each of the Company's executive officers who are not
Directors.
Daniel R. Gaubert, 49, Senior Vice President and Chief Financial Officer of
the Company and McDermott since February 1997. Prior thereto, he was Vice
President and Chief Financial Officer of the Company and McDermott from
September 1996; Vice President, Finance and Controller of the Company and
McDermott from February 1995; and Vice President and Controller of the Company
and McDermott from February 1992. Mr. Gaubert has also been Senior Vice
President and Chief Financial Officer of J. Ray McDermott since August 1997,
prior to which, he was Vice President, Finance, of J. Ray McDermott from
August 1995 and Acting Controller of J. Ray McDermott from February 1995.
S. Wayne Murphy, 63, Senior Vice President, General Counsel and Corporate
Secretary of the Company and McDermott since February 1997. Prior thereto, he
was Vice President, General Counsel and Corporate Secretary of the Company
from June 1996; Acting General Counsel and Acting Corporate Secretary of the
Company from February 1996; and Associate General Counsel of the Company from
August 1993. Mr. Murphy has also been Senior Vice President, General Counsel
and Corporate Secretary of J. Ray McDermott since August 1997, prior to which,
he was Acting General Counsel and Acting Corporate Secretary of J. Ray
McDermott from February 1996.
Robert H. Rawle, 50, President and Chief Operating Officer of J. Ray
McDermott since January 1997. Before assuming his present position, Mr. Rawle
was Vice President and Group Executive of J. Ray McDermott's North, Central
and South American Operations from January 1996, and Vice President, Domestic
Operations, of J. Ray McDermott from January 1995 to January 1996. Prior
thereto, he was Vice President of the Domestic Operations of the Company's
Marine Construction Services Division from March 1993 and Division Manager of
the Southeast Asia Operations of the Company's Marine Construction Services
Division from January 1992 to March 1993. Mr. Rawle is also a director of J.
Ray McDermott.
E. Allen Womack, Jr., 55, Executive Vice President of the Company and
President of BWX Technologies, Inc. since April 1998 and the Company's Chief
Technical Officer since February 1993. Prior thereto, he was Senior Vice
President and Group Executive, Industrial Group, from September 1996; Senior
Vice President and Group Executive, Shipbuilding and Industrial Group, from
August 1995; and Senior Vice President, Research and Development and Contract
Research Divisions, of the Company's Babcock & Wilcox unit from August 1991.
James F. Wood, 56, Executive Vice President of the Company and President of
the Company's Babcock & Wilcox Power Generation Group since October 1996,
prior to which, he was Vice President and General Manager, Global Ventures and
Power, of the Babcock & Wilcox Power Generation Group from June 1996. From
January 1989 until January 1996, he was an officer of Wheelabrator
Technologies, Inc. and certain of its subsidiaries.
6
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of June 5, 1998 (except as otherwise
noted), the number of shares of Common Stock beneficially owned by each
Director or nominee as a Director, each Named Executive Officer, as defined in
"COMPENSATION OF EXECUTIVE OFFICERS", and all Directors and executive officers
of the Company as a group, including shares which such persons have the right
to acquire within 60 days pursuant to the exercise of stock options.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME OWNED
- ---- ------------
<S> <C>
Theodore H. Black(1)............................................... 14,685
Philip J. Burguieres(2)............................................ 23,145
Bruce DeMars(3).................................................... 2,515
Robert L. Howard(4)................................................ 2,965
John W. Johnstone, Jr.(5).......................................... 5,540
William McCollam, Jr.(6)........................................... 15,755
Robert H. Rawle(7)................................................. 18,656
Joe J. Stewart(8).................................................. 211,775
Roger E. Tetrault(9)............................................... 124,431
John N. Turner(10)................................................. 9,235
E. Allen Womack, Jr.(11)........................................... 91,381
James F. Wood(12).................................................. 5,566
Richard E. Woolbert(13)............................................ 155,843
All Directors and executive officers as a group (15 persons)....... 754,846
</TABLE>
- --------
(1) Shares owned by Mr. Black include 2,750 shares of Common Stock that may
be acquired upon the exercise of stock options as described above, and
600 restricted shares of Common Stock as to which he has sole voting
power but no dispositive power.
(2) Shares owned by Mr. Burguieres include 3,150 shares of Common Stock that
may be acquired upon the exercise of stock options as described above,
and 750 restricted shares of Common Stock as to which he has sole voting
power but no dispositive power.
(3) Shares owned by Mr. DeMars include 650 shares of Common Stock that may
be acquired upon the exercise of stock options as described above, and
325 restricted shares of Common Stock as to which he has sole voting
power but no dispositive power.
(4) Shares owned by Mr. Howard include 950 shares of Common Stock that may
be acquired upon the exercise of stock options as described above, and
475 restricted shares of Common Stock as to which he has sole voting
power but no dispositive power.
(5) Shares owned by Mr. Johnstone include 1,500 shares of Common Stock that
may be acquired upon the exercise of stock options as described above,
and 750 restricted shares of Common Stock as to which he has sole voting
power but no dispositive power.
(6) Shares owned by Mr. McCollam include 3,450 shares of Common Stock that
may be acquired upon the exercise of stock options as described above,
and 600 restricted shares of Common Stock as to which he has sole voting
power but no dispositive power.
(7) Shares owned by Mr. Rawle include 12,820 shares of Common Stock that may
be acquired upon the exercise of stock options as described above, and
3,840 restricted shares of Common Stock as to which he has sole voting
power but no dispositive power. Also includes 571 shares of Common Stock
held in The Thrift Plan for Employees of McDermott Incorporated and
Participating Subsidiary and Affiliated Companies (the "McDermott Thrift
Plan") as of March 31, 1998.
(8) Shares owned by Mr. Stewart are provided as of April 1, 1998, the date
of his retirement from the Company, and include 149,760 shares of Common
Stock that may be acquired upon the exercise of stock options as
described above.
7
<PAGE>
(9) Shares owned by Mr. Tetrault include 104,747 shares of Common Stock that
may be acquired upon the exercise of stock options as described above,
and 18,900 restricted shares of Common Stock as to which he has sole
voting power but no dispositive power. Also includes 259 shares of
Common Stock held in the McDermott Thrift Plan as of March 31, 1998.
(10) Shares owned by Mr. Turner include 2,750 shares of Common Stock that may
be acquired upon the exercise of stock options as described above, and
450 restricted shares of Common Stock as to which he has sole voting
power but no dispositive power.
(11) Shares owned by Mr. Womack include 52,599 shares of Common Stock that
may be acquired upon the exercise of stock options as described above,
and 23,820 restricted shares of Common Stock as to which he has sole
voting power but no dispositive power. Also includes 1,945 shares of
Common Stock held in the McDermott Thrift Plan as of March 31, 1998.
(12) Shares owned by Mr. Wood include 5,147 shares of Common Stock that may
be acquired upon the exercise of stock options as described above. Also
includes 394 shares of Common Stock held in the McDermott Thrift Plan as
of March 31, 1998.
(13) Shares owned by Mr. Woolbert include 101,980 shares of Common Stock that
may be acquired upon the exercise of stock options as described above,
and 33,175 restricted shares of Common Stock as to which he has sole
voting power but no dispositive power. Also includes 1,593 shares of
Common Stock held in the McDermott Thrift Plan as of March 31, 1998.
As of June 5, 1998, (i) Mr. Womack beneficially owned 4 shares each of
McDermott's Series A $2.20 Cumulative Convertible Preferred Stock ("McDermott
Series A Preferred Stock") and Series B $2.60 Cumulative Preferred Stock
("McDermott Series B Preferred Stock"), and (ii) Mr. Woolbert beneficially
owned, through the McDermott Thrift Plan, the equivalent of 171 shares of
McDermott Series A Preferred Stock and 164.67 shares of McDermott Series B
Preferred Stock. As of such date, such shares constituted all shares of such
stock beneficially owned by all Directors and executive officers as a group.
As of June 5, 1998, Messrs. Howard, Rawle, Tetrault and Woolbert also
beneficially owned 2,000, 21,902, 36,534 and 14,066 shares, respectively, of
J. Ray McDermott's Common Stock, $.01 par value per share ("JRM Common
Stock"). With respect to the shares of JRM Common Stock beneficially owned by
Messrs. Howard, Rawle and Woolbert, 600, 14,234 and 9,616 shares,
respectively, may be acquired within 60 days after June 5, 1998 upon the
exercise of stock options, and with respect to Messrs. Howard, Rawle, Tetrault
and Woolbert, 300, 5,300, 8,100, and 4,450 shares, respectively, are
restricted stock as to which such individuals have sole voting power but no
dispositive power. As of such date, all Directors and executive officers as a
group beneficially owned 81,429 shares of JRM Common Stock.
Shares beneficially owned in all cases constituted less than one percent of
the outstanding shares of the applicable security, except that the 754,846
shares of Common Stock beneficially owned by all Directors and executive
officers as a group constituted approximately 1.2% of the outstanding Common
Stock on June 5, 1998, less shares held by McDermott, 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").
8
<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 the Common Stock, which is the
only class of voting stock of the Company:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS(1)
- -------------- ------------------------------------ ---------- -----------
<S> <C> <C> <C>
Common Stock..... The Prudential Insurance Company 7,203,438(2) 11.4%
of America
751 Broad Street
Newark, NJ 07102-3777
Common Stock..... Soros Fund Management LLC 6,362,200(3) 10.1%
George Soros
Stanley F. Druckenmiller
888 Seventh Avenue, 33rd Floor
New York, NY 10106
Duquesne Capital Management,
L.L.C. 2579 Washington Road,
Suite 322 Pittsburgh, PA 15241-
2591
Common Stock..... FMR Corp. 3,891,594(4) 6.2%
82 Devonshire Street
Boston, MA 02109-3614
Common Stock..... Chancellor LGT Asset Management, 3,626,281(5) 5.8%
Inc. 1166 Avenue of the Americas
New York, NY 10036
</TABLE>
- --------
(1) Percent of class based upon the outstanding shares of Common Stock on June
9, 1998, less shares held by McDermott, plus those shares deemed to be
outstanding pursuant to Rule 13d-3(d)(1) under the Exchange Act.
(2) As reported on a Schedule 13G (Amendment No. 3) dated February 10, 1998.
Such filing indicates that (a) 33,500 shares of Common Stock are held by
Prudential Insurance Company of America for its own general account and
(b) 7,169,938 shares are held for the benefit of its clients through
various accounts, registered investment companies, subsidiaries and
affiliates.
(3) As reported on a Schedule 13G dated March 6, 1998 jointly filed by Soros
Fund Management LLC ("SFM"), George Soros, Stanley Druckenmiller and
Duquesne Capital Management, L.L.C. ("DCM"). According to such filing, (a)
SFM is managed by a management committee comprised of, among others,
Messrs. Soros and Druckenmiller, and Mr. Soros is the Chairman and Mr.
Druckenmiller is the Lead Portfolio Manager of SFM; (b) SFM has sole
voting and dispositive power, and Mr. Soros has shared voting and
dispositive power by virtue of his positions with SFM, over 5,488,000
shares of Common Stock held for the account of Quantam Partners LDC
("Quantam"); (c) each of SFM and Mr. Soros may be deemed to be the
beneficial owner of the 5,488,000 shares of Common Stock held for the
account of Quantam; (d) DCM has sole voting and dispositive power over
874,200 shares of Common Stock held for the account of DCM's clients; (e)
Mr. Druckenmiller owns a 75% interest in, and is the sole managing member
of, DCM; (f) Mr. Drunkenmiller may be deemed to be the beneficial owner of
6,362,200 shares of Common Stock (5,488,000 shares held by SFM as to which
he has shared voting and dispositive power by virtue of his position with
SFM, and 874,200 shares held by DCM as to which he has sole voting and
dispositive power by virtue of his relationship with DCM); and (g) each of
SFM and Mr. Soros disclaims beneficial ownership of the 874,200 shares
held by DCM and DCM disclaims beneficial ownership of the 5,488,000 shares
held by SFM.
9
<PAGE>
(4) As reported on a Schedule 13G (Amendment No. 8) dated June 9, 1998. Such
filing indicates that 3,891,594 shares are beneficially owned through two
wholly-owned subsidiaries of FMR Corp. While FMR Corp. has sole
dispositive power over all 3,891,594 shares, it has sole voting power over
49,994 shares and no voting power over 3,841,600 shares. Such filing also
indicates that Edward C. Johnson 3d, Chairman of FMR Corp., and Abigail P.
Johnson, a director of FMR Corp., together with other family members and
trusts, may be deemed to beneficially own the same shares.
(5) As reported on a Schedule 13G dated January February 6, 1998. Such filing
indicates that Chancellor LGT Asset Management, Inc. and two related
entities have sole voting and dispositive power over these shares.
10
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
TO OUR STOCKHOLDERS
The Compensation Committee is comprised of four independent, nonemployee
directors who have no "interlocking" relationships with the Company. The
Compensation Committee exists to develop executive compensation policies that
support the Company's strategic business objectives and values. The duties of
this committee include:
. Review and approval of the design of executive compensation programs and
all salary arrangements that Company executives receive;
. Assessment of the effectiveness of the programs in light of compensation
policies; and
. Evaluation of executive performance.
COMPENSATION PHILOSOPHY
The Compensation Committee adheres to an executive compensation philosophy
that supports the Company's business strategies. These strategies are to:
. Maximize profits;
. Increase stockholder value;
. Strengthen cash flow; and
. Be the high tech, low cost provider of products and services within our
markets.
The Compensation Committee's philosophy for executive compensation is to:
. Emphasize at-risk compensation, while balancing short-term and long-term
compensation to support the Company's business and financial strategic
goals;
. Reflect positive, as well as negative, Company and individual
performance in pay;
. Encourage equity-based compensation to reinforce management's focus on
stockholder value; and
. Provide competitive pay opportunities that will attract, retain, and
develop executive talent.
Company executives participate in a comprehensive compensation program that
is built around this four-pronged philosophy. The key components of this
program include base salary, annual bonus opportunities, long-term incentives
(stock options and performance stock awards of restricted shares) and
benefits.
Each of these components is reviewed by the Compensation Committee as
previously described. To ensure the Company's pay is comparable to median
market practices, competitive market data is collected from multiple external
sources. The data is collected both on an industry-specific basis and an
overall industrial basis. The industry-specific comparison is collected using
a group of companies that have national and international business operations
and similar sales volumes, market capitalizations, employment levels and lines
of business. The Compensation Committee reviews and approves the selection of
companies used for this purpose and attempts to mirror the peer group
reflected in the performance graph. These comparator groups, however, are not
identical because the market data used by the Company is much more broad-based
than the companies included in the performance graph peer group. This market
information, which is reviewed annually by the Compensation Committee, is used
for assessing all components of Company executives' pay.
When setting compensation levels, the Compensation Committee considers each
component of an executive's pay. Certain quantitative formulas have been
adopted for the individual compensation plans themselves (e.g., incentive
plans). The Compensation Committee uses a combination of the results of the
performance-based compensation determiners (mathematical formulas) and
discretion, depending on the particular component involved. Each component of
pay is discussed in greater detail below.
11
<PAGE>
BASE SALARY
Generally, salaries reflect an individual's level of responsibility, prior
experience, breadth of knowledge, personal contributions, position within the
Company's executive structure, and market pay practices. Overall, salaries are
targeted at the median of the market practice, with annual adjustments based
upon performance. When making annual adjustments, a qualitative assessment of
performance is conducted, which considers many factors including individual
performance, both past and present. The factors used in making this evaluation
may vary by position.
Mr. Tetrault's base salary was established at $540,000 annually when he
joined the Company in March 1997. The Compensation Committee purposely set his
base salary substantially lower than the median base salary for comparable
chief executive officer positions. The balance of Mr. Tetrault's total
compensation was placed "at risk" through equity based compensation. See
"Tetrault Employment Agreement".
Effective March 1998, Mr. Tetrault received a 22.2% increase in base salary
($120,000). This increase reflects the Compensation Committee's evaluation of
Mr. Tetrault's individual contribution to the Company's financial performance
since he joined the Company as well as competitive data for chief executive
officers of comparable companies as previously described. Mr. Tetrault's base
salary, however, remains below the median base salary for comparable chief
executive officer positions and his total compensation package remains heavily
weighted toward "at risk" equity based incentives. No other executives' base
pay was increased in fiscal year 1998, except in the event of a promotion.
ANNUAL BONUS
To support its short-term financial focus, the Company provides annual bonus
opportunities under a Variable Supplemental Compensation Plan. The current
plan, which was adopted in 1994, was approved by the Company's stockholders.
Payments under the plan are intended to comply with the deductibility
requirements set forth under Section 162(m) of the Internal Revenue Code of
1986, as amended.
For fiscal year 1998, as in the prior year, the plan was tied to net income
return on capital. The plan is formula driven and self-funded, based on a
minimum level of financial performance to be achieved each year (8.5% adjusted
net income return on capital for the Company's corporate staff, including the
Chief Executive Officer, for fiscal year 1998). Executives' opportunities
under the plan are expressed as a targeted percent of base salary. These
targets, like base salary, are set at approximately the median market levels,
as indicated by a group of similar companies. The Chief Executive Officer has
a bonus target of 70% of base salary. The Compensation Committee believes the
goals associated with target bonus payments are achievable yet require
considerable effort and innovation on the part of each executive. Executives
only receive payments under the plan if the minimum level of financial
performance is reached. Financial performance at the minimum level results in
bonuses of one-half the targeted amounts. If the minimum level of financial
performance is exceeded, bonus payments are increased. Bonus awards are
considered when the Compensation Committee reviews the Company's financial
performance after the close of the fiscal year.
Mr. Tetrault's fiscal year 1998 bonus payment was $756,000, which represents
140% of his base salary in effect at the beginning of fiscal year 1998 (versus
a 70% target). Mr. Tetrault's bonus reflects the Company's superior adjusted
net income return on capital for fiscal year 1998 (16.7%), which exceeded the
minimum level of financial performance for the year. Other executive's bonuses
were determined based upon the same factors.
LONG-TERM INCENTIVES
The Company's 1996 Officer Long-Term Incentive Plan provides executives with
equity-based opportunities to earn additional compensation based upon Company
and stock performance over the mid- to long-term. Use of such incentives
focuses management on the long-term interests of stockholders.
12
<PAGE>
The Compensation Committee considers the following multiple factors when
determining award sizes. Weighting between the factors listed below is
informal, not quantitative.
. Various financial performance criteria (which may include return on
capital or assets, profitability, and stockholder return);
. Level of responsibility;
. Prior experience;
. Historical award data; and
. Market practices among similar companies.
Stock Options. Stock options are granted to Company executives to provide an
equity based incentive component to their compensation. Under the Company's
1996 Officer Long-Term Incentive Plan, stock options are granted at exercise
prices equal to fair market value of the underlying Common Stock on the date
of grant. Executives do not realize value unless the stock price rises above
the price on the date of grant. This reflects the Company's focus on
increasing stockholder value.
To reinforce the focus on creating stockholder value in the mid-term as well
as the long-term, fiscal year 1998 options were granted with a five-year term
as opposed to a ten-year term for option grants in previous years. Moreover,
fiscal 1998 option grants vest in 50% increments on the first and second
anniversaries of the date of grant. Previous grants vested in one-third
increments on the first, second and third anniversaries of the date of the
grant.
During fiscal year 1998, Mr. Tetrault received a grant of options to acquire
40,000 shares of Common Stock at an exercise price of $34.00 per share. He
also received a grant of options to acquire 9,500 shares of JRM Common Stock
at an exercise price of $37.5313 per share in recognition of the services that
he provides as Chairman and Chief Executive Officer of J. Ray McDermott. These
option grants were priced at the fair market value of the underlying common
stock on the date of grant, and reflect the Compensation Committee's continued
focus on the "at risk" component of Mr. Tetrault's total compensation.
Performance Stock Awards. Beginning in 1998, the Company modified its method
of awarding restricted stock to its officers. Previously, restricted stock
awards were granted annually to Company executives based upon the attainment
of pre-established financial goals, such as net income return on capital, for
a given year. Thereafter, 50% of the restricted stock would vest at the end of
five years, with the other 50% vesting between the third and tenth anniversary
of the date of grant based upon the Company's financial performance. Until
such restricted stock vested, it was nontransferable and subject to forfeiture
under certain circumstances. Holders of restricted stock receive dividends
paid on, and are entitled to vote, such shares prior to vesting.
For 1998, the Compensation Committee increased the "at risk" component of
the Company's restricted stock program by tying the number of restricted
shares awarded for such year, if any, to future stock performance. Under the
new program, Company executives receive performance stock awards of restricted
stock based upon salary multiples corresponding to their title and position
within the Company. Performance stock awards are made as notional grants of
restricted stock. No shares are issued by the Company at the time of the
grant. The number of restricted shares actually received by a participant, if
any, is determined on the second anniversary of the grant date by calculating
the difference between the fair market value of a share of the Company's
Common Stock (based upon the preceding 30 trading day average) and the fair
market value of the Common Stock on the grant date. The difference is
multiplied by that number of shares in an executive's notional grant and the
resulting product is divided by the fair market value of the Common Stock as
of the second anniversary of the grant date, calculated as described above.
The resulting number is added to (in the case of an increase in share price)
or subtracted from (in the case of a decrease in share price) the number of
shares in an executive's notional grant. The notional grant, as adjusted (to
the extent not reduced to zero), is then issued to the executive as restricted
stock on the second anniversary of the grant date, for which the executive is
required
13
<PAGE>
to pay $1.00 per share. The restricted stock vests two years thereafter. As
with previous restricted stock awards, restricted shares are nontransferable
and are subject to forfeiture under certain circumstances prior to vesting.
The Compensation Committee believes that the above described modification to
restricted stock awards reinforces the importance of creating stockholder
value because the ultimate size of each annual restricted stock award, if any,
is based upon the future performance of the Company's Common Stock.
During fiscal year 1998, Mr. Tetrault received a performance stock award of
15,000 restricted shares of Common Stock. Additionally, Mr. Tetrault received
a performance stock award of 3,450 restricted shares of JRM Common Stock in
his capacity as J. Ray McDermott's Chairman and Chief Executive Officer. Other
officers received performance stock awards in accordance with the method
described above.
BENEFITS
Benefits offered to key executives serve a different purpose than the other
elements of compensation. In general, they provide a safety net of protection
against financial catastrophes that can result from illness, disability, or
death. Benefits offered to key executives are generally those offered to the
general employee population with some variation to promote tax efficiency and
replacement of benefit opportunities lost to regulatory limits.
POLICY WITH RESPECT TO SECTION 162(M)
Section 162(m) of the Internal Revenue Code limits the tax deduction the
Company can take with respect to the compensation of certain executive
officers unless the compensation is performance-based, and the material terms
of performance goals are disclosed to and approved by the Company's
stockholders. The Company's executive compensation plans have received
stockholder approval and were drafted with the intention that such incentive
compensation qualify as performance-based compensation under Section 162(m).
While the Compensation Committee intends to continue to rely on performance-
based compensation programs, it is cognizant of the need for flexibility in
making executive compensation decisions, based upon the relevant facts and
circumstances, so that the best interests of the Company are achieved. To the
extent consistent with this goal, the committee anticipates that such programs
will continue to satisfy the requirements of Section 162(m) with respect to
the deductibility of executive compensation paid.
CONCLUSION
The Compensation Committee believes these executive compensation policies
and programs serve the interests of stockholders and the Company effectively.
The various pay vehicles offered are appropriately balanced to provide
increased motivation for executives to contribute to the Company's overall
future success, thereby enhancing the value of the Company for the
stockholders' benefit.
We will continue to monitor the effectiveness of the Company's total
compensation programs to meet the current needs of the Company.
COMPENSATION COMMITTEE
T. H. Black, Chairman
B. DeMars
R. L. Howard
J. W. Johnstone, Jr.
14
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total stockholder return
on the Common Stock for the last five fiscal years with the cumulative total
return of the S&P 500 Index and a Peer Group Index, which reflects the
Company's primary business segments, composed of Chicago Bridge & Iron Company
N.V., Dresser Industries, Inc., Fluor Corporation, Foster Wheeler Corporation,
Halliburton Company, Ingersoll-Rand Company, Jacobs Engineering Group, Inc.,
Schlumberger Limited, Stone & Webster Inc., and Weatherford Enterra, Inc.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
MCDERMOTT INTERNATIONAL, INC; S&P 500; AND PEER GROUP
[PERFORMANCE GRAPH APPEARS HERE]
* Assumes $100 invested on March 31, 1993 in McDermott International, Inc.
common stock; S&P 500; and the Peer Group and the reinvestment of dividends
as they are paid.
<TABLE>
<CAPTION>
3/31/93 3/31/94 3/31/95 3/31/96 3/31/97 3/31/98
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
McDermott International, Inc.... $100.00 $ 75.64 $107.62 $ 79.33 $ 90.65 $176.19
S&P 500......................... $100.00 $101.48 $117.26 $154.78 $185.42 $274.20
Peer Group...................... $100.00 $ 98.68 $107.33 $148.20 $171.59 $245.79
</TABLE>
15
<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"), the four highest paid executive
officers other than the CEO and a former executive officer (collectively, the
"Named Executive Officers") for fiscal years 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
----------------------------- -----------------------------
AWARDS PAYOUTS
--------------------- -------
SECURITIES
OTHER UNDERLYING ALL
FISCAL ANNUAL RESTRICTED STOCK LTIP OTHER
NAME PRINCIPAL POSITION YEAR SALARY BONUS COMP.(2) STOCK(3) OPTIONS(4) PAYOUT COMP.(5)
- ---- ------------------ ------ -------- -------- -------- ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
R.E. Tetrault(6) Chairman & Chief 1998 $550,000 $756,000 $122,031 $ 0 49,500 $ 0 $5,550
Executive Officer 1997 $ 45,000 $336,000(7) $ -- $582,863 422,340 $ 0 $1,413
R.H. Rawle President & Chief 1998 $275,040 $302,544 $ -- $ 0 12,460 $ 0 $5,228
Operating Officer, 1997 $192,540 $ 0 $ -- $ 0 10,090 $ 0 $4,614
J. Ray McDermott 1996 $157,540 $ 27,412 $ -- $ 73,200 9,660 $ 0 $4,850
J.J. Stewart(8) Former 1998 $408,360 $408,360 $ -- $ 0 0 $ 0 $7,923
Executive VP 1997 $408,360 $285,852 $ -- $ 0 34,390 $ 0 $6,930
1996 $383,885 $ 77,663 $ -- $218,705 23,710 $ 0 $9,162
E.A. Womack, Jr Executive VP 1998 $332,140 $329,640 $ -- $ 0 14,540 $ 0 $7,230
1997 $300,315 $ 0 $ 32,530 $ 0 17,290 $ 0 $5,594
1996 $265,820 $ 47,096 $ -- $126,203 16,410 $ 0 $4,619
J.F. Wood(9) Executive VP 1998 $275,040 $275,040 $ -- $ 0 12,130 $ 0 $5,550
1997 $186,472 $ 0 $ 29,192 $ 0 15,440 $ 0 $4,890
R.E. Woolbert Executive VP & 1998 $410,040 $410,040 $ -- $ 0 23,010 $ 0 $9,372
Chief Adminis- 1997 $373,410 $ 0 $ -- $ 0 26,120 $ 0 $7,956
trative Officer 1996 $344,945 $ 59,559 $ 44,724 $224,910 32,615 $ 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 1998, includes relocation expenses of $111,754 for Mr.
Tetrault. For fiscal year 1997, includes $20,439 for cost of personal use
of Company aircraft for Mr. Womack and $29,192 for relocation expenses for
Mr. Wood. For fiscal year 1996, includes $43,584 for cost of personal use
of Company aircraft for Mr. Woolbert.
(3) Restricted stock awards were not granted to officers of the Company for
fiscal years 1998 and 1997, except for Mr. Tetrault, who received a grant
of 18,900 restricted shares of Common Stock and 8,100 restricted shares of
JRM Common Stock in fiscal year 1997 in connection with his joining the
Company and J. Ray McDermott. Restricted stock awards are valued at the
closing market price of Common Stock or JRM Common Stock, as applicable,
on the date of grant less any amounts paid by the executive officers for
such awards ($1.00 per share). As of March 31, 1998, the total number of
restricted shares of Common Stock and JRM Common Stock held by the Named
Executive Officers and their market values (based upon closing market
prices on March 31, 1998 of $41.3125 and $42.125, respectively) are as
follows: Mr. Tetrault held 18,900 shares of Common Stock valued at
$761,906 and 8,100 shares of JRM Common Stock valued at $333,113; Mr.
Rawle held 3,840 shares of Common Stock valued at $154,800 and 2,040
shares of JRM Common Stock valued at $83,895; Mr. Stewart held 35,100
shares of Common Stock valued at $1,414,969; Mr. Womack held 23,820 shares
of Common Stock valued at $960,244; Mr. Wood held 0 shares of Common
Stock; Mr. Woolbert held 33,175 shares of Common Stock valued at
$1,337,367 and 4,450 shares of JRM Common Stock valued at $183,006.
Dividends are paid on restricted shares at the same time and at
16
<PAGE>
the same rate as dividends paid to all stockholders. Grants of restricted
stock generally vest 50% in five years with the remaining 50% vesting in
three to ten years based on performance. In the event of a change of control
of the Company, the Compensation Committee may cause all restrictions to
lapse. Upon Mr. Stewart's retirement on April 1, 1998, all of his restricted
shares of Common Stock vested. In fiscal year 1998, instead of granting
restricted stock awards, the Company granted performance stock awards, which
are more fully described in the table entitled "Long-Term Incentive Plans--
Performance Stock Awards in Fiscal Year 1998".
(4) Includes for services rendered in their capacity as officers of J. Ray
McDermott (a) 9,500, 12,460 and 4,920 options to purchase JRM Common Stock
granted to Messrs. Tetrault, Rawle and Woolbert, respectively, during fiscal
year 1998, (b) 108,100, 10,090 and 5,340 options to purchase JRM Common
Stock granted to Messrs. Tetrault, Rawle and Woolbert, respectively, during
fiscal year 1997, and (c) 9,660 and 8,110 options to purchase JRM Common
Stock granted to Messrs. Rawle and Woolbert, respectively, during fiscal
year 1996.
(5) Amounts shown for fiscal year 1998 include (a) company matching
contributions to the McDermott Thrift Plan in the amount of $4,800 for
each Named Executive Officer and (b) the value of insurance premiums paid
by the Company for Messrs. Tetrault, Rawle, Stewart, Womack, Wood and
Woolbert in the amounts of $750, $428, $3,123, $2,430, $750 and $4,572,
respectively.
(6) Compensation information for fiscal year 1997 only reflects the amounts
received by Mr. Tetrault from the time he joined the Company on March 1,
1997 to March 31, 1997.
(7) Bonus paid in June 1997 to Mr. Tetrault in connection with his election as
the Company's Vice Chairman of the Board and CEO on March 1, 1997. See
"Tetrault Employment Agreement".
(8) Mr. Stewart retired from the Company effective April 1, 1998.
(9) Compensation information for fiscal year 1997 only reflects the amounts
received by Mr. Wood from the time he joined the Company on June 3, 1996
to March 31, 1997.
17
<PAGE>
OPTION GRANT TABLE
Options granted in fiscal year 1998 vest in equal installments of one-half
on the first and second anniversaries of the date of grant and expire five
years from the date of grant. In general, vesting is contingent on continuing
employment with the Company. In the event of a change in control of the
Company, the Compensation Committee may accelerate the exercisability of any
outstanding options. The following table provides information about option
grants to the Named Executive Officers during fiscal year 1998. The Company
did not grant any stock appreciation rights to its executive officers during
fiscal year 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS 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>
R.E. Tetrault
Common Stock.......... 40,000 8.87 $ 34.00 02/06/03 $ 375,743 $ 830,294
JRM Stock............. 9,500 5.43 $37.5313 02/03/03 $ 98,507 $ 217,676
R.H. Rawle
JRM Common Stock...... 12,460 7.13 $37.5313 02/03/03 $ 129,200 $ 285,499
J.J. Stewart
Common Stock.......... 0 -- -- -- -- --
E.A. Womack, Jr.
Common Stock.......... 14,540 3.22 $ 34.00 02/06/03 $ 136,583 $ 301,812
J.F. Wood
Common Stock.......... 12,130 2.69 $ 34.00 02/06/03 $ 113,944 $ 251,787
R.E. Woolbert
Common Stock.......... 18,090 4.01 $ 34.00 02/06/03 $ 169,930 $ 375,500
JRM Common Stock...... 4,920 2.81 $37.5313 02/03/03 $ 51,016 $ 112,733
All Stockholders (4)
Common Stock.......... 56,607,247 -- $ 34.00 -- $531,744,314 $1,175,015,872
JRM Common Stock...... 40,767,828 -- $37.5313 -- $422,730,015 $ 934,122,781
</TABLE>
- --------
(1) Potential Realizable Value is based on the assumed annual growth rates for
each of the grants shown over their five-year option term. For example, if
the exercise price is $34.00, a 5% annual growth rate over five years
results in a stock price of $43.39 per share and a 10% rate results in a
price of $54.76 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 450,970 and 174,800 shares of Common Stock and
JRM Common Stock granted to all employees of the Company and JRM,
respectively, during fiscal year 1998.
(3) Fair market value on date of grant.
(4) Total dollar gains based on the assumed annual rates of appreciation shown
here and calculated on 56,607,247 outstanding shares of Common Stock and
40,767,828 outstanding shares of JRM Common Stock on March 31, 1998. The
Named Executive Officers' gains as a percentage of the total dollar gains
shown for all stockholders are .15% for Common Stock and .07% for JRM
Common Stock.
18
<PAGE>
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table provides information concerning the exercise of stock
options during fiscal year 1998 by each of the Named Executive Officers and
the value at March 31, 1998 of unexercised options held by such individuals.
The value of unexercised options reflects the increase in market value of
Common Stock and JRM Common Stock from the date of grant through March 31,
1998 (when the fair market value of Common Stock and JRM Common Stock was
$41.3125 and $42.125, respectively, per share). The actual value realized upon
option exercise will depend on the value of the Common Stock or JRM Common
Stock at the time of exercise.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
TOTAL VALUE OF
NUMBER OF TOTAL NUMBER OF UNEXERCISED, IN-THE-MONEY
SHARES UNEXERCISED OPTIONS HELD OPTIONS HELD AT FISCAL
ACQUIRED AT FISCAL YEAR-END YEAR-END
ON VALUE -------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R.E. Tetrault
Common Stock.......... 0 $ -- 104,747 249,493 $2,009,833 $4,312,147
JRM Common Stock...... 0 $ -- 36,034(1) 81,566 $ 675,638 $1,394,878
R.H. Rawle
Common Stock.......... 1,400 $ 16,450 12,820 0 $ 228,059 $ --
JRM Common Stock...... 0 $ -- 12,624 25,626 $ 257,508 $ 336,658
J.J. Stewart
Common Stock.......... 19,590 $246,321 111,028 38,732(2) $2,051,002 $ 804,819
E.A. Womack, Jr.
Common Stock.......... 15,272 $228,686 49,864 37,006 $ 903,056 $ 576,803
J.F. Wood
Common Stock.......... 0 $ -- 5,147 22,423 $ 102,618 $ 293,917
R.E. Woolbert
Common Stock.......... 9,830 $180,724 97,896 48,279 $1,855,398 $ 767,869
JRM Common Stock...... 0 $ -- 8,264 13,886 $ 173,087 $ 221,304
</TABLE>
- --------
(1) Mr. Tetrault exercised options to acquire 36,034 shares of JRM Common
Stock after March 31, 1998 and prior to the date of this Proxy Statement.
(2) Upon his retirement on April 1, 1998, all options held by Mr. Stewart
vested and became exercisable.
19
<PAGE>
PERFORMANCE STOCK AWARDS IN FISCAL YEAR 1998
The following table provides information concerning performance stock awards
of restricted shares made to each of the Named Executive Officers during
fiscal year 1998.
LONG-TERM INCENTIVE PLANS--PERFORMANCE STOCK AWARDS
IN FISCAL YEAR 1998*
<TABLE>
<CAPTION>
NUMBER OF
PERFORMANCE PERFORMANCE
NAME SHARES PERIOD
- ---- ----------- -----------
<S> <C> <C>
R.E. Tetrault
Common Stock.......................................... 15,000 2 years
JRM Common Stock...................................... 3,450 2 years
R.H. Rawle
JRM Common Stock...................................... 4,760 2 years
J.J. Stewart
Common Stock.......................................... 0 --
E.A. Womack, Jr.
Common Stock.......................................... 5,820 2 years
J.F. Wood
Common Stock.......................................... 4,850 2 years
R.E. Woolbert
Common Stock.......................................... 7,240 2 years
JRM Common Stock...................................... 1,970 2 years
</TABLE>
- --------
* No shares are issued at the time of the performance stock award (2/6/98 for
the Common Stock and 2/3/98 for JRM Common Stock). Actual number of shares
issued to an executive will be based on the change in the market price of
the Common Stock or JRM Common Stock, as applicable, two years after the
date of the award. The number of shares to be received by an executive, if
any, is determined on the second anniversary of the award date by
calculating the difference between the fair market value of the stock
(based upon the preceding 30 trading day average) and the fair market value
of the stock on the award date. The difference is multiplied by that number
of shares in an executive's award, and the resulting product is divided by
the fair market value of the stock as of the second anniversary of the
award date, calculated as described above. The resulting number is added to
(in the case of an increase in share price) or subtracted from (in the case
of a decrease in share price) the number of shares in an executive's
applicable award. The award, as adjusted (to the extent not reduced to
zero), is then issued to the executive as restricted stock as of the second
anniversary of the award date, for which the executive is required to pay
$1.00 per share. The restricted stock vests two years thereafter. Prior to
vesting, such restricted stock is nontransferable and subject to forfeiture
under certain circumstances.
TETRAULT EMPLOYMENT AGREEMENT
The Company entered into an employment agreement with Mr. Tetrault effective
as of March 1, 1997, whereby he agreed to serve as the Company's Vice Chairman
of the Board and CEO through February 28, 2000, subject to earlier termination
as described below. On June 1, 1997, he also became the Company's Chairman of
the Board. The employment agreement provides Mr. Tetrault with an annual base
salary of $540,000 subject to increase by the Compensation Committee in
accordance with Company practices based upon Mr. Tetrault's performance. Under
the employment agreement, Mr. Tetrault was also granted options to purchase
314,240 shares of Common Stock and 108,100 shares of JRM Common Stock, which
options will vest in equal installments of one-third on the first, second and
third anniversaries of the date of grant. In addition, Mr. Tetrault was
granted 18,900 restricted shares of Common Stock and 8,100 restricted shares
of JRM Common Stock for which he paid $1.00 per share. He also received a cash
bonus of $336,000 in June 1997 in accordance with the terms of the agreement,
and is entitled to annual cash bonuses (if any, as determined by the
Compensation
20
<PAGE>
Committee based upon the Company's achievement of certain pre-established
performance goals) and to participate in all retirement or other benefit
plans, policies and programs maintained or provided by the Company for its
officers. Under the agreement, the Company also purchased Mr. Tetrault's home
and agreed to pay his reasonable relocation expenses according to the
Company's relocation policy.
The employment agreement may be terminated prior to February 28, 2000 under
certain circumstances, including death, disability and voluntary retirement.
However, in the event of termination by the Board without cause, Mr. Tetrault
will continue to receive his annual base salary (which was increased to
$660,000 in March 1998) and other benefits and rights under the agreement
during the remaining term thereof and all stock options and restricted stock
will vest 100% on February 28, 2000. During the term of the agreement and for
the greater of 24 months following the expiration of the agreement or any
other period during which amounts are paid to him under the agreement, Mr.
Tetrault may not engage, directly or indirectly, in any business or enterprise
which is in competition with the Company or induce any employee of the Company
to accept employment with any competitor of the Company.
RETIREMENT PLANS
Pension Plans. The Company 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 or certain of its subsidiaries,
including McDermott, 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"). Officers who are
employed by J. Ray McDermott or certain of its subsidiaries or affiliates are
covered under The Retirement Plan of Employees of J. Ray McDermott Holdings,
Inc. (the "J. Ray McDermott Plan"). Employees do not contribute to any of
these plans and company contributions are determined on an actuarial basis. An
employee must be employed by the applicable company or a subsidiary 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 J. Ray
McDermott Retirement Plan at age 65 (the normal retirement age) to employees
retiring prior to April 1, 1998 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, plus a fixed pension supplement. As
of March 31, 1998, Mr. Rawle had Final Average Earnings of $176,101 and 19.6
years of credited service under the J. Ray 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.
J. RAY 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 $14,106 $21,097 $28,088 $35,080 $42,071 $49,062 $56,054
125,000 18,272 27,347 36,422 45,496 54,571 63,646 72,720
150,000 22,439 33,597 44,755 55,913 67,071 78,229 89,387
175,000 30,772 46,097 61,422 76,746 92,071 107,396 122,720
200,000 30,772 46,097 61,422 76,746 92,071 107,396 122,720
</TABLE>
21
<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
prior to April 1, 1998 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, 1998 for Messrs.
Stewart, Tetrault, Womack, Wood and Woolbert were $631,959 and 25.11 years,
$224,748 and 22.7 years, $319,017 and 22.6 years, and $138,153 and 25.7, and
$421,677 and 42.9 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.
B&W 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>
125,000 $16,321 $23,744 $31,166 $38,589 $46,011 $53,434 $60,856
150,000 19,446 28,431 37,416 46,401 55,386 64,371 73,356
200,000 25,696 37,806 49,916 62,026 74,136 86,246 98,356
250,000 31,946 47,181 62,416 77,651 92,886 108,121 123,356
300,000 38,196 56,556 74,916 93,276 111,636 129,996 148,356
400,000 50,696 75,306 99,916 124,526 149,136 173,746 198,356
500,000 63,196 94,056 124,916 155,776 186,636 217,496 248,356
600,000 75,696 112,806 149,916 187,026 224,136 261,246 298,356
650,000 81,946 122,181 162,416 202,651 242,886 283,121 323,356
</TABLE>
Supplemental Executive Retirement Plan. The Company maintains an unfunded
Supplemental Executive Retirement Plan (the "SERP"). The SERP covers certain
officers of the Company and other designated companies, including McDermott,
J. Ray McDermott 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 the SERP scheduled
retirement date, whichever is greater. The maximum benefit may not exceed 60-
65% (dependent upon date of initial participation in the SERP) of such 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 the Company, 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. Rawle, Stewart, Tetrault, Wood 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 average cash compensation.
A trust (the assets of which 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
the Company. Although the Company 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 the Company, including but not limited to
failure by the Company 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 that
would provide such participant with the same net after-tax stream of
22
<PAGE>
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.
INDEPENDENT AUDITORS
Ernst & Young LLP ("Ernst & Young") served as the Company's independent
auditors during fiscal year 1998. Representatives of Ernst & Young are
expected to be present at the Annual Meeting and will have an opportunity to
make a statement if they desire to do so and to respond to appropriate
questions.
No decision has been made as to the selection of the Company's independent
auditors for the fiscal year ended March 31, 1999. The Audit Committee of the
Board has considered the possibility of making a change in the Company's
independent auditors but has not submitted a formal recommendation to the
Board of Directors for approval. A decision as to the selection of the
Company's independent auditors for fiscal year 1999 is expected to be made
prior to the Annual Meeting.
During the Company's two most recently completed fiscal years and the
current interim period, there have been no disagreements with Ernst & Young on
any matters of accounting principles or practice, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to the
satisfaction of Ernst & Young, would have caused it to make a reference to the
subject matter of the disagreement in connection with its report. Ernst &
Young's reports on the Company's financial statements for the past two years
did not contain an adverse opinion or a disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.
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 SEC and the New York Stock Exchange. Directors,
executive officers and 10% or more holders 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 beneficial owners complied
with all Section 16(a) filing requirements during fiscal year 1998.
STOCKHOLDERS' PROPOSALS
Proposals by stockholders intended to be presented at the 1999 Annual
Meeting must be received by the Corporate Secretary of the Company no later
than March 8, 1999 in order to qualify for inclusion in the Company's Proxy
Statement and form of proxy for such meeting. Concurrently therewith,
proponents shall provide the Company in writing with his or her name, address,
the number of shares of Common Stock held of record or beneficially, the date
or dates upon which such Common Stock was acquired and documentary support for
a claim of beneficial ownership.
By Order of the Board of Directors,
/s/ Wayne Murphy
--------------------------------
S. WAYNE MURPHY
Secretary
Dated: July 6, 1998
23
<PAGE>
McDERMOTT INTERNATIONAL, INC.
SOLICITED BY THE BOARD OF DIRECTORS
P The undersigned hereby appoints S. Wayne Murphy and Daniel R. Gaubert,
or either of them, as attorneys, agents and proxies of the undersigned,
R with full power of substitution, to vote all the shares of common stock
of McDermott International, Inc. which the undersigned may be entitled
O to vote at the Annual Meeting of Stockholders to be held on August 11,
1998 and at any adjournment(s) of such meeting, with all powers which
X the undersigned would possess if personally present.
Y PLEASE MARK, SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD AND
PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE.
The undersigned acknowledges receipt of McDermott International, Inc.'s
Annual Report for the fiscal year ended March 31, 1998 and its Notice of
Annual Meeting of Stockholders and related Proxy Statement.
SEE REVERSE
SIDE
PLEASE FOLD AND DETACH HERE IF YOU ARE NOT VOTING BY INTERNET OR TELEPHONE
McDERMOTT INTERNATIONAL, INC.
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, AUGUST 11, 1998
9:30 A.M.
HYATT REGENCY NEW ORLEANS
CABILDO A AND B
POYDRAS STREET AT LOYOLA AVENUE
NEW ORLEANS, LOUISIANA
<PAGE>
Please mark your
X votes as in this
example.
IMPORTANT - PLEASE MARK APPROPRIATE BOXES ONLY IN BLUE OR BLACK INK AS SHOWN:
1. Nominees as Class I Directors: 1. Philip J. Burguieres 2. Bruce DeMars and
3. John W. Johnstone, Jr.
WITHHOLD AUTHORITY Annual Report
FOR for all nominees ------------------------
INSTRUCTION: To withhold authority for any Mark here to discontinue
individual nominee, write that nominee's annual report mailing for
name in the space provided below. the account (for multiple-
account holders only).
_______________________________ -------------------------
Every properly signed Proxy will be voted in accordance with specifications made
thereon. If not otherwise specified, this Proxy will be voted FOR the election
of Directors. The proxy holders named on the reverse side also will vote in
their discretion on any other matter that may properly come before the meeting.
SIGNATURE(S)_____________________________ DATE_________________
(Signature(s) should agree with name(s) on stock certificates as specified
hereon. Executors, administrators, trustees, etc. should indicate when
signing).
FOLD AND DETACH HERE IF YOU ARE NOT VOTING BY INTERNET OR TELEPHONE
McDERMOTT INTERNATIONAL, INC.
Dear Shareholder:
McDermott International, Inc. encourages you to take advantage of new and
convenient ways to vote your shares. You can vote your shares electronically
through the Internet or the telephone 24 hours a day, 7 days a week. This
eliminates the need to return the proxy card.
To vote your shares electronically you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
the box above must be used to access the system.
1. To vote over the Internet:
. Log on the Internet and go to the web site http://www.vote-by-net.com
2. To vote over the telephone:
. On a touch-tone telephone call 1-800-OK2-VOTE (1-800-652-8683)
. Outside of the U.S. and Canada call 201-324-0377.
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for your to
mail back your proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
