McDermott International, Inc.
New Supplemental Executive Retirement Plan
Effective January 1, 2005
1.1 Purpose of Plan. The purpose of this McDermott International, Inc., New
Supplemental Executive Retirement Plan (the "Plan") is to advance the interests
of McDermott International, Inc., its subsidiaries and affiliates by providing
certain retirement benefits that will attract and retain highly qualified key
employees accountable for the successful conduct of its business. This Plan
replaces the prior Supplemental Executive Retirement Plan, terminated effective
December 31, 2004.
1.2 ERISA Status. The Plan is governed by the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). It has been designed to qualify for
certain exemptions under Title I of ERISA that apply to plans that are unfunded
and maintained primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees.
1.3 Effective Date. The effective date of this Plan is January 1, 2005.
1.4 Grantor Trust. The Company may establish, in its sole discretion, a
grantor trust to be utilized in conjunction with this Plan.
Definitions and Construction
Definitions. Where the following words and phrases appear in the Plan, they
shall have the respective meanings set forth below, unless their context clearly
indicates to the contrary.
(1) Account. Collectively, means the Participant's Company Account and the
Participant's Deferral Account.
(2) Account Value. At any given time, the sum of all amounts credited to the
Participant's Account, adjusted for any income, gain or loss and any
payments attributable to such account.
(3) Beneficiary. The person designated by each Participant, on a form provided
by the Company for this purpose, to receive the Participant's distribution
under Article VI in the event of the Participant's death prior to receiving
complete payment of his Account. In order to be effective under this Plan,
any form designating a Beneficiary must be delivered to the Committee
before the Participant's death. In the absence of such an effective
designation of a Beneficiary, "Beneficiary" means the Participant's spouse,
or if there is no spouse on the date of the Participant's death, the
Participant's executor or administrator or heirs at law if there is no
administration of the Participant's estate.
(4) Board. The Board of Directors of McDermott International, Inc. or the board
of directors of a company that is a successor to the Company.
(5) Bonus. Any bonus paid to a Participant under any plan, policy or program of
the Company providing for the payment of annual bonuses to employees or any
extraordinary payment paid to a Participant if such payment is designated
by the Committee to be a Bonus for purposes of this Plan. Bonus shall not
include any compensation under the 2002 B&W Performance Incentive Plan.
(6) Cause. Cause means:
(a) the overt and willful disobedience of orders or directives issued to a
Participant that are within his scope of duties, or any other willful
and continued failure of a Participant to perform substantially his
duties with the Company (occasioned by reason other than physical or
mental illness or disability) after a written demand for substantial
performance is delivered to the Participant by the Committee or the
Chief Executive Officer of the Company which specifically identifies
the manner in which the Committee or the Chief Executive Officer
believes that the Participant has not substantially performed his
duties, after which the Participant shall have thirty days to defend
or remedy such failure to substantially perform his duties;
(b) the willful engaging by the Participant in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the
(c) the conviction of the Participant with no further possibility of
appeal or, or plea of nolo contendere by the Participant to, any
felony or crime of falsehood.
The cessation of employment of a Participant under subparagraph (a) and (b)
above shall not be deemed to be for "Cause" unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Committee at a meeting of such Committee called and held
for such purpose (after reasonable notice is provided to the Participant
and the Participant is given an opportunity to be heard before the
Committee), finding that, in the good faith opinion of the Committee, the
Participant is guilty of the conduct described in subparagraph (a) or (b)
above, and specifying the particulars thereof in detail.
(7) Change in Control. A change in control shall occur when:
(a) any person (other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company) is or becomes the
"beneficial owner" (as such term is used in ss. 13 of the Securities
Exchange Act of 1934, as amended), directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or
more of the combined voting power of the Company's then outstanding
(b) the shareholders of the Company approve (i) a merger or consolidation
of the Company with any other corporation other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior there to continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent (50%) of
the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (ii) the shareholders of the Company approve a plan
of complete liquidation of the Company, or (iii) an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets; or
(c) the individuals who, at the beginning of any period of two (2)
consecutive years, constitute the Board of Directors of the Company
cease, for any reason, to constitute at lease a majority thereof,
unless the election or nomination for election of each new director
was approved by the vote of at least a majority of the directors then
still in office who were directors at the beginning of such period; or
(d) such other circumstances as may be deemed by the Board of Directors of
McDermott International, Inc., in its sole discretion, to constitute a
change in control of the Company with respect to any Participant.
However, in no event shall a Change In Control be deemed to have occurred
with respect to a Participant if the Participant is part of the purchasing
group which consummates the Change In Control transaction. A Participant
shall be deemed "part of a purchasing group for purposes of the preceding
sentence if the Participant is an equity participant in the purchasing
company or group (except for passive ownership of less than three percent
(3%) of the stock of the purchasing company or ownership of equity
participation in the purchasing company or group which is otherwise not
significant, as determined prior to the Change in Control by a majority of
the non-employee continuing members of the Board of Directors of the
In no event shall a Change In Control be deemed to have occurred with
respect to any Participant as a result of the resolution of the Chapter 11
proceedings related to The Babcock & Wilcox Company and certain of its
subsidiaries which were filed in the U. S. Bankruptcy Court for the Eastern
District of Louisiana on February 22, 2000.
For purposes of determining whether a Change In Control has occurred, the
term "Company" shall mean McDermott International, Inc. with respect to all
Participants, and shall also mean the Company by which the Participant is
employed with respect to each Participant.
(8) Code. The Internal Revenue Code of 1986, as amended.
(9) Committee. The Compensation Committee of the Board, or such other
administrative committee that is appointed by the Board to administer the
(10) Company. McDermott International, Inc. and except where the context clearly
indicates otherwise, shall include the Company's subsidiaries and
affiliates, as well as any successor to any such entities.
(11) Company Account. The account maintained by the Committee reflecting each
Participant's Company Contributions, together with any income, gain or loss
and any payments attributable to such account.
(12) Company Contribution. The total contributions credited to a Participant's
Company Account for any one Plan Year pursuant to the provisions of Section
4.1 or 4.2.
(13) Compensation. The salary, wages and other cash remuneration received by a
Participant during any Plan Year or in respect of employment with the
Company, including any contributions made to a plan described in Sections
125, 132(f) or 401(k) of the Code pursuant to a salary reduction agreement
entered into between a Participant and the Company and Bonuses, but
excluding other additional remuneration in any form.
(14) Deemed Investments. With respect to any Account, the hypothetical
investment options with respect to which such Account is deemed to be
invested for purposes of determining the value of such Account under this
Plan, as selected from time to time by the Committee in its discretion.
(15) Deferral Account. The account maintained by the Committee reflecting each
Participant's Deferral Contributions, together with any income, gain or
loss and any payments attributable to such amount.
(16) Deferral Contribution. Compensation that is credited to a Participant's
Deferral Account pursuant to the provisions of Section 4.3.
(17) Eligible Employee. The Company's CEO and any officers of the Company and
its subsidiaries and affiliates.
(18) ERISA. The Employee Retirement Income Security Act of 1974, as amended.
(19) Exchange Act. The Securities Exchange Act of 1934, as amended.
(20) Hardship. An unforeseeable financial emergency which is a severe financial
hardship to the Participant resulting from a sudden and unexpected loss or
accident of the Participant or of a dependent of the Participant, a loss of
the Participant due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the
control of the Participant. To qualify as an unforeseeable financial
emergency, it must be demonstrated that such hardship cannot be relieved
(i) by reimbursement or compensation by insurance or otherwise, or (ii) by
liquidation of the Participant's assets, to the extent the liquidation of
such assets would not itself cause severe financial hardship.
(21) Participant. An Eligible Employee who has been selected by the Committee as
a Participant in the Plan until such Eligible Employee ceases to be a
Participant in accordance with Article III of the Plan.
(22) Plan Year. The twelve-consecutive month period commencing January 1 of each
(23) Retirement. Termination of service with the Company on or after the first
of the calendar month following the Participant's attainment of the age of
(24) Termination. The termination of a participant's employment with the Company
for any reason whatsoever.
(25) Vested Account. The sum of the Participant's vested Company Account and the
Participant's Deferral Account.
(26) Vested Percentage. The percentage as to which a Participant is vested in
his or her Company Account as determined under Sections 5.4 and 5.5.
(27) Years of Participation. The sum of whole Plan Years of participation in the
Plan as an active employee in continuous employment, excluding fractional
The Committee, in its sole discretion, shall select and notify in writing
those Eligible Employees of the Company who shall participate in the Plan. An
Eligible Employee who has been selected by the Committee as a Participant shall
begin participation in the Plan effective on the date specified by the Committee
in its notification and shall continue to participate in the Plan until the
earlier of (a) the date the Committee notifies the Participant that he is no
longer eligible to participate in the Plan or (b) the date of his Termination. A
Participant who ceases to participate in the Plan pursuant to (a) of the
preceding sentence shall be treated as if he had terminated employment with the
Company but (i) his benefit, if any, shall not be payable until after his
Termination, and (ii) his Vested Account shall be adjusted as provided in
Article V. An Eligible Employee who is rehired by the Company following his
Termination shall become a Participant only if such Eligible Employee is again
selected to participate in the Plan by the Committee.
4.1 Annual Company Contribution. As of the first day of each Plan Year, the
Company shall declare a contribution percentage for each Participant's Company
Account. The contribution percentage declared for a Participant may, but need
not be, the same as the contribution percentage declared for other Participants.
Company Contributions shall be credited as of the first day of the Plan Year or
at other such times as determined by the Committee to each Participant's Company
Account, in an amount equal to the contribution percentage declared for the
Participant multiplied by the Participant's Compensation received during the
prior Plan Year.
4.2 Discretionary Company Contribution. The Committee may in its sole
discretion at any time make an extraordinary contribution to the Company Account
of any Participant.
4.3 Participant Deferrals. For any Plan Year, the Committee may, in its
sole discretion, allow a Participant to elect to defer the payment by the
Company of any whole percentage (or dollar amount) of his annual base salary
that would otherwise be paid during such Plan Year and of any whole percentage
(or dollar amount) of any Bonus earned during such Plan Year, and instead have
such amounts credited to his Deferral Account. The salary and Bonus otherwise
payable to the Participant shall be reduced by the amount the Participant
elected to have contributed to the Participant's Deferral Account, which shall
be a Deferral Contribution.
4.4 Manner of Deferral. The Committee shall prescribe, in its sole
discretion, the procedures, limitations and timing requirements, for Participant
Deferral Contribution elections. Elections to make Deferral Contributions shall
be in writing, on a form supplied by the Committee, and shall be irrevocable
(except as otherwise provided in the Plan) for the applicable period to which
5.1 Company Accounts. The Committee shall establish and maintain an
individual bookkeeping account for each Participant, which shall be the
Participant's Company Account. The Committee shall credit the amount of each
Company Contribution made on behalf of a Participant to such Participant's
Company Account pursuant to Section 4.1 and 4.2. The Committee shall further
debit and/or credit the Participant's Company Account with any income, gain or
loss and any payments attributable to such account on a daily basis, or at such
other times as it shall det