def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Soliciting Material Pursuant to §240.14a-12 |
The Babcock & Wilcox
Company
(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):
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13024 Ballantyne Corporate Place, Suite 700
Charlotte, North Carolina 28277
April 1, 2011
Dear Stockholder:
You are cordially invited to attend this years Annual
Meeting of Stockholders of The Babcock & Wilcox
Company, which will be held on Thursday, May 12, 2011, at
The Ballantyne Hotel in the Ballantyne Ballroom, 10000
Ballantyne Commons Parkway, Charlotte, North Carolina 28277,
commencing at 9:30 a.m. local time. The notice of annual
meeting and proxy statement following this letter describe the
matters to be acted on at the meeting.
We are utilizing the Securities and Exchange Commissions
Notice and Access proxy rule, which allows us to furnish proxy
materials to you via the Internet as an alternative to the
traditional approach of mailing a printed set to each
stockholder. In accordance with these rules, we have sent a
Notice of Internet Availability of Proxy Materials to all
stockholders who have not previously elected to receive a
printed set of proxy materials. The Notice contains instructions
on how to access our 2011 Proxy Statement and Annual Report to
Stockholders, as well as how to vote either online, by telephone
or in person for the 2011 Annual Meeting.
It is very important that your shares are represented and voted
at the Annual Meeting. Please vote your shares by Internet or
telephone, or, if you received a printed set of materials by
mail, by returning the accompanying proxy card, as soon as
possible to ensure that your shares are voted at the meeting.
Further instructions on how to vote your shares can be found in
our Proxy Statement.
Thank you for your support of our company.
Sincerely yours,
BRANDON C. BETHARDS
President & Chief Executive Officer
YOUR VOTE IS IMPORTANT.
Whether or not you plan to attend the meeting, please take a
few minutes now to vote your shares.
Important Notice Regarding the Availability of Proxy
Materials for the Annual Meeting of Stockholders to Be Held on
May 12, 2011.
The proxy statement and annual report are available on the
Internet at www.proxyvote.com.
The following information applicable to the Annual Meeting may
be found in the proxy statement and accompanying proxy card:
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The date, time and location of the meeting;
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A list of the matters intended to be acted on and our
recommendations regarding those matters;
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Any control/identification numbers that you need to access your
proxy card; and
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Information about attending the meeting and voting in person.
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THE
BABCOCK & WILCOX COMPANY
13024 Ballantyne Corporate Place,
Suite 700
Charlotte, North Carolina 28277
Notice
of 2011 Annual Meeting of Stockholders
The 2011 Annual Meeting of the Stockholders of The
Babcock & Wilcox Company, a Delaware corporation, will
be held at The Ballantyne Hotel in the Ballantyne Ballroom,
10000 Ballantyne Commons Parkway, Charlotte, North Carolina
28277, on Thursday, May 12, 2011, at 9:30 a.m. local
time, in order to:
(1) elect Brandon C. Bethards, D. Bradley McWilliams and
Anne R. Pramaggiore as Class I directors of our Board of
Directors and elect Larry L. Weyers as a Class III director
of our Board of Directors;
(2) hold an advisory vote on the compensation of our named
executive officers;
(3) hold an advisory vote on the frequency of the advisory
vote on named executive officer compensation;
(4) approve material terms for performance-based awards for
section 162(m) purposes under the Amended and Restated 2010
Long-Term Incentive Plan;
(5) approve material terms for performance-based awards for
section 162(m) purposes under the Amended and Restated
Executive Incentive Compensation Plan;
(6) ratify our Audit & Finance Committees
appointment of Deloitte & Touche LLP as our
independent registered public accounting firm for the year
ending December 31, 2011; and
(7) transact such other business as may properly come
before the meeting or any adjournment thereof.
If you were a stockholder as of the close of business on
March 14, 2011, you are entitled to vote at the meeting and
at any adjournment thereof.
Instead of mailing a printed copy of our proxy materials,
including our Annual Report, to each shareholder of record, we
are providing access to these materials via the Internet. This
reduces the amount of paper necessary to produce these
materials, as well as the costs associated with mailing these
materials to all stockholders. Accordingly, on April 1,
2011, we mailed the Notice of Internet Availability of Proxy
Materials (the Notice) to all stockholders of record
as of March 14, 2011 and posted our proxy materials on the
Web site referenced in the Notice (www.proxyvote.com). As
more fully described in the Notice, all stockholders may choose
to access our proxy materials on the Web site referred to in the
Notice or may request a printed set of our proxy materials. The
Notice and Web site provide information regarding how you may
request to receive proxy materials in printed form by mail or
electronically by email on an ongoing basis.
If you previously elected to receive a printed copy of the
materials, we have enclosed a copy of our 2010 Annual Report to
Stockholders with this notice and proxy statement.
Your vote is important. Please vote your proxy promptly so
your shares can be represented, even if you plan to attend the
annual meeting. You can vote by Internet, by telephone, or by
requesting a printed copy of the proxy materials and using the
enclosed proxy card.
By Order of the Board of Directors,
JAMES D. CANAFAX
Secretary
Dated: April 1, 2011
Proxy
Statement for 2011 Annual Meeting of Stockholders
Table
of Contents
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General
Information
Our Board of Directors has made these materials available to you
over the Internet or, upon your request, has mailed you a
printed version of these materials in connection with our 2011
Annual Meeting of Stockholders, which will take place on
May 12, 2011. We mailed the Notice to our stockholders on
April 1, 2011, and our proxy materials were posted on the
Web site referenced in the Notice on that same date.
We have sent or provided access to the materials to you because
our Board of Directors is soliciting your proxy to vote your
shares at our Annual Meeting. We will bear all expenses incurred
in connection with this proxy solicitation, which we expect to
conduct primarily by mail. We have engaged The Proxy Advisory
Group, LLC to assist in the solicitation for a fee that will not
exceed $15,000, plus
out-of-pocket
expenses. In addition, our officers and regular employees may
solicit your proxy by telephone, by facsimile transmission or in
person and they will not be separately compensated for such
services. We solicit proxies to give all stockholders an
opportunity to vote on matters that will be presented at the
annual meeting. In this proxy statement, you will find
information on these matters, which is provided to assist you in
voting your shares. If your shares are held through a broker or
other nominee (i.e., in street name) and you
have requested printed versions of these materials, we have
requested that your broker or nominee forward this proxy
statement to you and obtain your voting instructions, for which
we will reimburse them for reasonable
out-of-pocket
expenses. If your shares are held through the Thrift Plan for
Employees of B&W and Participating Subsidiary and
Affiliated Companies (our Thrift Plan) and you have
requested printed versions of these materials, the trustee of
that plan has sent you this proxy statement and you should
instruct the trustee on how to vote your plan shares.
Voting
Information
Record
Date and Who May Vote
Our Board of Directors selected March 14, 2011 as the
record date (the Record Date) for determining
stockholders entitled to vote at the Annual Meeting. This means
that if you were a registered stockholder with our transfer
agent and registrar, Computershare Trust Company, N.A., on
the Record Date, you may vote your shares on the matters to be
considered at the Annual Meeting. If your shares were held in
street name on that date, you should refer to the instructions
provided by your broker or nominee for further information. They
are seeking your instructions on how you want your shares voted.
Brokers holding shares in street name can vote routine matters
if the beneficial owner has not provided voting instructions at
least 10 days before a meeting. As a result of a change in
the rules of the New York Stock Exchange, the election of
directors is no longer considered a routine matter. That means
that brokers may not vote your shares in the election of
directors if you have not given your broker specific
instructions as to how to vote. Please be sure to give specific
voting instructions to your broker.
On the Record Date, 117,452,887 shares of our common stock
were outstanding. Each outstanding share of common stock
entitles its holder to one vote on each matter to be acted on at
the meeting.
How to
Vote
Most stockholders can vote by proxy in three ways:
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by Internet at www.proxyvote.com;
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by telephone; or
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by mail.
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If you are a stockholder of record, you can vote your
shares by voting by Internet, phone, mailing in your proxy or in
person at the Annual Meeting. You may give us your proxy by
following the instructions included in the Notice or, if you
received a printed version of these proxy materials, in the
enclosed proxy card. If you want to vote by mail but have not
received a printed version of these proxy materials, you may
request a full packet of proxy materials through the
instructions in the Notice. If you vote using either telephone
or the Internet, you will save us mailing expense.
By giving us your proxy, you will be directing us how to vote
your shares at the meeting. Even if you plan on attending the
meeting, we urge you to vote now by giving us your proxy. This
will ensure that your vote is represented at the meeting. If you
do attend the meeting, you can change your vote at that time, if
you then desire to do so.
If you are the beneficial owner of shares held in street
name, the methods by which you can access the proxy
materials and give the voting instructions to the broker or
nominee may vary. Accordingly, beneficial owners should follow
the instructions provided by their brokers or nominees to vote
by Internet, telephone or mail. If you want to vote by mail but
have not
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received a printed version of these proxy materials, you may
request a full packet of proxy materials as instructed by the
Notice. If you want to vote your shares in person at the Annual
Meeting, you must obtain a valid proxy from your broker or
nominee. You should contact your broker or nominee or refer to
the instructions provided by your broker or nominee for further
information. Additionally, the availability of telephone or
Internet voting depends on the voting process used by the broker
or nominee that holds your shares.
You may receive more than one Notice or proxy statement and
proxy card or voting instruction form if your shares are held
through more than one account (e.g., through different
brokers or nominees). Each proxy card or voting instruction form
only covers those shares held in the applicable account. If you
hold shares in more than one account, you will have to provide
voting instructions as to all your accounts to vote all your
shares.
How to
Change Your Vote or Revoke Your Proxy
For stockholders of record, you may change your vote or
revoke your proxy entirely by written notice to our Corporate
Secretary, granting a new later dated proxy, submitting a later
dated vote by telephone or on the Internet or by voting in
person at the Annual Meeting. Unless you attend the meeting and
vote your shares in person, you should change your vote using
the same method (by Internet, telephone or mail) that you first
used to vote your shares. That way, the inspectors of election
for the meeting will be able to verify your latest vote.
For beneficial owners of shares held in street name, you
should follow the instructions in the information provided by
your broker or nominee to change your vote or revoke your proxy
entirely. If you want to change your vote as to shares held in
street name by voting in person at the Annual Meeting, you must
obtain a valid proxy from the broker or nominee that holds those
shares for you.
Quorum
The Annual Meeting will be held only if a quorum exists. The
presence at the meeting, in person or by proxy, of holders of a
majority of our outstanding shares of common stock as of the
Record Date will constitute a quorum. If you attend the meeting
or vote your shares by Internet, telephone or mail, your shares
will be counted toward a quorum, even if you abstain from voting
on a particular matter. Shares held by
brokers and other nominees as to which they have not received
voting instructions from the beneficial owners and lack the
discretionary authority to vote on a particular matter are
called broker non-votes and will count for quorum
purposes.
Proposals
to Be Voted On
We are asking you to vote on the following:
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the election of Brandon C. Bethards, D. Bradley McWilliams
and Anne R. Pramaggiore to Class I and Larry L. Weyers to
Class III of our Board of Directors
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an advisory vote on the compensation of our named executive
officers (Named Executives)
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an advisory vote on the frequency of the vote on the
compensation of our Named Executives
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the approval of material terms for performance-based awards for
section 162(m) purposes under the 2010 Long-Term Incentive
Plan (as amended and restated, the Amended 2010 LTIP)
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the approval of material terms for performance-based awards for
section 162(m) purposes under the our Executive Incentive
Compensation Plan (as amended and restated, the Amended
EICP)
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the ratification of our Audit & Finance
Committees appointment of Deloitte & Touche LLP
(Deloitte) as our independent registered public
accounting firm for the year ending December 31, 2011.
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Vote
Required
In the election of directors, you may vote FOR all
director nominees or withhold your vote for any one or more of
the director nominees. Director nominees are elected by a
plurality of the votes cast by the shares of our common stock
entitled to vote in the election of directors. This means that
the individuals nominated for election to the Board of Directors
who receive the most FOR votes (among votes properly
cast in person or by proxy) will be elected. Votes withheld,
which are deemed abstentions, and broker non-votes are not
counted for purposes of election of directors.
For the proposals on the Amended 2010 LTIP, Amended EICP and
executive compensation, you may
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vote FOR or AGAINST or you may
ABSTAIN. For the proposal on the frequency of the
vote on executive compensation, you may vote
1 Year, 2 Years,
3 Years or ABSTAIN. Each of these
proposals requires the affirmative vote of a majority of the
shares of our common stock present in person or represented by
proxy at the Annual Meeting and entitled to vote on the matter
in order to be adopted. Abstentions are counted for purposes of
determining a quorum and are considered present and entitled to
votes on these proposals. As a result, abstentions have the
effect of an AGAINST vote. Broker non-votes shall
not be considered as entitled to vote on these proposals, even
though they are considered present for purposes of determining a
quorum and may be entitled to vote on other matters. As a
result, broker non-votes will not have any effect on the
adoption of these proposals.
For the proposal to ratify the appointment of Deloitte, you may
vote FOR or AGAINST or abstain from
voting. This proposal requires the affirmative vote of a
majority of the shares cast on the matter. Abstentions will not
be considered as cast and, as a result, will not have any effect
on the proposal.
How Votes
are Counted
For stockholders of record, all shares represented by the
proxies mailed to stockholders will be voted at the Annual
Meeting in accordance with instructions given by the
stockholders. Where a stockholder returns their proxy and no
instructions are given with respect to a given matter, the
shares will be voted: (1) FOR the election of
the Board of Directors nominees; (2) FOR
the approval of the compensation of our Named Executives;
(3) FOR the selection of one year as the
frequency of the advisory vote on executive compensation;
(4) FOR the approval of the Amended 2010 LTIP;
(5) FOR the approval of the Amended EICP;
(6) FOR the ratification of the appointment of
Deloitte as our independent registered public accounting firm;
and (7) in the discretion of the proxy holders upon such
other business as may properly come before the Annual Meeting.
If you are a shareholder of record and you do not cast your
vote, no votes will be cast on your behalf on any of the items
of business at the Annual Meeting.
For beneficial owners of shares held in street name, the
brokers, banks, or nominees holding shares for beneficial owners
must vote those shares as instructed. Absent instructions from
you, brokers, banks and nominees may vote your shares only as
they decide as to matters for which they have discretionary
authority under the applicable New York Stock Exchange rules. A
broker, bank or nominee does not have discretion to vote on the
election of directors, approval of the Amended 2010 LTIP,
approval of the Amended EICP, approval of executive
compensation, or frequency of the vote on executive
compensation. If you do not instruct your broker, bank or
nominee how to vote, no votes will be cast on your behalf on
those matters. Your broker will be entitled to vote your
shares in its discretion, absent instructions from you, on the
ratification of the appointment of Deloitte as our independent
registered public accounting firm. Any shares of our common
stock held in the Thrift Plan that are not voted or for which
Vanguard does not receive timely voting instructions, will be
voted in the same proportion as the shares for which Vanguard
receives timely voting instructions from other participants in
the Thrift Plan.
We are not aware of any other matters that may be presented or
acted on at the meeting. If you vote by signing and returning
the enclosed proxy card or using the telephone or Internet
voting procedures, the individuals named as proxies on the card
may vote your shares, in their discretion, on any other matter
requiring a stockholder vote that comes before the meeting.
Confidential
Voting
All voted proxies and ballots will be handled to protect your
voting privacy as a stockholder. Your vote will not be disclosed
except:
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to meet any legal requirements;
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in limited circumstances such as a proxy contest in opposition
to our Board of Directors;
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to permit independent inspectors of election to tabulate and
certify your vote; or
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to adequately respond to your written comments on your proxy
card.
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Election
of Directors
(PROPOSAL 1)
Our Certificate of Incorporation provides for the classification
of our Board of Directors into three classes, with the term of
one class expiring each year.
Current Directors:
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Year Term
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Name
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Class
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Expires
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Brandon C. Bethards
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Class I
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2011
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John A. Fees
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Class III
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2013
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Robert W. Goldman
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Class II
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2012
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Stephen G. Hanks
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Class II
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2012
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Oliver D. Kingsley, Jr.
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Class I
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2011
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D. Bradley McWilliams
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Class I
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2011
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Richard W. Mies
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Class III
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2013
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Anne R. Pramaggiore
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Class I
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2011
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Larry W. Weyers
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Class III
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2013
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The term of office of our Class I directors will expire at
this years Annual Meeting. The current Class I
directors are Brandon C. Bethards, Oliver D. Kingsley, Jr.,
D. Bradley McWilliams and Anne R. Pramaggiore.
Messrs. Bethards, Kingsley and McWilliams were elected to
our Board on July 2, 2010 in connection with our spin-off
from McDermott International, Inc. (McDermott).
Ms. Pramaggiore was appointed to the Board in January 2011
and assigned to Class I in connection with
Mr. Kingsleys previously announced decision to not
stand for re-election and retire from our Board, effective at
this years Annual Meeting. Accordingly, on the nomination
of our Board following the recommendation of the Governance
Committee, Messrs. Bethards and McWilliams will each stand
for re-election as a Class I director for a
term of three years and Ms. Pramaggiore will stand for
election as a Class I director for a term of three years.
Mr. Larry W. Weyers was appointed to our Board in December
2010 and assigned to Class III to more evenly distribute
the number of directors among the three classes as prescribed by
our Certificate of Incorporation. Because of his assignment to
Class III, Mr. Weyers current term of office
will expire at our 2013 Annual Meeting. However, to provide our
stockholders the opportunity to ratify the selection of
Mr. Weyers as a Class III director, our Board has
determined to submit the nomination of Mr. Weyers for
election at this years Annual Meeting. Accordingly, on the
nomination of our Board following the recommendation of the
Governance Committee, Mr. Weyers will stand for election as
a Class III director at this years Annual Meeting for
a term of two years.
Ms. Pramaggiore and Mr. Weyers are the only new
director nominees for the 2011 Annual Meeting standing for
election for the first time. Ms. Pramaggiore was identified
as a potential nominee by one of our non-management directors
and Mr. Weyers was identified as a potential director
nominee by our Chief Executive Officer. The Governance Committee
recommended each of Ms. Pramaggiore and Mr. Weyers to
our Board of Directors for nomination as a director.
Unless otherwise directed, the persons named as proxies on the
enclosed proxy card 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 our Board of Directors. However, we are
not aware of any circumstances that would prevent any of the
nominees from serving.
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Set forth below is certain information (ages are as of
May 12, 2011) with respect to each nominee for
election as a director and each director of our company who will
continue to serve as a director after this years Annual
Meeting, including the specific experience, qualifications and
skills considered by the Governance Committee
and/or the
Board in assessing the appropriateness of the person to serve as
a director.
Class I
Nominees
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Brandon C. Bethards
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Director Since 2010
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Age 63
President & Chief Executive Officer
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Brandon C. Bethards is our President and Chief Executive
Officer. He has served in that role since November 2008, having
served as Interim Chief Executive Officer of B&W since
September 2008. Previously, he served as President of
Babcock & Wilcox Power Generation Group, Inc.
(B&W PGG), one of our subsidiaries, from
January 2007 to October 2008 and Senior Vice President and
General Manager of B&W PPGs Fossil Power Division
from February 2001 to January 2007. His earlier positions with
B&W PGG included Vice President of Business Development,
General Manager, District Engineer and Field Service Engineer.
Mr. Bethards has been affiliated with B&W for
37 years, having started with the predecessor to B&W
PGG in the early 1970s. He has held a number of management
positions within the B&W organization, including most
recently as President and Chief Executive Officer. His tenure
with the company, experience in the power industry and in-depth
knowledge of the operations and culture of our company make him
highly qualified to serve our stockholders.
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D. Bradley McWilliams
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Director Since 2010
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Age 68
Lead Independent Director
Audit & Finance Committee Member
Governance Committee Chairman
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From April 1995 until his retirement in April 2003,
Mr. McWilliams was Senior Vice President and Chief
Financial Officer of Cooper Industries Ltd., a worldwide
manufacturer of electrical products, tools and hardware. He was
Vice President of Cooper Industries from 1982 until April 1995.
Mr. McWilliams is also a member of the Board of Directors
of McDermott, where he has served since 2003.
Mr. McWilliams, a Certified Public Accountant and licensed
attorney, has more than 30 years of accounting and
financial experience, having served most recently as the chief
financial officer of a large, publicly traded company for nine
years. Mr. McWilliams has served on many corporate boards
both for profit (including Kronos Incorporated and McDermott,
where he served as chairman of the audit committee for
12 years and six years, respectively) and non-profit boards
(including as Life Member of the board of directors of the YMCA
of the Greater Houston area). Including his service on the board
of directors of McDermott, Mr. McWilliams is the most
tenured member of our Board of Directors.
6
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Anne R. Pramaggiore
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Director Since 2011
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Age 52
Audit & Finance Committee Member
Governance Committee Member
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Since May 2009, Ms. Pramaggiore has served as President and
Chief Operating Officer of Commonwealth Edison Company
(ComEd), an electric utility company. She joined
ComEd in 1998 and, prior to her current position with ComEd,
served as its Executive Vice President, Customer Operations,
Regulatory and External Affairs from September 2007 to May 2009,
Senior Vice President, Regulatory and External Affairs from
November 2005 to September 2007 and Vice President, Regulatory
and External Affairs from October 2002 to November 2007. She
also served as its General Counsel.
Ms. Pramaggiore is a licensed attorney and brings to the
Board extensive experience in the utilities industry, as
highlighted by her years of service at ComEd. She is a current
executive within another public company and her perspective on
the technical, regulatory, operational and financial aspects of
the industry make her a valuable addition to the Board.
Our Board
recommends that stockholders vote FOR the
Class I nominees named above.
Class III
Nominee
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Larry L. Weyers
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Director Since 2010
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Age 66
Compensation Committee Member
Safety & Security Committee Member
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In March 2010, Mr. Weyers retired as Chairman of Integrys
Energy Group, Inc. (previously WPS Resources Corporation), a
holding company with operations providing products and services
in regulated and nonregulated energy markets. Previously, he
served as its Chairman, President and Chief Executive Officer
from February 1998 to December 2008, having joined Wisconsin
Public Service Corporation, a utility subsidiary of Integrys
Energy Group, Inc., in 1985. Since July 2010, he has served as
Vice President and Lead Director of the board of directors of
Green Bay Packers, Inc., on which he has served since 2003.
Mr. Weyers brings a wealth of experience in the nuclear and
fossil fuel power generation industries to the Board and
possesses substantial corporate leadership and governance
skills. Having served over 24 years with Integrys Energy
Group, Inc., he has extensive knowledge of the utility industry
and provides a valuable resource for our power generation
operations. Mr. Weyers has a bachelors degree in
mathematics from Doane College, a masters degree in
nuclear engineering from Columbia University and a masters
degree in business administration from Harvard Business School.
Our Board
recommends that stockholders vote FOR the
Class III nominee named above.
7
Class II
Directors
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Robert W. Goldman
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Director Since 2010
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Age 69
Audit & Finance Committee Chairman
Compensation Committee Member
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Since October 2002, Mr. Goldman has served as an
independent financial consultant. Previously, Mr. Goldman
worked for Conoco Inc., an international, integrated energy
company and predecessor to ConocoPhillips, from 1988 to 2002,
most recently as its Senior Vice President, Finance and Chief
Financial Officer from 1998 to 2002. He formerly served as the
Vice President, Finance of the World Petroleum Council from 2002
to 2008. Mr. Goldman is also a member of the board of
directors of El Paso Corporation (since 2003), Parker
Drilling Company (since 2005) and Tesoro Corporation (since
2004) and served as a member of the board of directors of
McDermott from 2005 to 2010.
Mr. Goldman has an extensive background in corporate
finance and operations. While serving as Chief Financial Officer
of Conoco, Inc., Mr. Goldman played vital roles in the
initial public offering and split-off of Conoco, Inc. from
DuPont and the subsequent merger of Conoco and Phillips
Petroleum. As a member of our Board, he offers valuable public
company board experience and significant energy-industry
specific knowledge. Mr. Goldmans service on the audit
and finance committees of other public and non-public companies
also provides substantial benefit as he chairs the Boards
Audit & Finance Committee.
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Stephen G. Hanks
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Director Since 2010
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Age 60
Audit & Finance Committee Member
Compensation Committee Member
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From November 2007 until his retirement in January 2008,
Mr. Hanks was President of the Washington Division of
URS Corporation, an engineering, construction and technical
services company, and he also served as a member of
URS Corporations Board of Directors during that time.
Previously, from June 2001 to November 2007, he was President
and CEO of Washington Group International, Inc.
(Washington Group), an integrated engineering,
construction and management services company, which was acquired
by URS Corporation in 2007, and also served on its Board of
Directors. He formerly served as Executive Vice President, Chief
Legal Officer and Secretary for Washington Group. Mr. Hanks
is also a member of the board of directors of Lincoln Electric
Holdings, Inc. (since 2006) and McDermott (since 2009).
Through his background with Washington Group and subsequently
URS Corporation, Mr. Hanks brings to the Board
valuable operations, industry and legal experience from one of
the companies in our peer group. He also provides financial
experience, having served as Chief Financial Officer of Morrison
Knudsen Corporation, and public company board experience through
his service on the boards of Lincoln Electric Holdings, Inc. and
McDermott.
8
Other
Class III Directors
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John A. Fees
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Director Since 2010
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Age 53
Non-Executive Chairman
Safety & Security Committee Member
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Mr. Fees is the Chairman of our Board of Directors, and has
served in that capacity since July 2010. From October 2008 to
July 2010, he was Chief Executive Officer and a director of
McDermott. He joined B&W in 1979 and served as President
and Chief Executive Officer of B&W from January 2007 to
October 2008; President and Chief Operating Officer of BWX
Technologies, Inc., a subsidiary of B&W, from September
2002 to January 2007; and President, General Manager of BWXT
Services, Inc., a subsidiary of BWX Technologies, Inc., from
September 1997 to November 2002. His earlier positions at
subsidiaries of B&W include Vice President and General
Manager. Mr. Fees previously served as a member of the
board of directors of McDermott (October 2008 July
2010).
Mr. Fees service as Chief Executive Officer of
McDermott and member of McDermotts board of directors
makes him well qualified to serve as Chairman of the Board of
B&W. Prior to becoming McDermotts Chief Executive
Officer in 2008, Mr. Fees led a distinguished career at
B&W for nearly 30 years. During his time with
B&W, Mr. Fees held numerous management positions
within B&Ws Government Operations segment, including
President and Chief Operating Officer, and served as
B&Ws President and Chief Executive Officer.
Mr. Fees experiences provide him with extensive
knowledge of our businesses and strong leadership skills.
Mr. Fees also currently serves on the Board of Directors of
the Nuclear Energy Institute.
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Richard W. Mies
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Director Since 2010
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Age 66
Safety & Security Committee Chairman
Governance Committee Member
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Admiral Mies is a Retired Admiral, United States Navy. He served
in the U.S. Navy for 35 years, including most recently
as Commander in Chief of the U.S. Strategic Command for the
U.S. Air Force and U.S. Navy strategic nuclear forces
from 1998 until his retirement from the Navy in 2002. Following
his retirement from the Navy until 2007, he served as Senior
Vice President of Science Applications International
Corporation, a provider of scientific and engineering
applications for national security, energy, environment,
critical infrastructure and health. Since 2007, he has been
Chief Executive Officer and President of The Mies Group, Ltd. (a
consulting firm). He is also a member of the board of directors
of Exelon Corporation (since 2009) and Mutual of Omaha
Insurance Company (since 2002) and served as a member of
the board of directors of McDermott from 2008 to 2010.
Admiral Mies distinguished career as a nuclear submariner
in the U.S. Navy and as a former Senior Vice President of
Science Applications International Corporation has provided him
with extensive experience in nuclear operations, executive
leadership and U.S. Government procurement activities. He
served as the senior operational commander of the
U.S. Submarine Force and as the Commander in Chief of
U.S. Strategic Command. He brings to the Board an extensive
understanding of the U.S. Government, our single largest
customer.
There are no family relationships between any of our executive
officers and directors.
9
Corporate
Governance
We maintain a corporate governance section on our Web site which
contains copies of our principal governance documents. The
corporate governance section may be found at www.babcock.com
at Investor Relations Corporate
Governance Highlights. The corporate
governance section contains the following documents:
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By-Laws
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Corporate Governance Principles
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Code of Business Conduct
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Code of Ethics for CEO and Senior
Financial Officers
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Board of Directors Conflicts of Interest
Policies and Procedures
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Audit & Finance Committee Charter
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Compensation Committee Charter
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Governance Committee Charter
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Safety & Security Committee Charter
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Director
Independence
The New York Stock Exchange (NYSE) listing standards
require our Board of Directors to be comprised of at least a
majority of independent directors. For a director to be
considered independent, the Board must determine that the
director does not have any direct or indirect material
relationship with us. The Board has established categorical
standards which conform to the independence requirements in the
NYSE listing standards to assist it in determining director
independence. These standards are contained in the Corporate
Governance Principles found on our Web site at
www.babcock.com under Investor
Relations Corporate Governance
Highlights.
Based on these independence standards, our Board of Directors
has determined that the following directors are independent and
meet our categorical standards:
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Robert W. Goldman
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Richard W. Mies
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Stephen G. Hanks
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Anne R. Pramaggiore
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Oliver D. Kingsley, Jr.
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Larry L. Weyers
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D. Bradley McWilliams
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In determining the independence of the directors, our Board
considered ordinary course transactions between us and other
entities with which the directors are associated. Those
transactions are described below, although none were determined
to constitute a material relationship with us. Mr. Weyers
has no current
relationship with B&W, except as a director and
stockholder; although he is the former chairman of the board of
directors of Integrys Energy Group, Inc., with which
companys subsidiaries we have transacted business in the
ordinary course during the last three years.
Messrs. Goldman, Hanks and Kingsley and Admiral Mies are
directors of entities with which we transact business in the
ordinary course. Ms. Pramaggiore is an executive officer of
an entity, affiliates of which we transact business with in the
ordinary course. Our Board also considered unsolicited
contributions by us to charitable organizations with which the
directors were associated. Admiral Mies serves as a director of
a charitable organization to which we made unsolicited
contributions between 2008 and 2010 in the usual course of our
annual giving programs. Messrs. Hanks and McWilliams are
both directors of McDermott, which was our parent company prior
to our spin-off on July 30, 2010. McDermott does not own
any shares of our common stock, however, in connection with the
spin-off, we entered into a number of agreements with McDermott
regarding the spin-off, which allocate responsibilities for
obligations arising before and after the spin-off and provide
transition services between B&W and McDermott for a limited
period of time following the spin-off.
Executive
Sessions and Communications With the Board
Our independent directors meet in executive session without
management on a regular basis. Currently, D. Bradley McWilliams,
the Lead Independent Director, serves as the presiding director
for these executive sessions. Stockholders or other interested
persons may send written communications to the independent
members of our Board, addressed to Board of Directors
(independent members),
c/o The
Babcock & Wilcox Company, Corporate Secretarys
Office, 13024 Ballantyne Corporate Parkway, Suite 700
Charlotte, North Carolina 28277. Information regarding this
process is posted on our Web site at www.babcock.com
under Investor Relations Corporate
Governance Board of Directors.
Board
Leadership Structure and Roles in Risk Oversight
Our Board does not have a policy requiring either that the
positions of the Chairman and of the Chief Executive Officer
should be separate or that they
10
should be occupied by the same individual. Our Board believes
that this issue is properly addressed as part of the succession
planning process and that it is in the best interests of the
Company for the Board to make a determination on these matters
when it elects a new CEO or Chairman of the Board or at other
times consideration is warranted by circumstances. Currently,
the roles are separate, with Mr. Fees serving as our
Chairman and Mr. Bethards as our President and Chief
Executive Officer. Our Board believes that this leadership
structure is appropriate for us at this time because it allows
Mr. Bethards, who, with over 37 years experience with
our company including as chief executive officer, is serving as
a public company chief executive officer and board member for
the first time, to set our strategic direction and manage our
day-to-day
operations and performance, while Mr. Fees, who has over
30 years experience with our company and prior public
company board service with McDermott, is able to set the
Boards agenda, in coordination with our lead independent
director and independently lead the Board in its oversight of
management.
As part of its oversight function, the Board monitors various
risks that we face. To assist with aspects of that function, the
Board established the Safety & Security Committee,
which oversees the safety, security and reliability of our
business operations with specific focus on environmental,
regulatory, safety, and security matters. The Audit &
Finance Committee further assists the Board in fulfilling its
oversight responsibility in the areas of financial reporting and
by meeting periodically with management to review financial risk
exposures and discuss B&Ws policies and guidelines
concerning risk assessment and risk management. The Compensation
Committee also assists the Board with this function by assessing
risks associated with our compensation programs with management
and its outside compensation consultant. We further maintain an
enterprise risk management program administered by our Risk
Management group. The program reviews key external, strategic,
operational and financial risks with specific focus on the
effectiveness of risk mitigation. Information on the enterprise
risk management program is presented to senior management and
the Board by our Director of Risk Management.
Board of
Directors and Its Committees
Our Board met nine times during 2010. All directors attended 75%
or more of the meetings of the Board and of the committees on
which they served
during 2010. In addition, as reflected in our Corporate
Governance Principles, we have adopted a policy that each member
of our Board must make reasonable efforts to attend our Annual
Meeting.
Our Board currently has, and appoints the members of, standing
Audit & Finance, Compensation, Governance and
Safety & Security Committees. Each of those committees
is comprised entirely of independent non-management directors,
except for the Safety & Security Committee, and has a
written charter approved by the Board. The current charter for
each standing Board committee is posted on our Web site at
www.babcock.com under Investor
Relations Corporate Governance
Highlights.
The current members of the committees are identified below. NYSE
listing standards require that all members of our
Audit & Finance, Compensation and Governance
Committees be independent. Our Board of Directors has
affirmatively determined that each member of such committees is
independent in accordance with the NYSE listing standards.
Audit &
Finance Committee:
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Mr. Goldman (Chairman)
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Mr. Hanks
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Mr. McWilliams
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Ms. Pramaggiore
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During the year ended December 31, 2010, the
Audit & Finance Committee met three times. The
Audit & Finance Committees role is financial
oversight. Our management is responsible for preparing financial
statements, and our independent registered public accounting
firm is responsible for auditing those financial statements. The
Audit & Finance Committee is not providing any expert
or special assurance as to our financial statements or any
professional certification as to the independent registered
public accounting firms work.
The Audit & Finance Committee is directly responsible
for the appointment, compensation, retention and oversight of
our independent registered public accounting firm. The
committee, among other things, also reviews and discusses our
audited financial statements with management and the independent
registered public accounting firm. The committee provides
oversight of (i) our compliance with legal and regulatory
financial requirements; (ii) policies and procedures
relating to financial risks; and (iii) aspects of our
compliance and ethics program relating to financial
11
matters, books and records and accounting and as required by
applicable laws, rules and regulations.
The Audit & Finance Committee also reviews and
oversees financial policies and financial strategies, mergers,
acquisitions, financings, liabilities, investment performance of
our pension plans and the capital structures of B&W and its
subsidiaries. Generally, the Audit & Finance Committee
has responsibility over many such activities up to
$25 million, and for such activities involving amounts over
$25 million, the Audit & Finance Committee will
review the activity and make a recommendation to the Board.
Our Board has determined that Messrs. Goldman, Hanks and
McWilliams and Ms. Pramaggiore each qualify as an
audit committee financial expert within the
definition established by the Securities and Exchange Commission
(SEC). For more information on the backgrounds of
these directors, see their biographical information under
Election of Directors above.
Compensation
Committee:
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Mr. Kingsley (Chairman)
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Mr. Goldman
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Mr. Hanks
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Mr. Weyers
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During the year ended December 31, 2010, the Compensation
Committee met three times. The Compensation Committee has
overall responsibility for our officer and non-employee director
compensation plans, policies and programs and has the authority
to retain, terminate, compensate and oversee any compensation
consultant or other advisors to assist the committee in the
discharge of its responsibilities. The Compensation Committee
oversees the annual evaluation of our Chief Executive Officer.
Following the spin-off, the Compensation Committee retained
Meridian Compensation Partners, LLC, the compensation consultant
to the compensation committee of McDermotts board of
directors (the McDermott Committee) at the time of
the spin-off, while conducting a new search for an independent
consultant. In November 2010, the Compensation Committee engaged
Hay Group Inc. (Hay) to serve as the
committees consultant on executive and non-employee
director compensation. In determining executive compensation,
the Compensation Committee considered recommendations from Hay
as well as the joint recommendation of our Vice President of
Human Resources and our Chief Executive Officer.
Hay Group and our Chief Executive Officer and Vice President of
Human Resources, attend the meetings of our Compensation
Committee and participate in the committees deliberation
on executive compensation (except with respect to each
officers respective compensation). Please see the
Compensation Discussion and Analysis and
Compensation of Executive Officers sections of this
proxy statement for information about our 2010 executive officer
compensation, including a discussion of the role of the
compensation consultant.
The Compensation Committee regularly reviews the design of our
significant compensation programs with the assistance of its
compensation consultant. We believe our compensation programs
work to retain and motivate our employees at appropriate levels
of business risk, which risks are generally mitigated through
some of the following features:
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Reasonable and Balanced Compensation Programs
Using the elements of total direct compensation,
the Compensation Committee seeks to provide compensation
opportunities for employees targeted at or near the median
compensation of comparable positions in our market. As a result,
we believe the total direct compensation of employees provides
reasonable compensation opportunities with an appropriate mix of
cash and equity, annual and longer-term incentives, and
performance metrics.
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Emphasize Long-Term Incentive Over Annual Incentive
Compensation Long-term incentive compensation,
to the extent awarded, typically makes up a larger percentage of
an employees target total direct compensation than annual
incentive compensation. Incentive compensation helps drive
performance and align the interests of employees with those of
stockholders. However, tying a significant portion of an
employees total direct compensation to long-term
incentives (which typically vest over a period of three or more
years) helps to promote longer-term perspectives regarding
company performance.
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Long-Term Incentive Compensation Subject to Forfeiture for
Bad Acts The Compensation Committee may
terminate any outstanding stock award if the recipient
(1) is convicted of a misdemeanor involving fraud,
dishonesty or moral turpitude or a felony, or
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(2) engages in conduct that adversely affects or may
reasonably be expected to adversely affect the business
reputation or economic interests of the Company.
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2011 Annual and Long-Term Incentive Compensation Subject to
Clawbacks For 2011 incentive compensation
awards, we may recover excess amounts paid to individuals who
knowingly engaged in a fraud resulting in a restatement.
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Linear and Capped Incentive Compensation Payouts
The Compensation Committee establishes financial
performance goals which are used to plot a linear payout formula
for annual and long-term incentive compensation, eliminating
payout cliffs between the established performance
goals. The maximum payout for both the annual and long-term
incentive compensation is capped at 200% percent of target.
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Use of Multiple and Appropriate Performance Measures
Utilizing diversified performance measures helps
prevent compensation opportunities from being overly weighted
toward the performance result of a single measure. In general,
our incentive programs are based on a mix of financial and
individual goals. In 2010, our principal performance measures
were based on consolidated operating income and stock price
appreciation. Compared to other financial metrics, operating
income is a measure of the profitability of our business which
helps drive accountability at our operating segments thereby
reducing risks related to incentive compensation by putting the
focus on quality of revenues not quantity. For 2011 incentive
compensation, we incorporated return on invested capital and
diluted earnings per share in addition to operating income and
stock price appreciation. Operating income and return on
invested capital maintain the focus on operational performance
while earnings per share and stock price appreciation maintain a
focus on longer-term metrics that help drive stockholder value.
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Stock Ownership Guidelines Our executive
officers and directors are subject to share ownership guidelines
which also helps to promote longer-term perspectives and
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align the interests of our executive officers and directors with
those of our stockholders.
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The Compensation Committee administers our Executive Incentive
Compensation Plan (the EICP), under which it awards
annual cash-based incentive compensation to our officers based
on the attainment of annual performance goals. Our Compensation
Committee approves, among other things, target EICP compensation
for each officer and financial goals and, with respect to the
Chief Executive Officer, individual goals applicable to EICP
compensation. Our Chief Executive Officer and, in respect of the
Presidents of our principal operating groups, Chief Operating
Officer establish individual goals for our other executive
officers applicable to EICP compensation. This committee also
administers our 2010 Long-Term Incentive Plan of The
Babcock & Wilcox Company (the 2010 LTIP),
and may delegate some of its duties (other than awards to
directors under the 2010 LTIP) to our Chief Executive Officer or
other senior officers.
Compensation
Committee Interlocks and Insider Participation
All members of our Compensation Committee are independent in
accordance with the NYSE listing standards. No member of the
Compensation Committee (1) was, during the year ended
December 31, 2010, or had previously been, an officer or
employee of B&W or any of its subsidiaries or (2) had
any material interest in a transaction of B&W or a business
relationship with, or any indebtedness to, B&W. None of our
executive officers have served as members of a compensation
committee (or if no committee performs that function, the board
of directors) of any other entity that has an executive officer
serving as a member of our board of directors.
Governance
Committee:
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Mr. McWilliams (Chairman)
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Mr. Kingsley
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Adm. Mies
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Ms. Pramaggiore
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During the year ended December 31, 2010, the Governance
Committee met two times. This committee, in addition to other
matters, has overall responsibility to (1) establish and
assess director qualifications; (2) recommend nominees for
election to our Board of Directors; (3) oversee the annual
evaluation of our Board of Directors and management, including
the Chief Executive Officer in conjunction with our Compensation
Committee; and (4) oversee
13
our companys ethics and compliance program, excluding
certain oversight responsibilities assigned to the Audit and
Finance Committee of the Board under applicable statutes, rules
or regulations. This committee will consider individuals
recommended by stockholders for nomination as directors in
accordance with the procedures described under
Stockholders Proposals. This committee also
assists our Board with management succession planning and
director and officer insurance coverage.
Director
Nomination Process
Our Governance Committee is responsible for assessing the
qualifications, skills and characteristics of candidates for
election to the Board. In making this assessment, the Governance
Committee generally considers a number of factors, including
each candidates:
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professional and personal experiences and expertise in relation
to (1) our businesses and industries and (2) the
experiences and expertise of other Board members;
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integrity and ethics in
his/her
personal and professional life;
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professional accomplishment in
his/her
field;
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personal, financial or professional interests in any competitor,
customer or supplier of ours;
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preparedness to participate fully in board activities, including
active membership on at least one board committee and attendance
at, and active participation in, meetings of the board and the
committee(s) of which he or she is a member, and lack of other
personal or professional commitments that would, in the
Governance Committees sole judgment, interfere with or
limit his or her ability to do so; and
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ability to contribute positively to the Board and any of its
committees.
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Our bylaws provide that (1) a person shall not be nominated
for election or reelection to our Board of Directors if such
person shall have attained the age of 72 prior to the date of
election or re-election and (2) any director who attains
the age of 72 during his or her term shall be deemed to have
resigned and retired at the first Annual Meeting following his
or her attainment of the age of 72. Accordingly, a director
nominee may stand for election if he or she has not attained the
age of 72 prior to the date of election or reelection.
The Board recognizes the benefits of a diversified board and
believes that any search for potential director candidates
should consider diversity as to gender, ethnic background,
education, viewpoint and personal and professional experiences.
The Governance Committee solicits ideas for possible candidates
from a number of sources including members of the
Board, our Chief Executive Officer and other senior level
executive officers, individuals personally known to the members
of the Board and independent director candidate search firms.
In addition, any stockholder may nominate one or more persons
for election as one of our directors at an annual meeting of
stockholders if the stockholder complies with the notice,
information and consent provisions contained in our By-Laws. See
Stockholders Proposals in this proxy statement
and our By-Laws, which may be found on our Web site at
www.babcock.com at Investor Relations
Corporate Governance Highlights.
The Governance Committee will evaluate properly identified
candidates, including nominees recommended by stockholders,
based on the assessment and factors described above. The
Governance Committee also takes into account the contributions
of incumbent directors as Board members and the benefits to us
arising from the experience of incumbent directors on the Board.
Although the Governance Committee will consider candidates
identified by stockholders, the Governance Committee has sole
discretion whether to recommend those candidates to the Board.
Safety &
Security Committee:
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Adm. Mies (Chairman)
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Mr. Fees
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Mr. Kingsley
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Mr. Weyers
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During the year ended December 31, 2010, the
Safety & Security Committee met three times. This
committee has general oversight responsibility regarding the
safety, security and reliability of our business operations with
specific focus on environmental, regulatory, safety and security
matters. In the performance of its responsibilities the
committee will review reports and information from management
and others and visit key operating facilities and, where
appropriate, meet with regulatory authorities. The
Safety & Security Committee has the authority to
engage outside consultants or other advisors to assist it in the
discharge of its responsibilities.
14
Compensation
of Directors
At the time of our spin-off from McDermott, some of our
directors Messrs. John A. Fees, Robert W.
Goldman, Stephen G. Hanks, Oliver D. Kingsley, Jr. and D.
Bradley McWilliams and Admiral Richard W. Mies (the
Spin-Off Directors) served on the board
of directors of McDermott. The Spin-Off Directors, other than
Mr. Fees who was McDermotts Chief Executive Officer
at the time, received compensation in connection with their
McDermott board service. On July 2, 2010, the Spin-Off
Directors were elected members of our Board of Directors and,
other than Messrs. Hanks and McWilliams, resigned effective
July 30, 2010 (the effective date of spin-off) from the
Board of Directors of McDermott. None of the Spin-Off Directors
received any compensation for their service on our Board of
Directors prior to the spin-off. Mr. Larry L. Weyers was
appointed to our Board in December 2010. No information is
provided for Ms. Anne R. Pramaggiore since she was
appointed to our Board in January 2011 and was not a director at
any time during the year ended December 31, 2010.
Therefore, the table below summarizes the compensation earned by
or paid to our non-employee directors only for services as a
member of our Board of Directors for the period from
July 30, 2010 through December 31, 2010. Directors who
are also our employees do not receive any compensation for their
service as directors.
Director
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
Stock
|
|
|
Name of Non-Employee Director
|
|
Paid in Cash(1)
|
|
Awards(2)
|
|
Total
|
John A. Fees(3)
|
|
$
|
126,750
|
|
|
$
|
109,980
|
|
|
$
|
236,730
|
|
Robert W. Goldman
|
|
$
|
51,250
|
|
|
|
|
|
|
$
|
51,250
|
|
Stephen G. Hanks
|
|
$
|
41,250
|
|
|
|
|
|
|
$
|
41,250
|
|
Oliver D. Kingsley Jr.
|
|
$
|
53,500
|
|
|
|
|
|
|
$
|
53,500
|
|
D. Bradley McWilliams
|
|
$
|
54,750
|
|
|
|
|
|
|
$
|
54,750
|
|
Richard W. Mies
|
|
$
|
53,000
|
|
|
|
|
|
|
$
|
53,000
|
|
Larry L. Weyers
|
|
$
|
12,250
|
|
|
$
|
54,986
|
|
|
$
|
67,236
|
|
|
|
|
(1) |
|
See Fees Earned or Paid in Cash below for a
discussion of the amounts reported in this column. |
|
(2) |
|
See Stock Awards below for a discussion of the
amounts reported in these columns. |
|
(3) |
|
Prior to the spin-off, Mr. Fees was employed by various
affiliates of McDermott for 31 years and participated in
qualified and non-qualified pension plans sponsored by such
affiliates. We assumed the assets and liabilities in respect of
those pensions in connection with the spin-off. The payment of
the pension is not conditioned on his service as a director and,
therefore, the Director Compensation Table does not include any
information regarding Mr. Fees pension benefits.
Additionally, this table does not include a contribution of
$87,051 by McDermott prior to the spin-off to
Mr. Fees account under McDermotts supplemental
executive retirement plan in connection with his service as
McDermotts Chief Executive Officer. In connection with the
spin-off, we adopted a supplemental executive retirement plan
and assumed all liabilities of McDermotts plan
attributable to post spin-off employees and directors, including
Mr. Fees. |
During 2010, non-employee director compensation generally
consisted of cash and equity, as described in more detail below.
Fees Earned or Paid in Cash. Under our
current director compensation program, non-employee directors
are eligible to receive the following cash compensation:
|
|
|
|
|
an annual retainer of $45,000, paid in quarterly installments
(prorated for partial term); and
|
|
|
|
a fee of $2,500 for each Board meeting personally attended,
$1,750 for each meeting
|
|
|
|
|
|
of a committee of which they are a member personally attended
and $1,000 for each Board meeting and meeting of a committee of
which they are a member attended by telephone.
|
The chairs of Board committees, the Lead Independent Director
and the Non-Executive Chairman receive additional annual
retainers, paid in quarterly installments, as follows (prorated
for partial term):
|
|
|
|
|
the chair of each of the Audit & Finance Committee and
the Compensation Committee: $20,000;
|
15
|
|
|
|
|
the chair of the Safety & Security Committee: $15,000;
|
|
|
|
the chair of the Governance Committee: $10,000;
|
|
|
|
the Lead Independent Director: $10,000; and
|
|
|
|
the Non-Executive Chairman: $175,000.
|
We also reimburse directors for travel and other expenses
incurred in connection with their service on the Board.
Stock Awards. In addition to the cash
payments provided to our directors, each non-employee director
was entitled to receive a number of restricted shares of our
common stock equal to $110,000 (prorated for partial term)
divided by the closing price of our common stock on the grant
date, rounded down to the nearest whole share. The amount
reported for Mr. Weyers is attributable to restricted
shares of our common stock received in connection with his
appointment to our Board and represent the prorated amount of
the non-employee director stock grant. The restricted stock
awards were granted under our 2010 LTIP and vested immediately
on the date of grant. See Proposal 4 below for more
information regarding the 2010 LTIP.
In May 2010, prior to the spin-off, McDermott made the same
grant (the McDermott Grant) of restricted shares of
McDermott common stock equal to $110,000 to its then-current
directors, including the Spin-Off Directors other than
Mr. Fees. Those
directors each received 4,243 shares of McDermott common
stock, with a grant date fair value computed in accordance with
Financial Accounting Standards Board Accounting Standards
Codification (FASB ASC) Topic 718 of $109,979. At
the time of the McDermott Grant, the compensation of the
non-employee directors following the spin-off was discussed and
it was decided that no director appointed to our Board, other
than Mr. Fees, who was expected to be appointed Chairman of
our Board at the time, would receive any equity-based
compensation relating to post-spin-off board service for the
2010/2011 term. As a result, no Spin-Off Director received any
of our equity in connection with their 2010 Board service, other
than Mr. Fees. The Spin-Off Directors who received the
4,243 shares of McDermott common stock received
2,121 shares of B&W common stock and a cash payment in
lieu of a B&W fractional share of $11.58 through the
spin-off.
The amounts reported in the Stock Awards column
represent the grant date fair value computed in accordance with
FASB ASC Topic 718. Grant date fair values are determined using
the closing price of our common stock on the date of grant.
The following table reflects the number of shares and grant date
fair value with respect to each award of restricted shares of
our common stock granted to non-employee directors in 2010 and
the stock and option awards each non-employee director had
outstanding as of December 31, 2010.
Equity
Awards Granted to Directors in 2010 and
Outstanding at December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B&W Equity Awards
|
|
|
B&W Equity Awards Outstanding at
|
|
|
|
Granted in 2010
|
|
|
December 31, 2010(1)
|
|
|
|
|
|
Shares of
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
Grant Date
|
|
|
|
|
|
Name
|
|
|
Grant Date
|
|
Stock
|
|
Fair Value
|
|
|
Stock Awards
|
|
Option Awards
|
John A. Fees
|
|
|
|
August 12, 2010
|
|
|
|
4,912
|
|
|
$
|
109,980
|
|
|
|
|
72,270
|
(2)
|
|
|
98,572
|
|
Robert W. Goldman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
5,115
|
|
Stephen G. Hanks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
Oliver D. Kingsley Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
20,616
|
|
D. Bradley McWilliams
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
18,938
|
|
Richard W. Mies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
Larry L. Weyers
|
|
|
|
December 10, 2010
|
|
|
|
2,248
|
|
|
$
|
54,986
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(1) |
|
The equity awards reported represent B&W awards converted
in connection with the spin-off from awards originally granted
by McDermott prior to 2010. |
|
(2) |
|
The shares reported represent shares in a B&W restricted
stock unit award which vested in connection with the spin-off
but which, under the terms of the grant agreement, are not
payable in B&W common stock until October 1, 2011. |
16
Named
Executives Profiles
The following are named executive officer profiles that
summarize the compensation earned or paid in 2010 to our Chief
Executive Officer, our Chief Financial Officer and our three
other most highly compensated executive officers, whom we refer
to as our Named Executives. The individual executive
profiles provide biographical information, including age as of
May 12, 2011, and summarize the compensation disclosures
that are provided in the Compensation Discussion and Analysis
and executive compensation tables in this proxy statement. Prior
to July 30, 2010, the effective date of our spin-off from
McDermott, we were a subsidiary of McDermott. Accordingly,
compensation information presented reflects compensation for the
year ended December 31, 2010 paid to our Named Executives
by McDermott
and its subsidiaries prior to the spin-off and by us and our
subsidiaries after the spin-off.
These profiles are supplemental, and are being provided in
addition to, and not in substitution for, the detailed
compensation tables required by the SEC that follow. We believe
these profiles provide stockholders with a concise and easy to
understand summary of compensation paid to Named Executives for
2010. The compensation information presented in the following
executive profiles is derived from the more detailed
compensation tables contained in the Compensation of
Executive Officers section below and should be read in
conjunction with those tables, the narrative disclosures
following the tables and the Compensation Discussion and
Analysis.
17
Brandon
C. Bethards
President,
Chief Executive Officer & Director,
The
Babcock & Wilcox Company
Age: 63
Tenure with B&W (including as subsidiary of McDermott):
37 years
Mr. Bethards has been President and Chief Executive Officer
of B&W since November 2008 after serving as Interim Chief
Executive Officer since September 2008. He joined the
predecessor to B&W PGG, our principal operating subsidiary
providing power generation, environmental, and clean energy
solutions, in the early 1970s and served most recently as its
President from January 2007 to October 2008 and Senior Vice
President and General Manager of its Fossil Power Division from
February 2001 to January 2007. His earlier positions within
B&W PGG include Vice President of Business Development,
General Manager, District Engineer and Field Service Engineer.
2010
Compensation
|
|
|
|
|
|
|
|
|
|
Annual Base Salary
|
|
|
|
|
Base Salary
|
|
$
|
665,503
|
|
|
|
|
|
|
Annual Incentive Compensation
|
|
|
|
|
Executive Incentive Compensation Plan
|
|
$
|
841,500
|
|
|
|
|
|
|
Long-Term Incentive Compensation
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock Units
|
|
$
|
1,249,963
|
|
Restricted Stock (Retention Agreement)
|
|
$
|
941,062
|
|
Stock Options
|
|
$
|
865,320
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual Increase in Accumulated Pension Benefit
|
|
$
|
509,958
|
|
|
|
|
|
|
Other Compensation
|
|
|
|
|
SERP Contribution
|
|
$
|
52,275
|
|
Thrift Match
|
|
$
|
4,900
|
|
Service-Based Thrift Contribution
|
|
|
N/A
|
|
Tax Gross-Ups
|
|
$
|
7,038
|
|
Perquisites and Personal Benefits
|
|
$
|
47,079
|
|
2010
Total Direct Compensation
18
Michael
S. Taff
Senior
Vice President & Chief Financial Officer,
The
Babcock & Wilcox Company
Age: 49
Tenure with B&W (including as a subsidiary of McDermott):
6 years
Michael S. Taff has been our Senior Vice President and Chief
Financial Officer since July 2010. Prior to the spin-off,
Mr. Taff served as Senior Vice President and Chief
Financial Officer of McDermott from April 2007 until July 2010
and prior to that as Vice President and Chief Accounting Officer
from June 2005 until April 2007. Previously, Mr. Taff
served as Vice President and Chief Financial Officer of HMT
Inc., an engineering and construction company, from June 2004 to
June 2005 and as Vice President and Corporate Controller of
Philip Services Corporation, a provider of industrial,
environmental, transportation and container services, from
September 1994 to May 2004.
2010
Compensation
|
|
|
|
|
|
|
|
|
|
Annual Base Salary
|
|
|
|
|
Base Salary
|
|
$
|
516,363
|
|
|
|
|
|
|
Annual Incentive Compensation
|
|
|
|
|
Executive Incentive Compensation Plan
|
|
$
|
359,936
|
|
|
|
|
|
|
Long-Term Incentive Compensation
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock Units
|
|
$
|
302,996
|
|
Restricted Stock (Retention Agreement)
|
|
$
|
605,025
|
|
Stock Options
|
|
$
|
209,751
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual Increase in Accumulated Pension Benefit
|
|
|
N/A
|
|
|
|
|
|
|
Other Compensation
|
|
|
|
|
Cash Bonus (Retention Agreement)
|
|
$
|
294,752
|
|
SERP Contribution
|
|
$
|
37,810
|
|
Thrift Match
|
|
$
|
7,350
|
|
Service-Based Thrift Contribution
|
|
$
|
7,671
|
|
Tax Gross-Ups
|
|
$
|
3,022
|
|
Perquisites and Personal Benefits
|
|
$
|
28,114
|
|
2010
Total Direct Compensation
19
Mary
Pat Salomone
Senior
Vice President & Chief Operating Officer,
The
Babcock & Wilcox Company
Age: 51
Tenure with B&W (including as a subsidiary of McDermott):
28 years
Mary Pat Salomone has served as our Chief Operating Officer
since January 2010. Most recently she served as Manager of
Business Development for Babcock & Wilcox Nuclear
Operations Group, Inc. (B&W NOG) from January
2009 until January 2010. She also served as Manager of Strategic
Acquisitions for B&W NOG from January 2008 to January 2009.
From 1998 through December 2007, Ms. Salomone served as an
officer of Marine Mechanical Corporation, which was acquired by
us in May 2007, including as President and Chief Executive
Officer from 2001 through December 2007. Ms. Salomone
previously served with two of B&Ws operating
divisions, Nuclear Equipment Division and Fossil Power Division,
from 1982 until 1998, in a variety of positions, including
Manager of Navy Contracts, Project Manager and Manager of
Quality Assurance Engineering.
2010
Compensation
|
|
|
|
|
|
|
|
|
|
Annual Base Salary
|
|
|
|
|
Base Salary
|
|
$
|
406,000
|
|
|
|
|
|
|
Annual Incentive Compensation
|
|
|
|
|
Executive Incentive Compensation Plan
|
|
$
|
242,829
|
|
|
|
|
|
|
Long-Term Incentive Compensation
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock Units
|
|
$
|
300,026
|
|
Stock Options
|
|
$
|
207,699
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual Increase in Accumulated Pension Benefit
|
|
$
|
577,713
|
|
|
|
|
|
|
Other Compensation
|
|
|
|
|
SERP Contribution
|
|
|
N/A
|
|
Thrift Match
|
|
$
|
6,230
|
|
Service-Based Thrift Contribution
|
|
|
N/A
|
|
Tax Gross-Ups
|
|
$
|
7,706
|
|
Perquisites and Personal Benefits
|
|
$
|
82,118
|
|
2010
Total Direct Compensation
20
a
Richard
L. Killion
President &
Chief Operating Officer,
Babcock &
Wilcox Power Generation Group, Inc.
Age: 63
Tenure with B&W (including as a subsidiary of McDermott):
40 years
Richard L. Killion was named President and Chief Operating
Officer of B&W PGG in November 2008, after service as
Interim President of B&W PGG since September 2008. He
joined B&W in 1970 and has served as Vice President and
General Manager of B&W PGGs Fossil Power Division,
where he served from May 2007 to September 2008; Vice President
of B&Ws Fossil Steam Generating Systems from June
2006 to May 2007; and Director of Global Joint Ventures from May
2002 to June 2006. His earlier positions with B&W PGG
include General Manager of Babcock & Wilcox Beijing
Company Ltd.
2010
Compensation
|
|
|
|
|
|
|
|
|
|
Annual Base Salary
|
|
|
|
|
Base Salary
|
|
$
|
348,765
|
|
|
|
|
|
|
Annual Incentive Compensation
|
|
|
|
|
Executive Incentive Compensation Plan
|
|
$
|
193,639
|
|
|
|
|
|
|
Long-Term Incentive Compensation
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock Units
|
|
$
|
239,215
|
|
Stock Options
|
|
$
|
165,623
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual Increase in Accumulated Pension Benefit
|
|
$
|
338,891
|
|
|
|
|
|
|
Other Compensation
|
|
|
|
|
SERP Contribution
|
|
|
N/A
|
|
Thrift Match
|
|
$
|
7,350
|
|
Service-Based Thrift Contribution
|
|
|
N/A
|
|
Tax Gross-Ups
|
|
$
|
0
|
|
Perquisites and Personal Benefits
|
|
$
|
|
|
2010
Total Direct Compensation
21
Winfred
D. Nash
Former
President,
Babcock &
Wilcox Nuclear Operations Group, Inc.
Age: 67
Tenure with B&W (including as a subsidiary of McDermott):
41 years
Winfred D. Nash retired from B&W April 1, 2011.
Previously, he served as President of B&W NOG, our
principal operating subsidiary providing products and services
to the U.S. government and commercial customers, since
November 2007. He joined B&W in the late 1960s and
previously served as President of our Nuclear Operations
Division from September 2006 to November 2007 and as Vice
President and General Manager of BWX Technologies, Inc., the
holding company of our Government Operations segment businesses
(BWXT) from March 2001 to September 2006. His
earlier positions within our Nuclear Government Operations group
included a major leadership role with Operations, Quality
Control and Program Management.
2010
Compensation
|
|
|
|
|
|
|
|
|
|
Annual Base Salary
|
|
|
|
|
Base Salary
|
|
$
|
357,000
|
|
|
|
|
|
|
Annual Incentive Compensation
|
|
|
|
|
Executive Incentive Compensation Plan
|
|
$
|
172,409
|
|
|
|
|
|
|
Long-Term Incentive Compensation
(Grant Date Fair Value)
|
|
|
|
|
Restricted Stock Units
|
|
$
|
217,513
|
|
Stock Options
|
|
$
|
150,562
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
|
Annual Increase in Accumulated Pension Benefit
|
|
$
|
116,224
|
|
|
|
|
|
|
Other Compensation
|
|
|
|
|
SERP Contribution
|
|
$
|
32,040
|
|
Thrift Match
|
|
$
|
6,220
|
|
Service-Based Thrift Contribution
|
|
|
N/A
|
|
Tax Gross-Ups
|
|
$
|
441
|
|
Perquisites and Personal Benefits
|
|
$
|
|
|
2010
Total Direct Compensation
22
Executive
Officers
Set forth below is the age (as of May 12, 2011), the
principal positions held with B&W or our subsidiaries, and
other business experience information for each of our current
executive officers other than our Named Executives. For
information on our Named Executives, see Named Executives
Profiles above. Unless otherwise indicated, all positions
described below are positions with The Babcock &
Wilcox Company.
Jenny L. Apker, 53, has served as our Vice President and
Treasurer since joining us in June 2010. Previously,
Ms. Apker served as Vice President and Treasurer with Dex
One Corporation (formerly R.H. Donnelley Corporation), a
marketing services company, from May 2003 until June 2010.
Vangel Athanas, 55, has served as our Vice President of Human
Resources since joining us in August 2008. Prior to joining us,
Mr. Athanas served with Computer Sciences Corporation, an
information technology outsourcing and services provider, from
1995 until August 2008, including his most recent position as
the Vice President, Human Resources of World Sourcing Services
from April 2007 to August 2008. Mr. Athanas previously
served as the Director, Human Resources, Global Transformation
Solutions of Computer Sciences Corporation from April 2004 to
April 2007. Prior to that, Mr. Athanas was employed by the
Electric Boat Division of General Dynamics from 1979 to 1995 in
human resources roles of increasing responsibility.
Peyton S. Baker, 63, has served as President of B&W NOG
since April 2011. He joined B&W in 1971 and has served in
various capacities with B&W NOG, including most recently as
Vice President of Programs, Contracts and Central Planning from
August 2009 to April 2011; Manager, Programs from August 2006 to
August 2009 and Manager, Project Management of the Nuclear
Operations Division from January 2005 to August 2006. His
earlier positions include Project Manager of the Advanced
Carrier Program at B&W NOG, President and General Manager
of BWXT of Ohio, Inc., Managing Director of our former
subsidiary, Babcock & Wilcox Egypt SAE, and General
Manager of Engineering Research, Inc., one of our Department of
Defense businesses.
David S. Black, 49, has served as our Vice President and Chief
Accounting Officer since July 2010. Prior to the spin-off,
Mr. Black served as our Vice President and Controller since
January 2007 and Vice President and Controller of BWXT from
September 2003 to January 2007. He joined B&W in 1991 as
General Accounting Manager for the Nuclear Environmental
Services Division. Other positions he held with B&W include
Financial Services Manager for the ASD Service Center Division,
Controller for B&W Federal Services, Inc., and Controller
for BWXT Services, Inc.
James D. Canafax, 40, has served as our Senior Vice President,
General Counsel and Corporate Secretary since July 2010. Prior
to the spin-off, Mr. Canafax had been affiliated with
McDermott since July 2001, where he served as Assistant General
Counsel for McDermott from January 2007 until July 2010; Senior
Counsel, Legal Manager and Assistant Secretary for J. Ray
McDermott, Inc. (JRMI) from July 2004 through
December 2006; and Counsel and Contracts Manager for JRMI from
July 2001 until July 2004. Previously he was an associate
attorney with Jones, Walker, Waechter, Poitevent,
Carrère & Denègre L.L.P. in New Orleans,
Louisiana.
S. Robert Cochran, 58, has served as President of
Babcock & Wilcox Technical Services Group, Inc., our
principal operating subsidiary providing management, operational
and technical services for U.S. government facilities and
private industry, since July 2006. He joined our company as
Senior Vice President of Strategic Development for BWXT, in
which position he served from June 2005 through July 2006. Prior
to joining B&W, Mr. Cochran served as Senior Vice
President of Tyco Infrastructure and President of Kaiser Group
International, Inc.
George Dudich, 50, rejoined B&W following the spin-off in
August 2010 as our Senior Vice President of Business Development
and Strategic Planning. From 1990 to 1999, he served our company
in a number of positions of increasing responsibility, including
Vice President of Business Development for a prior subsidiary of
ours, B&W Services, Inc.; Project Procurement Manager for
B&W PGG; and Manager, ASRM Subcontracts, in our former
Aerospace Components Division. Prior to joining us in August
2010, he served as Senior Vice President of Business Development
for Washington Group beginning in 2004 until
URS Corporation acquired Washington Group, at which time he
became the Senior Vice President of Business Development for the
Global Management and Operations Services group of
URS Corporation through July 2010.
23
Christofer M. Mowry, 48, has served as President of
Babcock & Wilcox Nuclear Energy, Inc. (B&W
NE), our principal operating subsidiary manufacturing
nuclear components and providing services for commercial nuclear
customers, since April 2010. He joined B&W in August 2008,
serving as Senior Vice President and Chief Business Development
Officer until June 2009 and then as President of
Babcock & Wilcox Modular Nuclear Energy, LLC until
April 2010 when it was consolidated under Babcock &
Wilcox Nuclear Power Group, Inc. (which changed its name to
B&W NE). Prior to joining B&W, Mr. Mowry served
as President and Chief Operating Officer of Welding Services,
Inc., an energy services company located in Atlanta, Georgia,
from January 2005 through June 2008. Previously, he held various
global management positions with GE Energy from June 1995 until
January 2005, after spending 11 years with the utility PECO
Energy.
24
Advisory
Vote on Executive Compensation
(PROPOSAL 2)
In accordance with recently adopted Section 14A of the
Securities Exchange Act of 1934, as amended (the Exchange
Act), we are asking stockholders to approve an advisory
resolution on our executive compensation as reported in this
proxy statement.
It is our belief that our ability to hire, retain and motivate
employees is essential to the success of the company and its
stockholders. Therefore, we generally seek to design executive
compensation:
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that provides reasonable and competitive pay, when compared to
companies with whom we compete for personnel; and
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a substantial portion is performance-based compensation
structured to drive and reward the achievement of objectives
expected to create stockholder value.
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As a result, our executive compensation is structured in the
manner that we believe best serves the interests of the company
and its stockholders. We encourage stockholders to read the
Compensation Discussion and Analysis section of this proxy
statement which provides a more thorough review of our
compensation philosophy and how that philosophy was implemented
in 2010. We have given considerable attention to how, why and
what we pay our executives. Recognizing that no single
compensation structure will match perfectly with all
stockholders, we believe that our compensation practices are
effective in balancing motivation with retention and ultimately
in achieving the goal of driving the creation of stockholder
value.
Accordingly, we submit the following resolution to stockholders
at the 2011 Annual Meeting:
RESOLVED, that the stockholders of The Babcock &
Wilcox Company approve, on an advisory basis, the compensation
of executives,
as such compensation is disclosed pursuant to Item 402 of
Regulation S-K
in this proxy statement under the sections entitled
Compensation Discussion and Analysis and
Compensation of Executive Officers.
Effect of
Proposal
The resolution to approve our executive compensation is
non-binding on us and our Board of Directors and Compensation
Committee. Accordingly, even if the resolution is approved, the
Board of Directors and Compensation Committee retain discretion
to change executive compensation from time to time if it
concludes that such a change would be in the best interest of
the company. No determination has been made as to what action,
if any, would be taken if our stockholders fail to approve
executive compensation. However, our Board of Directors and its
Compensation Committee value the opinions of stockholders on
important matters such as executive compensation and will
carefully consider the results of this advisory vote when
evaluating our executive compensation programs.
Recommendation
and Vote Required
Our Board of Directors recommends that stockholders vote
FOR the approval of executive compensation. The
proxy holders will vote all proxies received for approval of
this proposal unless instructed otherwise. Approval of this
proposal requires the affirmative vote of a majority of the
outstanding shares of common stock present in person or
represented by proxy and entitled to vote on this proposal at
the Annual Meeting. Because abstentions are counted as present
for purposes of the vote on this matter but are not votes
FOR this proposal, they have the same effect as
votes AGAINST this proposal. Broker non-votes will
not have any effect on this proposal.
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Advisory
Vote on the Frequency
of the Vote on Executive Compensation
(PROPOSAL 3)
We will provide an advisory vote on executive compensation at
least once every three years. In accordance with
Section 14A of the Exchange Act, we are asking stockholders
for an advisory vote on how frequently future advisory votes to
approve executive compensation should occur.
After careful consideration, the Board of Directors recommends
that the advisory vote to approve executive compensation occur
every year (annually). We believe this frequency is appropriate
at this time for the following reasons:
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we value stockholder input on executive compensation and believe
that an annual advisory vote will provide us with regular input
on important issues relating to executive compensation; and
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we became an independent public company through a spin-off to
McDermott stockholders on July 30, 2010 and an annual
advisory vote on executive compensation will allow stockholders
to provide direct input as we formulate the compensation
philosophy, policies and practices of executive compensation.
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Effect of
Proposal
The vote on the frequency of advisory votes to approve executive
compensation is non-binding on us
and our Board of Directors. Our Board of Directors values the
opinions of stockholders and will carefully consider the results
of this advisory vote. However, irrespective of the Board of
Directors recommendation and the results of the
stockholder vote, the Board of Directors may decide to conduct
an advisory vote to approve executive compensation on a more or
less frequent basis as it determines would be in the best
interest of the company.
Recommendation
and Vote Required
Our Board of Directors recommends that stockholders vote for a
frequency of 1 YEAR for the advisory vote to approve
executive compensation. Stockholders are asked to specify one of
four votes on this proposal: one year, two years, three years or
abstain. Stockholders are not voting to approve or disapprove of
the Board of Directors recommendation. The proxy holders
will vote all proxies received for an advisory vote to approve
executive compensation every three years unless instructed
otherwise. Approval of the frequency of an advisory vote to
approve executive compensation requires the affirmative vote of
a majority of the outstanding shares of common stock present in
person or represented by proxy and entitled to vote on this
proposal at the Annual Meeting. Abstentions are counted as
present for purposes of the vote on this matter. Broker
non-votes will not have any effect on this proposal.
26
Compensation
Discussion and Analysis
The following Compensation Discussion and Analysis, or
CD&A, provides information relevant to understanding the
compensation of our Named Executives for 2010. It should be read
in conjunction with the compensation tables and accompanying
narratives under Compensation of Executives
below.
Summary
On July 30, 2010, The Babcock & Wilcox Company
became an independent public company through a spin-off from our
former parent company, McDermott International, Inc., or
McDermott. As a result, much of the compensation awarded to and
earned by our Named Executives in 2010 was determined before the
spin-off by the compensation committee of McDermotts board
of directors, which we refer to as the McDermott Compensation
Committee. Following the spin-off, the compensation committee of
our board of directors, which we refer to as our Compensation
Committee, reviewed and, in some cases, adjusted the target
total direct compensation established by the McDermott
Compensation Committee to ensure that target compensation of our
corporate and operational officers was reasonable, competitive
and appropriate for B&W, as an independent company. We have
summarized key characteristics of 2010 compensation of our Named
Executives below:
Reasonable
Target and Actual Direct Compensation
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the amount of 2010 total direct compensation targeted for our
Named Executives was, on average, approximately 8% higher than
the average median total direct compensation paid to comparable
positions as benchmarked against our peer group;
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2010 target total direct compensation decreased from 2009 target
compensation for Named Executives serving in equivalent
positions in both years, including Messrs. Taff, Killion
and Nash; and
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the average total direct compensation actually paid to our Named
Executives in 2010 was approximately 5% higher than the average
median total direct compensation paid to comparable positions as
benchmarked against our peer group.
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Performance
and Variable Compensation Emphasized
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performance-based compensation, which is compensation earned
solely on the attainment of objective criteria or increases in
our share price, represented approximately 47% of our Named
Executives average 2010 target total direct compensation;
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performance-based compensation represented 50% of the 2010
target long-term incentive compensation, which consisted of
stock options and restricted stock units, of each of our Named
Executives; and
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variable compensation, which consisted of annual and long-term
incentive compensation, represented approximately 74% of our
Named Executives average 2010 target total direct
compensation.
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We believe that compensation, structured properly, should not
only reward performance but also drive performance. To that end,
a significant amount of our Named Executives 2010 target
total direct compensation was performance-based, designed to
promote and reward the achievement of short- and longer-term
objectives that are expected to drive shareholder value. The
chart below demonstrates the composition of target total direct
compensation in 2010 and highlights the emphasis on
performance-based and variable compensation.
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At approximately 47% of average target total direct
compensation, performance-based compensation represented a
smaller percentage of target compensation for our executives
than in prior years, due to the increased emphasis on retention
by the McDermott Compensation Committee in anticipation of the
spin-off. However, at nearly 75%, variable compensation, the
value of which is at-risk and depends on company
performance
and/or stock
price, continued to represent a substantial majority of average
target compensation of our Named Executives in 2010.
Variable compensation consisted of annual and long-term
components. For 2010, annual incentive compensation was
structured to promote the timely completion of the spin-off and
to maintain management focus and discipline on the production of
operating income and investment in long-term initiatives during
challenging economic conditions facing our Power Generation
Systems segment. Long-term incentive compensation in 2010
focused on long-term stock appreciation and retention following
the spin-off, with one-half of long-term incentive compensation
consisting of stock options and one-half of restricted stock
units.
Performance &
Compensation
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Since the spin-off on July 30, 2010, our stock has
appreciated over 12% through December 31, 2010.
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Our Government Operations segment produced operating income of
$182.9 million, which represents the highest annual
operating income for this segment since we began reporting it as
a separate segment in 1996.
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Our Power Generation Systems segment earned $100.7 million
in operating income despite a challenging economic environment.
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On a consolidated basis, after funding $69.2 million in
R&D (net of amounts paid by our customers) which
represented an increase of approximately 30% from fiscal year
2009, we earned $264.0 million in operating income,
compared to $269.6 million in 2009.
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2010 annual incentive compensation for our Named Executives was
based on consolidated operating income goals, resulting in
payouts to Named Executives at just below target level. Despite
a slight decline in consolidated operating income, the annual
incentive compensation paid to our Named Executives in 2010
relative to target compensation was considerably less
than 2009, in which our Named Executives were eligible to earn
the maximum level payout.
To increase the focus on
pay-for-performance
in 2011, our Compensation Committee determined that at least a
majority of 2011 target total direct compensation for our
executives would be performance-based. For 2011,
performance-based compensation represents approximately 62% and
variable compensation represents approximately 77% of target
total direct compensation of our Named Executives, excluding
Mr. Nash whose incentive compensation for 2011 was
structured differently from the other Named Executives as a
result of his announced retirement. For both annual incentive
and long-term incentive compensation in 2011, we have expanded
the performance metrics used by adding return on invested
capital under our long-term and annual incentive plans in an
effort to emphasize short and longer-term focus on returns from
our operations and diluted earnings per share under our
long-term incentive plan to emphasize a longer-term focus on
performance metrics that we believe drive stockholder value. We
are submitting the material terms for performance-based awards
applicable under these plans to a vote at our 2011 Annual
Meeting of Stockholders. See Proposal 4 below for more
information regarding the amended and restated 2010 LTIP and
Proposal 5 below for more information regarding the amended
and restated EICP.
For 2011, our Compensation Committee awarded target long-term
compensation to our Named Executives as follows:
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50% performance shares, based one-half on the achievement of
cumulative diluted earnings per share targets and one-half on
the achievement of average annual return on invested capital
targets;
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25% stock options; and
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25% restricted stock units.
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Changes
in Compensation Programs
Following the spin-off, we reviewed the compensation
arrangements of our Named Executives and implemented a number of
changes, including:
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Appointment of a new independent compensation consultant.
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Creation of a change in control program, which includes
non-solicitation and non-competition restrictions and does not
provide for any tax
gross-up.
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Adoption of enhanced stock ownership guidelines, which increase
our Chief Executive Officer ownership guideline to five times
his annual base salary and the members of our Board of Directors
ownership guideline to five times the annual retainer of a
director.
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Adoption of clawback provisions in our 2011 annual and long-term
incentive compensation awards, which provide for our ability to
recover excess amounts paid to individuals who knowingly engaged
in fraud resulting in a restatement.
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Overview
of Compensation Programs
Administration and Consultants. Our
executive compensation programs are administered by our
Compensation Committee. However, prior to the spin-off, our
executive compensation program was initially designed by the
McDermott Compensation Committee, which established the basic
structure of executive compensation, including the initial
annual base salaries, components of annual incentive
compensation and the type and amount of target long-term
incentive compensation. The McDermott Compensation Committee
engaged Meridian Compensation Partners, LLC, which we refer to
as Meridian, as its outside compensation consultant to advise on
principal elements of McDermotts compensation programs.
Meridian spun-off from Hewitt Associates LLC
(Hewitt) in February 2010 and prior to then, Hewitt
served as the consultant to the McDermott Compensation Committee
Neither McDermotts nor our management directed or oversaw
the retention or activities of Meridian; although Meridian
sought and received input from and worked with McDermotts
and our executive management on various matters and to formalize
proposals for the McDermott Compensation Committee. Meridian did
not perform any services for us during 2010, except as described
below, and we are not aware of any other services provided by
Meridian for McDermott during 2010. Hewitt assisted
McDermotts management in preparing the performance graph
included in McDermotts annual report on
Form 10-K
for the year ended December 31, 2010, otherwise we are not
aware of any other services provided by Hewitt for McDermott
during 2010.
Following the spin-off, our Compensation Committee retained
Meridian as its interim compensation consultant while conducting
a search for an independent consultant. In November 2010, our
Compensation Committee engaged Hay Group Inc., which we refer to
as Hay Group, to provide advice and analysis on the design,
structure and level of executive and director compensation. Our
management does not direct or oversee the retention or
activities of Hay Group; although Hay Group seeks and receives
input from and works with our management on various compensation
matters and to formalize proposals for our Compensation
Committee. Additionally, in determining executive compensation,
our Compensation Committee considers recommendations from Hay
Group as well as the joint recommendation of our Vice President
of Human Resources and our Chief Executive Officer. Hay Group
did not perform any other services for us during 2010.
Following the spin-off, our Compensation Committee reviewed the
compensation arrangements established by McDermott prior to the
spin-off, including the compensation arrangements of the Named
Executives, for alignment with our compensation philosophy and
objectives. Except as discussed in Analysis of
Target Total Direct Compensation below, our Compensation
Committee deferred adjusting target compensation (other than
annual incentive compensation for internal equity reasons) until
our normal annual review cycle in February 2011. Unless
otherwise indicated, the information provided in this CD&A
reflects the compensation of our Named Executives as approved or
adjusted by our Compensation Committee following the spin-off.
Philosophy and Objectives. We believe
that our ability to attract, retain and motivate qualified
employees is essential to the success of our company. As a
result, our compensation programs seek to provide reasonable and
competitive compensation and are generally structured to:
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incent and reward short- and long-term performance, continuity
of service and individual contributions; and
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promote retention of well-qualified executives, while aligning
the interests of our executives with those of our stockholders.
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Elements. Our Compensation Committee
sets the total direct compensation for our executives to achieve
these objectives. Total direct compensation consists of the
following three elements:
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annual base salary;
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annual incentive compensation; and
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long-term incentive compensation.
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While our Compensation Committee does not set a specific target
allocation among the elements of total direct compensation, it
believes that a significant portion of a Named Executives
total direct compensation should be performance-based. Annual
base salary provides a fixed level of compensation that helps
attract and retain highly qualified executives. Annual incentive
and long-term incentive compensation are the principal
performance-based components of a Named Executives
compensation. The annual incentive element is cash-based
compensation generally designed to incent a Named Executive to
achieve performance goals relative to the then-current fiscal
year. Long-term incentives are generally equity-based and are
designed to retain executives and align the interests of
executives with our stockholders. Like our annual incentives,
performance-based long-term incentive compensation is designed
to promote the achievement of performance goals, only over a
longer period typically of three or more years.
As we discuss in more detail below, the Compensation Committee
also administers several plans as part of our post-employment
compensation arrangements designed to reward long-term service
and performance.
Target Total Direct Compensation. To
provide reasonable and competitive compensation, our
Compensation Committee seeks, and the McDermott Compensation
Committee sought, to target each element of total direct
compensation for our Named Executives within approximately 15%
of the median compensation paid to the executives peers
determined through benchmarking. Throughout this CD&A, we
refer to compensation that is within approximately 15% of median
as market range compensation. Because some
compensation elements are performance-based, Named Executives
are capable of earning compensation above or below the market
range for similarly situated executives in our market depending
on company and individual performance.
Our Compensation Committee may set elements of total direct
compensation above or below the market range to account for a
Named Executives performance, tenure, experience, internal
equity and other factors or situations that are not typically
captured by looking at standard market data and practices that
our Compensation Committee may deem relevant to the
appropriateness
and/or
competitiveness of the compensation of a Named Executive.
When making decisions regarding individual compensation
elements, our Compensation Committee also
considers the overall effect of each element on the Named
Executives target total direct compensation and target
total cash-based compensation (annual base salary and annual
incentives). Our Compensation Committees goal is to
establish target compensation for each element it considers
appropriate to support the compensation objectives that, when
combined, create a target total direct compensation award for
each Named Executive that is reasonable and competitive.
Determining Median Compensation
Benchmarking. To identify median compensation
and the relevant market range, our Compensation Committee relies
on benchmarking reviewing the
compensation of our Named Executives relative to the
compensation paid to similarly situated executives at companies
we consider our peers. Performance goals used within incentive
compensation elements of total direct compensation are designed
for the principal purpose of supporting our strategic and
financial goals
and/or
driving the creation of shareholder value, and, as a result, are
not generally benchmarked.
To benchmark Named Executive compensation, our Compensation
Committee and the McDermott Compensation Committee used separate
peer groups to determine median compensation. Prior to the
spin-off, the McDermott Compensation Committee used two
principal peer groups for benchmarking, depending on the primary
affiliation of the executive within McDermott. To determine
median compensation for executives of its segments previously
referred to as corporate and Offshore Oil and Gas Construction,
including Mr. Taff, the McDermott Compensation Committee
relied on survey data provided by Meridian for companies within
a peer group we refer to as the McDermott-Corporate Survey Peer
Group. For executives of McDermotts former Power
Generation Systems and Government Operations segments, including
Messrs. Bethards, Killion and Nash and Ms. Salomone,
the McDermott Compensation Committee relied on survey data
provided by Meridian for companies within a peer group we refer
to as the McDermott-B&W Survey Peer Group. Additionally,
McDermott used publicly available compensation information on
selected companies referred to as the McDermott Custom Peer
Group, to supplement data provided under the two primary peer
groups.
In preparation of the spin-off, the McDermott Compensation
Committee approved a new custom peer group for us to use when
benchmarking Named Executive compensation following the spin-off
in substitution of the McDermott Custom Peer Group. The new
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peer group, which we refer to as the B&W Custom Peer Group,
was recommended by McDermotts management in consultation
with us and Meridian. As advised by Meridian, the B&W
Custom Peer Group was selected with the following considerations
in mind:
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Competitors for Executive Talent The peer group was
constructed to reflect the types of companies with which we
compete for executive talent, not necessarily with which we are
direct business competitors.
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Similar Business The peer group was constructed to
generally reflect companies of related industries.
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Similar Size and Scope The peer group was
constructed with the goal in mind to provide valid pay
comparisons relative to the scope of the company.
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Number of Peers To ensure statistical validity, the
peer group was constructed to contain approximately 15 component
companies, but with no fewer than 10 and no more than 20.
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The B&W Custom Peer Group consists of 13 companies
with a focus in the construction and engineering industry and
revenues of $1.0-$9.0 billion.
Our Compensation Committee used the B&W Custom Peer Group
to benchmark Named Executive compensation following the
spin-off. Unless otherwise indicated, references in this
CD&A to market or our market are
references to the median compensation of companies within the
B&W Custom Peer Group.
Information related to all four peer groups, including the
companies comprising each group, is included in Schedule A
to this CD&A.
Analysis
of Target Total Direct Compensation
2010 Overview. The chart below shows
the 2010 target total direct compensation for each Named
Executive as approved or adjusted by our Compensation Committee
following the spin-off.
2010
Target Total Direct Compensation Summary
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Annual
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Target Total
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Incentive*
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Long-Term
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Direct
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Named Executive
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Annual Base Salary
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(% of Salary)
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Incentive**
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Compensation
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B. C. Bethards
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$
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850,000
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100
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%
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$
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2,500,000
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$
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4,200,000
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M. S. Taff
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$
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520,150
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70
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%
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$
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1,212,000
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$
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2,096,255
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M. P. Salomone
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$
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408,000
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70
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%
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$
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600,000
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$
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1,293,600
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R. L. Killion
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$
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355,020
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60
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%
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$
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478,500
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$
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1,046,532
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W. D. Nash
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$
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360,000
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60
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%
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$
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435,000
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$
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1,011,000
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*
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Amounts shown represent the target percentage approved by our
Compensation Committee following the spin-off used to calculate
target annual incentive compensation. See
Annual Incentive Compensation below for
a discussion of the target awards.
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**
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The long-term incentive compensation for Messrs. Bethards
and Taff exclude the value of restricted stock awards granted in
connection with the spin-off in accordance with retention
agreements entered into with McDermott in 2009. See
Post-Employment Compensation
Employment, Severance and Retention Agreements
Retention Agreements below for a discussion of those
awards.
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The 2010 target total direct compensation for each of our Named
Executives was within the market range, except in respect of
Ms. Salomone and Mr. Taff.
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Market = Median compensation as indicated by the B&W Peer
Group. Market range is total direct compensation within 15% of
Market. $ in millions.
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At the time of the spin-off, Ms. Salomones target
total direct compensation was roughly equivalent to median
compensation of comparable positions as benchmarked by
McDermott. However, due to the use of different benchmarks by us
and McDermott, her target compensation set by McDermott
represented compensation considerably below the market range
based on the B&W Custom Peer Group. As a result, our
management recommended increasing Ms. Salomones
annual base salary and annual incentive compensation to
approximately 85% of median compensation. As discussed further
below, our Compensation Committee adjusted the target annual
incentive compensation of Ms. Salomone to align the target
percentage used in connection with her annual incentive
compensation with the target percentage of Mr. Taff and to
more closely align the target compensation of that element with
market range compensation. Otherwise, our Compensation Committee
generally deferred making compensation adjustments until our
annual review cycle in February 2011. As adjusted,
Ms. Salomones 2010 target total direct compensation
was below market range at approximately 80% of median
compensation for comparable positions in our market.
Mr. Taffs target total direct compensation was
roughly equivalent to median compensation when benchmarked by
McDermott prior to the spin-off. However, it represented above
market range compensation as measured against the B&W
Custom Peer Group, primarily as a result of differences in
median
compensation of long-term incentives between the pre- and post-
spin-off peer groups. In addition, his 2010 target total direct
compensation represented a decrease of approximately 15% from
his 2009 target total direct compensation. As a result,
following the spin-off, our management made no recommendation
nor did our Compensation Committee take any action to change
Mr. Taffs target total direct compensation.
Annual
Base Salary
2010 Annual Base Salaries. The
following table shows the annual base salary applicable to each
of our Named Executives during 2010.
2010
Annual Base Salary
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Named Executive
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January 1
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April 1
|
|
August 1
|
|
|
B. C. Bethards
|
|
$
|
526,200
|
|
|
$
|
539,360
|
|
|
$
|
850,000
|
|
M. S. Taff
|
|
$
|
505,000
|
|
|
$
|
520,150
|
|
|
$
|
520,150
|
|
M. P. Salomone
|
|
$
|
400,000
|
|
|
$
|
408,000
|
|
|
$
|
408,000
|
|
R. L. Killion
|
|
$
|
330,000
|
|
|
$
|
355,020
|
|
|
$
|
355,020
|
|
W. D. Nash
|
|
$
|
348,000
|
|
|
$
|
360,000
|
|
|
$
|
360,000
|
|
For all Named Executives other than Ms. Salomone, annual
base salaries as of January 1, 2010 represent 2009 annual
base salaries set by the McDermott Compensation Committee, based
on the recommendation of its compensation consultant and
McDermotts management, as of April 1, 2009.
Ms. Salomone was promoted to our Chief Operating Officer,
effective January 1, 2010. Accordingly, the McDermott
Compensation Committee set Ms. Salomones annual base
salary at $400,000 in connection with her promotion. In
anticipation of the spin-off, the McDermott Compensation
Committee compared market data provided by its compensation
consultant at the time showing median base salary for chief
operating officers of an operating group and of independent
public companies. The McDermott Compensation Committee set her
January 1 annual base salary at an amount recommended by
McDermotts management which was higher than the median
base salary for the operating group chief operating officers but
lower than the median base salary for public company chief
operating officers, and represented an increase in annual base
salary of approximately 35%.
In February 2010, the McDermott Compensation Committee conducted
its annual review of executive compensation and set 2010 annual
base salaries,
32
effective April 1, 2010. It considered the base salary
recommendations of its outside compensation consultant and
McDermotts then chief executive officer. Market data
provided by its compensation consultant indicated 2010 annual
base salary adjustments were expected to be approximately 2-3%
for peer companies applicable to McDermott. With the expected
adjustments as a guide, the McDermott Compensation Committee
sought to position annual base salaries for applicable Named
Executives within the market range of comparable positions as
benchmarked against the peer groups selected by the McDermott
Compensation Committee. Each of Messrs. Bethards and Taff
and Ms. Salomone received April 1 annual base salary
increases consistent with the expected market adjustment.
Messrs. Killion and Nash received increases above expected
market levels to maintain the relative pay equity among our
operating group presidents; however, each officers April 1
annual base salary was within the market range as indicated by
the McDermott-B&W Survey Peer Group.
Following the spin-off, our Compensation Committee reviewed the
existing annual base salaries for our Named Executives based on
market data of the B&W Custom Peer Group provided by
Meridian. Our management recommended adjusting the annual base
salary of certain executives, including Ms. Salomone and
Mr. Killion, to reflect the increase in the scope and scale
of their respective responsibilities at an independent public
company and to more closely align annual base salaries with
applicable median compensation as indicated by the B&W
Custom Peer Group. Mr. Taffs annual base salary was
within the market range indicated by the B&W Custom Peer
Group and, as a result, our management did not make a
recommendation to increase Mr. Taffs annual base
salary. Our Compensation Committee deferred adjusting annual
base salaries, other than Mr. Bethards, until our
normal annual review cycle in February 2011. In respect of
Ms. Salomone, whose annual base salary was substantially
below the market range as indicated by the B&W Custom Peer
Group, our Compensation Committee also considered the
significant increase she received in January 2010. In the
context of promotions, the compensation increase necessary to
bring an executive within applicable market range can be
substantial. Generally, our Compensation Committee will seek to
phase-in compensation adjustments in those circumstances over
more than one review cycle as it determines appropriate under
the circumstances and, as a result, it is typical for target
compensation of our
newly promoted executives to trail their benchmark for a short
time.
Prior to the spin-off, the McDermott Compensation Committee
considered the post-spin-off compensation of Mr. Bethards
based on compensation data of the B&W Custom Peer Group.
Following its review, the McDermott Compensation Committee
recommended that our Compensation Committee set
Mr. Bethards annual base salary at $850,000 following
the spin-off, which amount represented median compensation as
indicated by the B&W Custom Peer Group. After a review by
our Compensation Committee, including with the advice of
Meridian and market data from companies within the B&W
Custom Peer Group, our Compensation Committee approved
Mr. Bethards post-spin-off annual base salary at
$850,000.
The following table shows the 2010 annual base salary, as
approved or adjusted by our Compensation Committee, of each
Named Executive and its relation to median compensation
indicated by the B&W Custom Peer Group.
Annual
Incentive Compensation
Overview. Our Compensation Committee
administers the annual incentive compensation element of total
direct compensation primarily through our Executive Incentive
Compensation Plan, which we refer to as the EICP. The EICP is a
cash incentive plan designed to motivate and reward our
executives and other key employees for their contributions to
business goals and other factors that we believe drive our
earnings
and/or
create shareholder value.
In February 2010, the McDermott Compensation Committee granted
annual incentive compensation
33
awards under its annual cash incentive plan to eligible officers
of McDermott and its subsidiaries, including our Named
Executives. In connection with the spin-off, we assumed the
rights and obligations of those incentive awards in respect of
our officers under our EICP, pursuant to the Employee Matters
Agreement among McDermott, McDermott Investments LLC,
Babcock & Wilcox Investment Company and us dated as of
July 2, 2010 (the Employee Matters Agreement).
In general, the Employee Matters Agreement provides, among other
things, that we and McDermott will each assume responsibility
for our own employees and compensation plans.
The McDermott Compensation Committee set target annual incentive
compensation awards for its executives, including our Named
Executives, by establishing a target percentage, which is
expressed as a percentage of each executives annual base
salary at the time the award was granted. Except for
Mr. Bethards, when determining the actual payout, the
applicable pre- and post- spin-off target percentages are
applied to an executives earnings from salary during the
relevant period. As a result, the amount paid under a target
award can be affected by, among other factors, any changes to an
executives annual base salary and target percentage during
the year.
An officers award is funded based on the attainment of
pre-established short-term financial or other goals, which
determine principal payout levels, including threshold payout
(25% of target award), target payout (100% of target award) and
maximum payout (200% of target award). Except as discussed
below, the actual payout received under an award is determined
based on the attainment of financial and individual performance
goals. For 2010 EICP awards, the McDermott Compensation
Committee divided financial and individual performance as
follows:
|
|
|
|
|
70% of target EICP was attributable to financial
performance; and
|
|
|
|
30% of target EICP was attributable to individual performance.
|
No amount is paid under the EICP unless the financial goal
required for the threshold payout is achieved. Notwithstanding
the level of performance attained, our Compensation Committee
may decrease an annual incentive compensation award in its
discretion.
2010 EICP Award Analysis. The following
table shows the 2010 target percentages applicable to each Named
Executive before and after the spin-off.
|
|
|
|
|
|
|
|
|
|
|
EICP Target Percentages
|
|
|
(as a % of salary)
|
|
|
Pre-
|
|
Post-
|
Named Executive
|
|
Spin-Off
|
|
Spin-Off
|
|
|
B. C. Bethards
|
|
|
70
|
%
|
|
|
100
|
%
|
M. S. Taff
|
|
|
70
|
%
|
|
|
70
|
%
|
M. P. Salomone
|
|
|
55
|
%
|
|
|
70
|
%
|
R. L. Killion
|
|
|
55
|
%
|
|
|
60
|
%
|
W. D. Nash
|
|
|
50
|
%
|
|
|
60
|
%
|
In February 2010, the McDermott Compensation Committee conducted
its annual review of executive compensation and set initial 2010
target annual incentive compensation. It considered the annual
incentive compensation recommendations of its outside
compensation consultant and McDermotts then chief
executive officer. The McDermott Compensation Committee
positioned annual incentive compensation for applicable Named
Executives within the market range of comparable positions as
benchmarked against the applicable peer group used by the
McDermott Compensation Committee.
Following the spin-off, our Compensation Committee reviewed
existing annual incentive compensation for our Named Executives
based on market data provided by Meridian from the B&W
Custom Peer Group. Our management recommended adjusting the
target percentage applicable to the annual incentive
compensation of certain executives, including
Messrs. Killion and Nash and Ms. Salomone, whose
target annual incentive compensation fell considerably below
market range as indicated by the B&W Custom Peer Group. To
more closely align target annual incentive compensation with
market range compensation, our Compensation Committee adjusted
the target percentages of each of Messrs. Killion and Nash
and Ms. Salomone, factoring in internal equity
considerations. Mr. Taffs target annual incentive
compensation was within the market range as indicated by the
B&W Custom Peer Group; therefore, our management made no
recommendation nor did our Compensation Committee take any
action to adjust his target percentage.
The following table shows 2010 target annual incentive
compensation based on the target percentage and annual base
salary applicable to the Named Executive following the spin-off
and its relation to median
34
compensation indicated by the B&W Custom Peer Group.
Prior to the spin-off, the McDermott Compensation Committee
considered the post-spin-off compensation of Mr. Bethards
based on compensation data from the B&W Custom Peer Group.
Following its review, the McDermott Compensation Committee
recommended that our Compensation Committee set
Mr. Bethards annual incentive compensation at 100% of
his annual base salary as it may be modified in connection with
the spin-off. After a review by our Compensation Committee,
consultation with Meridian and review of market data from
companies within the B&W Custom Peer Group, our
Compensation Committee set Mr. Bethards target
percentage at 100%. Unlike other Named Executives,
Mr. Bethards target annual incentive compensation for
2010 was based entirely on his adjusted target percentage and
post-spin-off annual base salary, or 100% of $850,000. The
target percentage adjustments made for the other Named
Executives were effective as of the spin-off to coincide with
the increase in the scope of their respective responsibilities
with a public company. Mr. Bethards, however, had begun to
assume responsibilities of an independent public company chief
executive officer from the beginning of 2010. As a result, for
all Named Executives other than Mr. Bethards, 2010 annual
incentive compensation was prorated between the pre- and post-
spin-off time periods, as follows:
|
|
|
|
|
for the period prior to the spin-off, target annual incentive
compensation was determined based on the target percentage set
by the McDermott Compensation Committee and the respective base
salary earned by the Named Executive during the period; and
|
|
|
|
|
|
for the period following the spin-off, target annual incentive
compensation was determined based on the target percentage
approved by our Compensation Committee and the respective base
salary earned by the Named Executive during the period.
|
2010 EICP Structure and Performance
Goals. The McDermott Compensation Committee
structured 2010 EICP compensation around two distinct
performance designs depending on the principal role of the
participating executive within McDermott and its subsidiaries
prior to the spin-off.
Traditional Structure Financial &
Individual Performance. For participating
executives who were principally functioning within one of
McDermotts operating segments, including
Messrs. Bethards, Killion and Nash and Ms. Salomone,
2010 EICP awards followed the structure traditionally used by
McDermott, which consisted of a financial performance component
and an individual performance component. To maintain the focus
of segment executives on successful operational performance, the
McDermott Compensation Committee tied the financial performance
component of EICP awards of segment executives to approved
financial goals related to each executives respective
segment. For Messrs. Bethards, Killion and Nash and
Ms. Salomone, their financial goals were based on the
combined operations of McDermotts former Power Generation
Systems and Government Operations segments.
Under this structure, a segment executive would be eligible to
earn 0-200% of his or her target EICP award, depending on the
level of financial performance attained. Of the performance
factors, the financial performance component is the larger
factor in determining EICP compensation because historically the
McDermott Compensation Committee has considered financial
performance to be more objective and to more directly influence
the creation of shareholder value, as compared to individual
performance. The McDermott Compensation Committee, however, has
historically recognized that individual performance can serve an
important role in helping promote the achievement of strategic
and operational, non-financial goals. The traditional structure
includes the individual performance component to reward and
incent significant individual contributions to the
organizations success.
Spin-off Plus Traditional Structure. The
McDermott Compensation Committee structured 2010 EICP awards for
McDermotts corporate
35
executives, including Mr. Taff, around the spin-off. To
maintain focus on the timely and successful completion of the
spin-off, corporate executives would be eligible to earn their
prorated target EICP award based on the effective date of the
spin-off. For corporate executives who continued employment with
us following the spin-off, their EICP award for the remainder of
2010 followed the traditional structure applicable to our
executives. As a result, Mr. Taffs EICP award was
capped at an amount equal to a prorated target EICP award prior
to the spin-off, but he was eligible to earn 0-200% of his
prorated target EICP award following the spin-off, depending on
the level of financial performance attained.
2010 Financial Goals. The McDermott
Compensation Committee established the financial goals
applicable to our executives under the traditional structure
described above based on the combined operations of
McDermotts former Power Generation Systems and Government
Operations segments. The results of those operations at
McDermott excluded certain corporate expenses that were not
allocated by McDermott to such operations. However, following
the spin-off, our results of operation for 2010 included certain
of those unallocated and other expenses previously not charged
to or incurred by us other than as a result of the spin-off. To
avoid diluting the annual incentive compensation awards of our
Named Executives as a result of the spin-off, our Compensation
Committee adjusted the performance goals to exclude
approximately $31 million of additional operating expenses
either allocated to or incurred by us in connection with the
spin-off. The chart below shows the initial and adjusted
performance goals.
|
|
|
|
|
|
|
|
|
|
|
Operating Income Levels
|
|
|
($ in millions)
|
Performance
|
|
Pre-
|
|
Post-
|
Level
|
|
Spin-off
|
|
Spin-off
|
|
|
Threshold
|
|
$
|
210
|
|
|
$
|
188
|
|
Target (min)
|
|
$
|
285
|
|
|
$
|
256
|
|
Target
|
|
$
|
300
|
|
|
$
|
269
|
|
Target (max)
|
|
$
|
315
|
|
|
$
|
282
|
|
Maximum
|
|
$
|
360
|
|
|
$
|
323
|
|
The McDermott Compensation Committee has historically based EICP
financial goals on operating income because it considered it to
be the primary driver of net income, which is expected to drive
the stock price. Additionally, in comparison to net income,
operating income is more directly influenced by the revenues
generated and costs incurred as a result of
management action and, as a result, it is more readily
attributable to McDermotts operating segments.
In 2010, the McDermott Compensation Committee established three
principal operating income goals to determine the threshold,
target and maximum amounts that would be payable under the EICP.
The EICP was designed to drive target level performance, the
goal for which was based on managements internal
projections of operating income for 2010 excluding
$33 million of research and development expenditures
relating to our B&W mPower nuclear reactor program. The
focus of annual incentive compensation is, by its nature, on the
attainment of short-term goals, whereas the development of our
B&W mPower nuclear reactor program is a long-term strategic
initiative. The research and development expenses were excluded
to avoid creating potential conflicts between short-term goals
and strategic long-term initiatives.
The goals for threshold level and maximum level payout were set
as a percentage of the target level goal. To avoid rewarding
financial performance substantially below target, the McDermott
Compensation Committee established a threshold level goal, which
determines the minimum level of financial performance required
to be attained under the traditional structure to fund an EICP
award. To reward superior financial performance, the McDermott
Compensation Committee established a maximum level payout goal,
but capped the payout to maximize shareholder returns for
performance above that level and reduce risk related to
incentive compensation.
Additionally, the McDermott Compensation Committee established
two secondary operating income goals, target (min) and target
(max), to create a range for target level performance. By
creating a target range, the McDermott Compensation Committee
intended to reduce the impact on the payout of a Named
Executives EICP award for minor changes in financial
performance within the range and the risk related to annual
incentive compensation.
The McDermott Compensation Committee considered a number of
performance goals recommended by management, including threshold
level goals as low as 50% of target operating income and maximum
level goals as high as 120% of target operating income. In
consultation with its outside compensation consultant at that
time, the McDermott Compensation Committee set the threshold
level operating income goal at 70% of target and the maximum
level operating income goal at 120% of target. The operating
income goals at the
36
target level ranged from 95% of the target goal to 105% of the
target goal.
Named Executives were eligible to earn the following amounts
under the 2010 EICP based on attaining the following levels of
operating income:
|
|
|
|
|
25% of target EICP at threshold level operating income (70% of
target operating income);
|
|
|
|
98% of target EICP at target (Min) level operating income (95%
of target operating income);
|
|
|
|
100% of target EICP at target level operating income (100% of
target operating income);
|
|
|
|
102% of target EICP at target (Max) level operating income (105%
of target operating income); and
|
|
|
|
200% of target EICP at maximum level operating income (120% of
target operating income).
|
For other levels of operating income between threshold and
maximum, the percentage paid would have been determined by
linear interpolation using the two neighboring pre-established
performance levels and percentage payout of target award. No
payment would have been earned under the EICP for 2010 if
operating income results had been below the threshold level.
The following graph shows the correlation between financial
results and EICP payout levels for 2010:
2010 Individual Goals. Generally, individual
goals established for each Named Executive included safety
metrics and were tailored to the individuals position and
focused on supporting strategic and operational initiatives. The
McDermott Compensation Committee, with the advice of both
B&W and McDermott management, determined the safety goals.
Mr. Bethards established the other individual goals for
Ms. Salomone and, with respect to annual incentive
compensation for the period following the spin-off,
Mr. Taff. Ms. Salomone established the other
individual goals of Messrs. Killion and Nash. The Named
Executives individual goals and target weightings are set
forth in the table below.
|
|
|
Brandon C. Bethards:
|
|
receive a positive assessment by
the Governance Committee of the Board regarding six categories:
leadership, strategic planning, financial results, succession
planning, communications and Board relations (30%)
|
Michael S. Taff:
|
|
achieve specific levels of
company-wide health, safety and environmental performance
averages (10%); and
|
|
|
successfully complete spin-off
transition relating to finance and accounting and investor
relations (20%).
|
Mary Pat Salomone:
|
|
achieve specific levels of
company-wide health, safety and environmental performance
averages (10%);
|
|
|
achieve specific levels of new
bookings at the segments (10%);
|
|
|
successfully develop and integrate
the chief operating officer function within the organization
(5%); and
|
|
|
maintain active participation in
certain subsidiary or joint venture boards of directors (5%).
|
37
|
|
|
|
|
|
Richard L. Killion:
|
|
achieve specific levels of health,
safety and environmental performance averages for B&W PGG
(10%);
|
|
|
achieve specific levels of new
bookings at B&W PGG (5%);
|
|
|
achieve specific strategic
milestones relating to new investments and integration of
certain businesses (5%);
|
|
|
secure demonstration project
commitment relating to a strategic technology (5%); and
|
|
|
achieve two specified renewable
strategic initiatives (5%).
|
Winfred D. Nash:
|
|
achieve specific levels of health,
safety and environmental performance averages for B&W NOG
(10%);
|
|
|
achieve specific milestones
regarding production at a specified facility within the
Government Operations segment (10%);
|
|
|
develop a strategic plan relative
to certain manufacturing process at B&W NOG (5%); and
|
|
|
achieve specific levels of new
bookings at B&W NOG (5%).
|
|
2010 Annual Incentive Compensation
Payments. In February 2011, our Compensation
Committee considered (1) our 2010 consolidated operating
income relative to the established operating income performance
goals; (2) the Governance Committees assessment of
the individual performance of Mr. Bethards;
(3) Mr. Bethards self-assessment of his
individual performance relative to his individual goals and
(4) Mr. Bethards recommendation of each other
Named Executives 2010 EICP compensation based on his
assessment of the financial and individual performance
applicable to each.
For 2010, we produced operating income of approximately
$264.0 million, which was approximately 98% of target level
performance. Accordingly, applicable Named Executives were
eligible to earn a 99% payout on their target EICP awards. The
following paragraphs contain a description of the evaluation and
calculation of each Named Executives 2010 annual incentive
compensation.
Mr. Bethards. Mr. Bethards
target annual incentive compensation was $850,000 or 100% of his
annual base salary in effect following the spin-off. Based on
the financial results discussed above, Mr. Bethards was
eligible to earn 99% of his target award, subject to the
assessment of his individual goals. Mr. Bethards met or
exceeded his individual goals. As a result, Mr. Bethards
earned 99% of his 2010 target EICP compensation, or $841,500.
Mr. Taff. Mr. Taffs target
annual incentive compensation was equal to $361,454, calculated
by multiplying his target percentage (70%) by his earnings from
annual base salary in 2010 ($516,363). Mr. Taffs 2010
annual incentive compensation payout
was prorated between the pre and post spin-off time periods. For
the pre-spin-off period, Mr. Taff was a former corporate
executive of McDermott and earned
7/12
of his target annual incentive compensation award based on the
effective date of the spin-off, which occurred on July 30,
2010.
In addition, for the post-spin-off period, Mr. Taff was an
executive officer of our company and he was eligible to earn
5/12
of his annual incentive compensation award depending on our
financial results and the assessment of his individual goals.
Based on the financial results discussed above, Mr. Taff
was eligible to earn 99% of his target award, subject to the
assessment of his individual goals. Mr. Taff met or
exceeded his individual goals. As a result, Mr. Taff earned
99% of his 2010 prorated post spin-off target award.
Mr. Taffs total 2010 annual incentive compensation
was $359,936.
Ms. Salomone. Ms. Salomones
target annual incentive compensation was equal to $248,800,
based on target percentages of 55% for annual base salary earned
from January 1, 2010 through July 31, 2010 and 70% for
annual base salary earned from August 1, 2010 through
December 31, 2010.
Based on the financial results discussed above,
Ms. Salomone was eligible to earn 99% of her target award,
subject to the assessment of her individual goals.
Ms. Salomone met or exceeded her individual goals, except
with respect to one goal (new bookings), which was only
partially achieved. As a result, Ms. Salomone earned 97.6%
of her 2010 target EICP compensation, or $242,829.
Mr. Killion. Mr. Killions
target annual incentive compensation was equal to $199,217,
based on
38
target percentages of 55% for annual base salary earned from
January 1, 2010 through July 31, 2010 and 60% for
annual base salary earned from August 1, 2010 through
December 31, 2010.
Based on the financial results discussed above, Mr. Killion
was eligible to earn 99% of his target award, subject to the
assessment of his individual goals. Mr. Killion met or
exceeded his individual goals, except with respect to one goal
(new bookings) which was only partially achieved As a result,
Mr. Killion earned 97.2% of his 2010 target EICP
compensation, or $193,639.
Mr. Nash. Mr. Nashs target
annual incentive compensation was equal to $193,500, based on
target percentages of 50% for annual base salary earned from
January 1, 2010 through July 31, 2010 and 60% for
annual base salary earned from August 1, 2010 through
December 31, 2010.
Based on the financial results discussed above, Mr. Nash
was eligible to earn 99% of his target award, subject to the
assessment of his individual goals. Mr. Nash met or
exceeded his individual goals, except with respect to one goal
(safety). As a result, Mr. Nash earned 89.1% of his 2010
target EICP compensation, or $172,409.
Long-Term
Incentive Compensation
Long-term incentive compensation for our Named Executives in
2010 consisted entirely of equity-based awards granted under one
or more of the following circumstances:
|
|
|
|
|
by the McDermott Compensation Committee in February 2010 in
connection with its annual review of executive compensation, in
the case of all Named Executives; and
|
|
|
|
retention equity awards granted by our Compensation Committee
following the spin-off pursuant to retention agreements entered
into with McDermott in December 2009, in the case of each of
Messrs. Bethards and Taff.
|
Analysis
of 2010 Equity Grants.
Mix of 2010 Equity. In determining the type
and mix of equity granted to our Named Executives prior to the
spin-off, the McDermott Compensation Committee sought to
maintain a strong correlation between pay and performance in
long-term incentive compensation while balancing the need to
retain employees through the complexity and uncertainty
associated
with the spin-off. When granting equity to its executives,
including our Named Executives, in connection with
McDermotts annual review of executive compensation in
February 2010, the McDermott Compensation Committee allocated
long-term incentive compensation between the following types and
amounts of equity:
|
|
|
|
|
50% stock options; and
|
|
|
50% restricted stock units.
|
To maintain its commitment to performance-based compensation,
the McDermott Compensation Committee determined to issue at
least a majority of long-term incentive compensation in the form
of performance-based compensation. The McDermott Compensation
Committee utilized stock options for this purpose, which reward
and drive performance based on absolute improvement in stock
price. The McDermott Compensation Committee considered using
performance shares in 2010 as it had each year since 2006.
However, it elected not to utilize performance shares as a
component of long-term compensation during 2010 as a result of
(1) the complexities of establishing performance goals for
McDermott or our company when the precise date of the spin-off
was uncertain but was anticipated to occur during the
measurement period that would have been applicable to the equity
awards and (2) the belief that it was more appropriate for
our board of directors to establish performance targets and
metrics tailored to our specific strategies following the
spin-off.
To promote the retention of employees, the McDermott
Compensation Committee granted time-based restricted stock units
as part of long-term incentive compensation. The restricted
stock units represented a larger percentage of a Named
Executives long-term incentive compensation than in the
recent past. However, at the time of grant, the McDermott
Compensation Committee anticipated that, in the case of our
Named Executives, the restricted stock units would be converted
in connection with the spin-off into restricted stock units
payable in shares of our common stock. As a result, the
restricted stock units were intended to provide us with an
immediate long-term retention tool following the spin-off.
The stock options and restricted stock units granted by the
McDermott Compensation Committee in 2010 were each denominated
in shares of McDermott common stock. Both forms of awards were
converted in connection with the spin-off to equity-based awards
granted under our long-term incentive plan and payable in shares
of our common stock. See
39
Conversion of McDermott Equity in the
Spin-Off below for a discussion of the conversion of
McDermott equity awards in connection with the spin-off.
For more information regarding the 2010 restricted stock units
and stock options, see the Grants of Plan-Based Awards table
under Compensation of Executive Officers below and
disclosures under Compensation of Executive
Officers Estimated Future Payouts Under Equity
Incentive Plan Awards.
Value of 2010 Target Long-Term Incentive
Compensation. The following table shows the 2010
target long-term incentive compensation of each Named Executive
and its relation to median compensation indicated by the
B&W Custom Peer Group.
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$ in millions. The long-term incentive compensation for
Messrs. Bethards and Taff exclude the value of restricted
stock awards granted in connection with the spin-off in
accordance with retention agreements entered into with McDermott
in 2009.
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In connection with the McDermott Compensation Committees
review of executive compensation in February 2010, its outside
compensation consultant advised that the adverse economic and
stock market conditions that began in 2008 resulted in decreases
in target long-term incentive compensation values among
applicable peer companies in 2009. The benchmark used by
McDermott to determine the target value of its executives
long-term incentive compensation awards reflected those
decreases. As a result, the target value of 2010 long-term
incentive compensation (excluding the retention grants discussed
below) for most of our executives, including Messrs. Taff,
Killion and Nash, decreased compared to the target value of
their 2009 long-term incentive compensation. The target value of
2010 long-term incentive compensation for Mr. Bethards and
Ms. Salomone increased due to the substantial change in
their respective positions from 2009.
Mr. Bethards 2010 target long-term incentive
compensation represented an approximate increase of 65% over his
2009 target; although its value was below market range based on
McDermotts market data. The value was set by the McDermott
Compensation Committee to be equal with the amount awarded to
the chief executive officer of McDermotts other principal
subsidiary at that time. At the time of the grants, it was
anticipated that McDermotts two segment chief executive
officers, which included Mr. Bethards, would become the
chief executive officer of their respective companies following
the spin-off. The value of Mr. Bethards target
long-term incentive compensation, however, was above market
range based on the B&W Custom Peer Group due to the use of
different benchmarks between us and McDermott.
The value of Mr. Taffs target long-term incentive
compensation was set by the McDermott Compensation Committee
based on market data provided by its compensation consultant and
was roughly equivalent to median compensation when benchmarked
by McDermott. As a result of the market conditions discussed
above, however, the value of Mr. Taffs 2010 target
long-term incentive compensation represented a decrease of
approximately 25% from his 2009 target, which decrease
contributed to the
year-over-year
decrease in target total direct compensation. Due to the use of
different benchmarks between us and McDermott, the value of his
2010 target long-term incentive compensation was considerably
above market range as indicated by the B&W Custom Peer
Group when reviewed by our Compensation Committee following the
spin-off.
The value of Ms. Salomones target long-term incentive
compensation was set by the McDermott Compensation Committee
based on market data provided by its compensation consultant and
was roughly equivalent to median compensation as benchmarked by
McDermott. Due to her promotion to Chief Operating Officer, the
value of Ms. Salomones 2010 target long-term
incentive compensation represented a substantial increase from
her 2009 target, despite the impact on long-term incentive
compensation values following the market conditions discussed
above. The value of her 2010 target long-term incentive
compensation was within market range as indicated by the
B&W Custom Peer Group when reviewed by our Compensation
Committee following the spin-off.
The value of Mr. Killions target long-term incentive
compensation was set by the McDermott Compensation Committee
based on market data provided by its
40
compensation consultant and was roughly equivalent to median
compensation when benchmarked by McDermott. As a result of the
market conditions discussed above, however, the value of
Mr. Killions 2010 target long-term incentive
compensation represented a decrease of approximately 14% from
his 2009 target, which decrease contributed to the
year-over-year
decrease in target total direct compensation. Due to the use of
different benchmarks between us and McDermott, the value of his
2010 target long-term incentive compensation was above market
range as indicated by the B&W Custom Peer Group when
reviewed by our Compensation Committee following the spin-off.
The value of Mr. Nashs target long-term incentive
compensation was set by the McDermott Compensation Committee
based on market data provided by its compensation consultant and
was slightly higher than median compensation when benchmarked by
McDermott, although within market range. As a result of the
market conditions discussed above, however, the value of
Mr. Nashs 2010 target long-term incentive
compensation represented a decrease of approximately 13% from
his 2009 target, which decrease contributed to the
year-over-year
decrease in his target total direct compensation. When reviewed
by our Compensation Committee following the spin-off the value
of his 2010 target long-term incentive compensation was still
within market range although below median compensation, due to
the use of different benchmarks between us and McDermott.
Other Retention Awards. On August 2,
2010, our Compensation Committee granted Messrs. Bethards
and Taff restricted stock awards. The awards were made pursuant
to certain Restructuring Transaction Retention Agreements
between the officers selected by the McDermott Compensation
Committee (including Messrs. Bethards and Taff) and
McDermott, dated as of December 10, 2009 (Retention
Agreements), in connection with McDermotts
announcement of our spin-off. In accordance with the Employee
Matters Agreement, we assumed the rights and obligations arising
under those agreements in respect of Messrs. Bethards and
Taff. Under the terms of the agreement, in the event the officer
remained employed with McDermott or us through the spin-off, the
officer would receive a one-time bonus generally payable in
restricted stock equal in value to the sum of the officers
annual base salary and target annual incentive compensation in
effect immediately prior to the effective date of the spin-off.
For Mr. Taff, one-third of his bonus was payable in cash.
As stipulated in the agreement, the restricted stock awards vest
100% on July 30, 2011,
which is the first anniversary of the spin-off; provided the
Named Executive remains employed with us through that date. The
chart below shows the grant date fair values computed in
accordance with Financial Accounting Standards Board Accounting
Standards Codification Topic 718 and number of restricted stock
granted to Messrs. Bethards and Taff.
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Grant Date Fair
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Restricted
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Named Executive
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Value of Award
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Shares Granted
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B. C. Bethards
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$
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941,062.32
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39,607
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M. S. Taff
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$
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605,024.64
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25,464
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Sizing Long-Term Incentive
Compensation. When granting long-term
incentive compensation, our Compensation Committee generally
seeks to target a dollar value to grant, rather than granting a
targeted number of shares. The McDermott Compensation Committee
employed the same methodology when granting long-term incentive
compensation to our Named Executives prior to the spin-off. The
number of restricted stock, restricted stock units and stock
options granted can be expressed through the following formula:
target value of award($)/fair market value of stock($)
The fair market value of one restricted stock unit or one share
of restricted stock was computed based on the closing price of
the common stock underlying the award on the date of the grant.
The fair market value of one stock option was determined by the
outside compensation consultant using a Black-Scholes formula
also based on the closing price of the common stock underlying
the award on the date of the grant. Because the long-term
incentive compensation grants vest over three years, the number
of shares calculated was rounded to the nearest multiple of
three.
In prior years, fair market value of the stock was determined
using a discounted share price to reflect the vesting conditions
and transfer restrictions characterizing the equity awards. The
valuation methodology was changed with respect to awards made in
2010, which had the intended effect of lowering the number of
shares or units that otherwise would have been granted.
Timing of Equity Grants. To avoid
timing equity grants ahead of the release of material nonpublic
information, our Compensation Committee generally approves stock
option and other equity awards effective as of the first day
following the end of a trading blackout after the meeting at
which the grants are approved, which is generally the third day
following the filing of our annual report on
Form 10-K
or quarterly report on
Form 10-Q
with the Securities and Exchange
41
Commission. This practice was followed for all long-term
incentive compensation grants to Named Executives in 2010 with
the exception of the retention grants to Messrs. Bethards
and Taff. Unlike other awards granted during 2010, the retention
grants were not discretionary. They were earned on the effective
date of the spin-off pursuant to a retention agreement with the
executives and were granted on the first business day following
the spin-off.
Conversion of McDermott Equity in the
Spin-Off. In
preparation for the spin-off, the McDermott Compensation
Committee carefully considered the treatment of outstanding
McDermott equity awards for its employees, including those who
would be transferred to or continuing with us following the
spin-off. The decisions regarding equity treatment were made by
the McDermott Compensation Committee in consultation with the
committees outside legal and compensation advisors as well
as McDermott management.
In general, the principles underlying the decisions regarding
treatment of equity included:
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fully converting certain outstanding McDermott equity awards to
our equity awards consistent with the post-spin-off employment
of the award holder to align the holder with their future
employer; and
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preserving the intrinsic value of the outstanding equity awards
as of the date of the spin-off.
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The treatment approved by the McDermott Compensation Committee
for our employees, including our Named Executives, included the
following:
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Options: Each McDermott option was cancelled
on the spin-off and replaced with substitute options to purchase
shares of our common stock. For Mr. Taff, each McDermott
option was cancelled on the spin-off and one-half of each was
replaced with a substitute option to purchase shares of our
common stock and one-half of each was replaced with a substitute
option to purchase shares of McDermott common stock. Each of the
substitute options contained terms intended to preserve the
intrinsic value of the original option and the ratio of the
exercise price to the fair market value of the stock subject to
the option, each as of the date of the spin-off. The substitute
options were generally made subject to the same terms and
conditions as the options that were
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replaced, including vesting schedule. To the extent the options
that were replaced had already vested, the substitute options
were also vested.
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Restricted Stock and Restricted Stock
Units: Each McDermott restricted stock award and
restricted stock unit award was cancelled and replaced with
substitute restricted stock and restricted stock unit awards
based on our common stock, each of which generally preserved the
intrinsic value of the original award as of the date of the
spin-off. The substituted awards were generally made subject to
the same terms and conditions as the awards being replaced,
including vesting schedule. For Mr. Taff, one-half of his
McDermott restricted stock awards and restricted stock unit
awards were cancelled on the spin-off and were replaced with
substitute restricted stock and restricted stock unit awards as
described above. The other one-half of Mr. Taffs
McDermott restricted stock awards and restricted stock unit
awards continued and he received additional restricted shares
and restricted stock units with respect to McDermott common
stock in an amount designed to preserve the value of the
one-half McDermott awards as of the date of the spin-off.
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Performance Shares: Each McDermott performance
share award was cancelled and replaced with a substitute
restricted stock unit award based on our common stock. The
replacement restricted stock unit awards represented the right
to receive at the time of vesting the number of shares of our
common stock equal to the number of shares of McDermott common
stock underlying the replaced performance shares assuming target
performance. For Mr. Taff, each McDermott performance share
award was cancelled on the spin-off and one-half of each was
replaced with a substitute restricted stock unit award described
above and one-half of each was replaced with a substitute
McDermott restricted stock unit award. The replacement McDermott
restricted stock unit awards represented the right to receive at
the time of vesting the number of shares of McDermott common
stock equal to the number of shares of McDermott common stock
underlying the replaced performance shares assuming target
performance. The replacement restricted
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stock unit awards retained the original three year cliff vesting
schedule as the original performance share award.
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Perquisites
Perquisites are not factored into the determination of the total
direct compensation of our Named Executives because they are
typically not material in light of a Named Executives
total compensation. Our Named Executives received the following
perquisites and other benefits, as described in the Summary
Compensation Table under Compensation of Executive
Officers below: relocation assistance, annual physicals,
tax and financial planning services, limited personal use of
corporate aircraft, club dues and other miscellaneous items.
Following the spin-off, our Compensation Committee reviewed the
type and level of perquisites and other personal benefits
provided to Named Executives. The committee decided to continue
the perquisites offered under McDermotts compensation
program for the remainder of 2010 with a further review in
connection with its 2011 annual executive compensation review.
We believe the personal benefits to our Named Executives that we
provide are reasonable and appropriate.
We own a fractional interest in two aircraft through an aircraft
management company. We acquired these interests and we use the
aircraft to facilitate travel to and from our operations, a
number of which have infrequent or limited access to commercial
flights as a result of their location. We do make the aircraft
available to our Named Executives for limited personal use,
which use is typically limited to permitting the
executives spouse to accompany the executive on business
travel.
Under current Internal Revenue Service rules, we may impute to
the executive officer the actual cost incurred by us for any
personal aspects of the flight or an amount based on Standard
Industry Fare Level (SIFL) rates set by the
U.S. Department of Transportation. Imputing income based on
SIFL rates usually results in less income tax liability to the
executive officer but higher income taxes to us due to
limitations on deducting aircraft expenses that exceed the
income imputed to employees. To minimize our cost of permitting
the personal use of the aircraft, we impute income for personal
use of aircraft to our Named Executives in an amount that
results in the least amount of tax burden for us.
In addition, the presence of an employees spouse may be
appropriate or necessary at certain meetings, conferences or
other business-related functions. In those cases, we will bear
the expenses of the employees spouse, including the
provision of a
gross-up for
any imputed income to the employee.
As a result of the spin-off, we incurred higher than normal
relocation expenses in 2010, some of which we expect to carry
over into 2011. In preparation of the spin-off, we established
our headquarters in Charlotte, North Carolina and relocated a
number of our employees principally from Ohio and Virginia and
former McDermott employees from Texas. Under the Employee
Matters Agreement, we are responsible for all relocation
expenses for our employees (including former McDermott
employees) relating to the spin-off other than expenses incurred
prior to the effective date of the spin-off, which remained
McDermotts responsibility. We have reported relocation
amounts as a perquisite in the Summary Compensation
Table in strict adherence with the U.S. Securities and
Exchange Commissions rules relating to executive
compensation. However, the Named Executives who relocated in
connection with the spin-off received our standard relocation
package provided to all other employees who relocated in
connection with the spin-off. Our relocation package includes
gross-up of
related employment and income taxes in order to ensure that the
relocation is cost neutral to the employee.
Post-Employment
Compensation
Retirement
Plans
Overview. We provide retirement
benefits through a combination of qualified defined benefit
pension plans, which we refer to as our Retirement Plans, and a
qualified defined contribution 401(k) plan, which we refer to as
our Thrift Plan, for most of our U.S. employees, including
our Named Executives. In respect of our Named Executives, we
sponsor the following two Retirement Plans:
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the Government Operations Retirement Plan for the benefit of
employees of us and our Government Operations segment; and
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the Commercial Operations Retirement Plan for the benefit of
U.S. employees of our Power Generation Systems segment.
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We sponsor the Government Operations Retirement Plan through
Babcock & Wilcox Investment Company and the Commercial
Operations Retirement
43
Plan through B&W PGG. In connection with the spin-off, we
assumed the Government Operations Retirement Plan from McDermott
which sponsored the plan through one of its subsidiaries.
In addition to the broad-based qualified plans described above,
McDermott maintains unfunded, nonqualified excess retirement
plans, which we refer to as the Excess Plans. The Excess Plans
cover a small group of highly compensated employees, including
Messrs. Bethards, Killion and Nash and Ms. Salomone,
whose ultimate benefits under the applicable Retirement Plan are
reduced by Internal Revenue Code limits on the amount of
benefits which may be provided under qualified plans, and on the
amount of compensation which may be taken into account in
computing benefits under qualified plans. Benefits under the
excess plans are paid from the general assets of the B&W
company employing the participant, which is not necessarily the
plan sponsor. We sponsor the Commercial Operations Excess Plan
and the Government Operations Excess Plan through the same
subsidiaries that sponsor the respective qualified plan. See the
Pension Benefits table under Compensation of
Executive Officers below for more information regarding
the Retirement Plans.
Recent Changes to Retirement
Plans. Over the past several years, we have
reassessed our retirement plans due to the volatility, cost and
complexity associated with defined benefit plans and evolving
employee preferences. As a result, we have taken steps to shift
away from traditional defined benefit plans toward a defined
contribution approach. In 2006, the Commercial Operations and
Government Operations Retirement Plans were closed to new
salaried participants and benefit accruals were frozen for
existing salaried participants with less than five years of
credited service as of March 31, 2006, subject to specific
annual
cost-of-living
increases. In lieu of future defined benefit plan accruals under
those plans, our qualified defined contribution 401(k) plan
provides an automatic cash contribution to plan accounts of
affected employees and new hires in an amount between 3% and 8%
of the employees base pay, plus overtime pay, expatriate
pay and commissions, based on their length of service.
Mr. Taff does not participate in a Retirement Plan or an
Excess Plan because he did not meet the eligibility requirements
at the time that the plan applicable to him was closed to new
participants; however, he does receive the supplemental cash
contribution to his 401(k) plan account. In 2007, salaried
participants in the Commercial Operations and Government
Operations Retirement Plans with
between five and 10 years of credited service as of
January 1, 2007 were offered the one-time irrevocable
choice between (1) continuing to accrue future benefits
under the Retirement Plan or (2) freezing their Retirement
Plan accrued benefit as of March 31, 2007, subject to
annual
cost-of-living
increases, and receiving an automatic service-based cash
contribution to their Thrift Plan account instead. No Named
Executives were affected by the changes in 2007.
Supplemental Plans. Prior to the
spin-off, McDermott maintained a supplemental executive
retirement plan, or the McDermott SERP, in which selected
officers of McDermott and its subsidiaries participated,
including Messrs. Bethards, Taff and Nash. In connection
with the spin-off, we adopted the Supplemental Executive
Retirement Plan of The Babcock & Wilcox Company, which
was substantially similar to the McDermott SERP. We amended that
plan on December 8, 2010 and refer to that plan, as amended
and restated, as the B&W SERP. The B&W SERP assumed
all liabilities of the McDermott SERP attributable to persons
who were or would become employees of us and certain of our
subsidiaries following the spin-off, including
Messrs. Bethards, Taff and Nash, and such persons ceased
participating in the McDermott SERP. Our employees were credited
under the B&W SERP with service for any period of
employment with McDermott and its subsidiaries prior to the
spin-off.
The B&W SERP is an unfunded, nonqualified defined
contribution plan through which we provide annual contributions
to participants notional accounts. Participants include
our Chief Executive Officer and other officers of us and certain
of our subsidiaries selected by our Compensation Committee.
Under eligibility guidelines for the B&W SERP adopted by
our Compensation Committee, employees must generally have
completed at least one year of service with us or one of our
subsidiaries as a reporting person for purposes of
Section 16 of the Securities Exchange Act of 1934, as
amended, or as an officer with direct responsibility over
operations. As a result of these guidelines, Ms. Salomone
and Mr. Killion were selected to participate in the
B&W SERP for 2011. As previously discussed,
Messrs. Bethards, Taff and Nash were already participants
in the B&W SERP during 2010.
In addition and as a result of the December 8, 2010
amendments, participants may, if permitted by the Compensation
Committee, elect to defer the payment of certain compensation
earned from us. For
44
purposes of compensation deferral, members of our Board are also
participants in the B&W SERP. Under the B&W SERP, an
officer selected by our Compensation Committee may elect to
defer up to 50% of his or her annual salary
and/or up to
100% of any bonus earned in any plan year and a member of the
Board may elect to defer up to 100% of his or her retainers and
fees earned in any plan year. No compensation was eligible to be
deferred in 2010. See the Nonqualified Deferred Compensation
table and accompanying narrative under Compensation of
Executive Officers below for more information about the
B&W SERP and our contributions to our Named
Executives B&W SERP accounts.
Employment,
Severance and Retention Arrangements
Employment and Severance
Agreements. Except for the
change-in-control
agreements and retention agreements discussed below, we did not
have any employment or severance agreements with any of our
Named Executives during 2010.
Change-in-Control
Agreements. Prior to the spin-off, McDermott
maintained change in control agreements for selected executives,
including Messrs. Bethards and Taff. For those Named
Executives, their change in control agreement terminated by its
terms on the effective date of the spin-off.
Following the spin-off, our Compensation Committee approved
change in control agreements for selected executives, including
the Named Executives, after considering market data and trend
information provided by Meridian on change in control practices
among companies within the B&W Custom Peer Group and
selected S&P 500 companies, the McDermott change in
control agreements and recommendations from B&Ws
management. We believe change in control agreements protect
stockholders interests by serving the following objectives:
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to attract and retain top-quality executive management;
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to assure both present and future continuity of executive
management in the event of a threatened or actual change in
control; and
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to ensure the objective focus of executive management in the
evaluation of any change in control opportunities.
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Our change in control agreements contain what is commonly
referred to as a double trigger, that is, they
provide benefits only upon a qualified
termination of the executive within one year following a change
in control. Additionally, the agreements do not provide any tax
gross-up on
the benefits following a qualified termination. Instead, the
agreements contain a modified cutback provision,
which acts to reduce the benefits payable to an executive to the
extent necessary so that no excise tax would be imposed on the
benefits paid, but only if doing so would result in the
executive retaining a larger after-tax amount. The provision was
included with the intent of benefiting us by seeking to preserve
the tax deductibility of the benefits paid under the agreement,
without compromising the objectives for which the agreement was
approved.
In respect of our Named Executives, the change in control
agreements generally provide a cash severance payment of two
(2.99 for Mr. Bethards) times the sum of the Named
Executives annual base salary and target annual incentive
compensation; a pro-rated annual incentive compensation payment
at target for the year in which the qualified termination
occurs; a cash payment equal to three years of medical benefits;
full vesting in any outstanding and unvested equity and full
vesting in the executives supplemental executive
retirement plan account balance. See the Potential
Payments Upon Termination or Change in Control tables
under Compensation of Executive Officers below and
the accompanying disclosures for more information regarding the
change in control agreements with our Named Executives, events
considered to be change in control events and other plans and
arrangements that have different trigger mechanisms that relate
to a change in control.
Retention Agreements. Following
McDermotts announcement of the spin-off in December 2009,
McDermott sought to retain key employees and executives in
connection with the spin-off by entering into the Retention
Agreements with selected executives and employees, including
Messrs. Bethards and Taff. Under the terms of the Employee
Matters Agreement, we assumed the rights and obligations arising
under the Retention Agreements in respect of
Messrs. Bethards and Taff on the spin-off.
In general, the Retention Agreements contained retention and
severance provisions. The retention provision provided that if
the executive remained employed through the spin-off, he would
receive a restricted stock grant that would vest on the first
anniversary of the spin-off. In the case of Mr. Taff, his
agreement provided that one-third of his retention payment would
be payable in cash on the effective date
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of the spin-off. Accordingly, in connection with the completion
of the spin-off and pursuant to their respective retention
agreements, Mr. Taff received a cash payment and our
Compensation Committee granted restricted shares of our common
stock to Messrs. Bethards and Taff. See the Grants of
Plan Based Awards table under Compensation of
Executive Officers below and the accompanying disclosures
for more information regarding the restricted stock awards
granted.
The severance provision provides for cash payments to the
executive of two times the sum of their annual base salary and
target annual incentive compensation, prorated target annual
incentive compensation and a cash payment equal to two years of
medical benefits as well as the full vesting of outstanding
equity and supplemental executive retirement plan account
balance in the event of a qualifying termination prior to the
first anniversary of the spin-off. The McDermott Compensation
Committee determined that the need to maintain continuity of
management and personnel that exists under a change in control
scenario equally existed in connection with the spin-off and, as
a result, based the retention agreement payments on the
severance payments that were payable under McDermotts
change in control agreements at that time. In recognition of
Mr. Taffs agreement to serve as our chief financial
officer following the spin-off, under his Retention Agreement it
was agreed that such service would not constitute a qualifying
termination under but that Mr. Taff may elect to terminate
his employment with us on the first anniversary of the
effective date of the spin-off and that such termination would
then constitute a qualifying termination for purposes of the
Retention Agreement. See the Potential Payments Upon
Termination or Change in Control tables under
Compensation of Executive Officers below and the
accompanying disclosures for more information regarding the
retention agreements with Messrs. Bethards and Taff and the
events considered to be a qualifying termination.
Other
Compensation Policies / Practices
Stock Ownership Guidelines. Following
the spin-off, our Board of Directors adopted stock ownership
guidelines to further align the interests of our officers and
directors with the interests of our stockholders and promote our
commitment to sound corporate governance. Under these
guidelines, our officers and non-management directors are
expected to maintain minimum stock ownership in our company. The
minimum ownership level is between two and five times annual
base salary for officers depending on their position, and five
times annual base retainer for non-management directors.
Directors and officers have five years from the effective date
of the stock ownership guidelines or their initial election as a
director/officer, whichever is later, to comply with the
guidelines. The Governance Committee annually reviews the
compliance with these guidelines and has discretion to waive or
modify the stock ownership guidelines for directors and officers.
46
Schedule A
to Compensation Discussion and Analysis
B&W Custom Peer Group. This group
consists of the following 13 companies selected with a
focus on companies within the construction and engineering
industry:
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AECOM Technology Corporation
Chicago Bridge & Iron Company N.V.
Curtiss-Wright Corporation
EMCOR Group
Fluor Corporation
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Foster Wheeler AG
Jacobs Engineering Group Inc.
KBR, Inc.
MasTec, Inc.
Quanta Services, Inc.
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The Shaw Group Inc.
Tetra Tech, Inc.
URS Corporation
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McDermott-Corporate Survey Peer
Group. The group consisted of
43 companies with operations in engineering, construction,
government operations
and/or
energy. The component companies within this group included:
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|
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|
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Alliant Techsystems Inc.
Ameron International Corp.
Anadarko Petroleum Corp.
Baker Hughes, Inc.
BJ Services Company
Cameron International, Inc.
Chicago Bridge & Iron Company N.V.
Cooper Industries Plc
Curtiss-Wright Corporation
Devon Energy Corporation
Dover Corporation
Eaton Corporation
El Paso Corporation
ESCO Technologies Inc.
Flowserve Corporation
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|
FMC Technologies, Inc.
Foster Wheeler AG
General Dynamics Corporation
Granite Construction Incorporated
Halliburton Company
Honeywell International, Inc.
Hubbell Inc.
Illinois Tool Works Inc.
Ingersoll-Rand Company
ITT Corp.
Joy Global Inc.
KBR, Inc.
Lockheed Martin Corporation
Martin Marietta Materials, Inc.
Noble Corporation
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Northrop Grumman Corporation
Pioneer Natural Resources Company
Raytheon Company
Rockwell Collins, Inc.
The Shaw Group Inc.
The Williams Companies, Inc.
Terex Corporation
Textron Inc.
Thomas & Betts Corporation
USG Corporation
Valmont Industries, Inc.
Vulcan Materials Company
Walter Industries, Inc.
|
McDermott-B&W Survey Peer
Group. The group is largely a subset of the
McDermott-Corporate Survey Peer Group and consisted of 27
engineering, construction
and/or
government operations companies that are more specifically
representative of McDermotts former Power Generation
Systems and Government Operations segments. The component
companies within this group included:
|
|
|
|
|
Ameron International Corp.
Chicago Bridge & Iron Company N.V.
Cooper Industries Plc
Curtiss-Wright Corporation
Dover Corporation
Eaton Corporation
ESCO Technologies Inc.
Flowserve Corporation
General Dynamics Corporation
Honeywell International, Inc.
|
|
Hubbell Inc.
Illinois Tool Works Inc.
Ingersoll-Rand Company
ITT Corporation
Joy Global Inc.
Lockheed Martin Corporation
Martin Marietta Materials, Inc.
Northrop Grumman Corporation
Raytheon Company
Rockwell Collins, Inc.
|
|
The Shaw Group Inc.
Terex Corporation
Textron, Inc.
Thomas & Betts Corporation
USG Corporation
Valmont Industries, Inc.
Vulcan Materials Company
|
McDermott Custom Peer Group. The
McDermott Custom Peer Group consisted of nine similarly situated
engineering and construction companies. Compensation information
for the McDermott Custom Peer Group companies was based on
information reported by those companies in publicly available
Securities and Exchange Commission filings. The component
companies within this group included:
|
|
|
|
|
Cal Dive International, Inc.
Chicago Bridge & Iron Company N.V.
Fluor Corporation
|
|
Foster Wheeler AG.
Jacobs Engineering Group Inc.
KBR, Inc.
|
|
Oceaneering International, Inc.
The Shaw Group Inc.
URS Corporation.
|
47
Compensation
Committee Report
The following report of the Compensation Committee shall not
be deemed to be soliciting material or to otherwise
be considered filed with the SEC or be subject to
Regulation 14A or 14C (other than as provided in
Item 407 of
Regulation S-K)
or to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended (the Exchange Act),
nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or
the Exchange Act, except to the extent that B&W
specifically incorporates it by reference into such filing.
We have reviewed and discussed the Compensation Discussion and
Analysis with B&Ws management and, based on our
review and discussions, we recommended to the Board that the
Compensation Discussion and Analysis be included in this Proxy
Statement.
THE COMPENSATION COMMITTEE
Oliver D. Kingsley, Jr., Chairman
Robert W. Goldman
Stephen G. Hanks
Larry L. Weyers
48
Compensation
of Executive Officers
The following table summarizes the prior three years
compensation of our Named Executives. Prior to July 30,
2010, the effective date of our spin-off from McDermott,
B&W was a subsidiary of McDermott. Accordingly, the
information presented reflects compensation paid to our Named
Executives by McDermott and its subsidiaries prior to the
spin-off and by us and our subsidiaries after the spin-off.
Summary
Compensation Table
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Change in
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Pension
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Value and
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Nonqualified
|
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Non-Equity
|
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Deferred
|
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Stock
|
|
Option
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Incentive Plan
|
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Compensation
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All Other
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Name and Principal Position
|
|
Year
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|
Salary(1)
|
|
Bonus(2)
|
|
Awards(3)
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|
Awards(3)
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Compensation(4)
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Earnings(5)
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Compensation(6)
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Total
|
B.C. Bethards,
|
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|
2010
|
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$
|
665,503
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|
|
$
|
0
|
|
|
$
|
2,191,026
|
|
|
$
|
865,320
|
|
|
$
|
841,500
|
|
|
$
|
509,958
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|
|
$
|
111,292
|
|
|
$
|
5,184,599
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|
President &
|
|
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2009
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|
|
$
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526,200
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|
|
$
|
0
|
|
|
$
|
840,544
|
|
|
$
|
473,450
|
|
|
$
|
663,012
|
|
|
$
|
305,160
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|
|
$
|
65,693
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|
|
$
|
2,874,059
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|
Chief Executive Officer
|
|
|
2008
|
|
|
$
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438,675
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|
|
$
|
10,000
|
|
|
$
|
1,207,512
|
|
|
$
|
0
|
|
|
$
|
509,298
|
|
|
$
|
158,014
|
|
|
$
|
54,831
|
|
|
$
|
2,378,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
|
|
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|
M.S. Taff,
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|
2010
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|
$
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516,363
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|
|
$
|
294,752
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|
|
$
|
908,021
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|
|
$
|
209,751
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|
|
$
|
359,936
|
|
|
|
N/A
|
|
|
$
|
83,967
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|
|
$
|
2,372,790
|
|
Senior Vice President &
|
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|
2009
|
|
|
$
|
505,000
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|
|
$
|
0
|
|
|
$
|
980,544
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|
|
$
|
552,314
|
|
|
$
|
707,000
|
|
|
|
N/A
|
|
|
$
|
59,315
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|
|
$
|
2,804,173
|
|
Chief Financial Officer
|
|
|
2008
|
|
|
$
|
440,000
|
|
|
$
|
110,000
|
|
|
$
|
1,671,638
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|
|
$
|
0
|
|
|
$
|
141,207
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|
|
|
N/A
|
|
|
$
|
45,757
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|
|
$
|
2,408,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
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M.P. Salomone,
|
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|
2010
|
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|
$
|
406,000
|
|
|
$
|
0
|
|
|
$
|
300,026
|
|
|
$
|
207,699
|
|
|
$
|
242,829
|
|
|
$
|
577,713
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|
|
$
|
96,054
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|
|
$
|
1,830,321
|
|
Senior Vice President &
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
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Chief Operating Officer(7)
|
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|
|
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|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
R.L. Killion,
|
|
|
2010
|
|
|
$
|
348,765
|
|
|
$
|
0
|
|
|
$
|
239,215
|
|
|
$
|
165,623
|
|
|
$
|
193,639
|
|
|
$
|
338,891
|
|
|
$
|
7,350
|
|
|
$
|
1,293,483
|
|
President & COO,
|
|
|
2009
|
|
|
$
|
330,000
|
|
|
$
|
0
|
|
|
$
|
309,627
|
|
|
$
|
174,413
|
|
|
$
|
347,210
|
|
|
$
|
305,071
|
|
|
$
|
7,546
|
|
|
$
|
1,473,867
|
|
B&W PGG
|
|
|
2008
|
|
|
$
|
272,850
|
|
|
$
|
0
|
|
|
$
|
551,098
|
|
|
$
|
0
|
|
|
$
|
256,350
|
|
|
$
|
182,469
|
|
|
$
|
6,957
|
|
|
$
|
1,269,724
|
|
|
|
|
|
|
|
|
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|
W.D. Nash,
|
|
|
2010
|
|
|
$
|
357,000
|
|
|
$
|
0
|
|
|
$
|
217,513
|
|
|
$
|
150,562
|
|
|
$
|
172,409
|
|
|
$
|
116,224
|
|
|
$
|
38,701
|
|
|
$
|
1,052,409
|
|
Former President,
|
|
|
2009
|
|
|
$
|
348,000
|
|
|
$
|
0
|
|
|
$
|
279,320
|
|
|
$
|
157,324
|
|
|
$
|
292,668
|
|
|
$
|
76,599
|
|
|
$
|
37,872
|
|
|
$
|
1,191,783
|
|
B&W NOG
|
|
|
2008
|
|
|
$
|
330,800
|
|
|
$
|
0
|
|
|
$
|
673,920
|
|
|
$
|
0
|
|
|
$
|
292,808
|
|
|
$
|
6,272
|
|
|
$
|
33,271
|
|
|
$
|
1,337,071
|
|
|
|
(1)
|
The amounts included in this column include 2010 salary paid
prior to the spin-off to the Named Executives in the following
amounts: Mr. Bethards: $311,337; Mr. Taff: $299,633;
Ms. Salomone: $236,000; Mr. Killion: $200,840; and
Mr. Nash: $207,000.
|
(2)
|
See Bonus below for a discussion of the amounts
included in this column.
|
(3)
|
See Stock and Option Awards below for a discussion
of the amounts included in this column.
|
(4)
|
See Non-Equity Incentive Plan Compensation below for
a discussion of the amounts included in this column.
|
(5)
|
See Change in Pension Value and Nonqualified Deferred
Compensation Earnings below for a discussion of the
amounts included in this column.
|
(6)
|
See All Other Compensation below for a discussion of
the amounts included in this column.
|
(7)
|
No compensation information is provided for Ms. Salomone
for 2009 and 2008 because she became a Named Executive in 2010.
|
Bonus. The amount reported for
Mr. Taff in the Bonus column is attributable to
the cash portion of the retention bonus paid to Mr. Taff
under the Retention Agreement entered into in conjunction with
the spin-off.
Stock and Option Awards. The amounts
reported in the Stock Awards and Option
Awards columns represent the aggregate grant date fair
value of all stock and option awards granted to Named Executives
in 2010 (i) by McDermott prior to the spin-off (the
2010
McDermott Awards) and (ii) by us following the
spin-off (the 2010 B&W Awards). The 2010
B&W Awards consist of stock awards made by us to
Messrs. Bethards and Taff in accordance with their
respective Retention Agreements entered into in conjunction with
the spin-off representing $941,062 and $605,025, respectively,
of the amounts reported under Stock Awards above. In
accordance with the Employee Matters Agreement, the 2010
McDermott Awards were converted entirely to stock and options
awards based on our common stock, except in the case of
Mr. Taff. For
49
Mr. Taff, one-half of his 2010 McDermott Awards were
converted to stock and option awards based on our common stock
and one-half were converted to stock and option awards based on
McDermott common stock, in accordance with the Employee Matters
Agreement. The amounts reported above in respect of the 2010
McDermott Awards represent the grant date fair value
attributable to such awards as converted to awards based on our
common stock, which amounts are being expensed by us over the
remaining vesting period of the award. McDermott is expensing
the grant date fair value attributable to Mr. Taffs
2010 McDermott Awards that were converted on the spin-off to
stock and option awards based on McDermott common stock. See
Compensation Discussion and Analysis Long-Term
Incentive Compensation Conversion of McDermott
Equity in the Spin-Off above for more information about
the treatment of the 2010 McDermott Awards and other
pre-spin-off equity awards in connection with the spin-off.
The grant date fair values shown were computed in accordance
with Financial Accounting Standards Board Accounting Standards
Codification (FASB ASC) Topic 718). For a discussion
of the valuation assumptions used in determining the grant date
fair value, see Note 9 to our consolidated financial
statements included in our annual report on
Form 10-K
for the year ended December 31, 2010. See the Grants
of Plan-Based Awards table for more information regarding
the stock and option awards granted in 2010, including a
discussion of grant date fair value.
Non-Equity Incentive Plan
Compensation. The amounts reported in the
Non-Equity Incentive Plan Compensation column are
attributable to the annual incentive awards earned under our
EICP in fiscal years 2008, 2009 and 2010, but paid in 2009, 2010
and 2011, respectively. See the Grants of Plan-Based
Awards table for more information regarding the annual
incentive awards earned in 2010.
Change in Pension Value and Nonqualified Deferred
Compensation Earnings. The amounts reported
in the Change in Pension Value and Nonqualified Deferred
Compensation Earnings column represent the changes in
actuarial present values of the accumulated benefits under
defined benefit plans, determined by comparing the prior
completed fiscal year end amount to the covered fiscal year end
amount.
All Other Compensation. The amounts
reported for 2010 in the All Other Compensation
column are attributable to the following:
All Other
Compensation
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service-Based
|
|
|
|
|
|
|
|
|
|
|
Thrift
|
|
|
|
|
|
|
SERP Contribution
|
|
Thrift Match
|
|
Contribution
|
|
Tax Gross-Ups
|
|
Perquisites
|
B.C. Bethards
|
|
$
|
52,275
|
|
|
$
|
4,900
|
|
|
|
N/A
|
|
|
$
|
7,038
|
|
|
$
|
47,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M.S. Taff
|
|
$
|
37,810
|
|
|
$
|
7,350
|
|
|
$
|
7,671
|
|
|
$
|
3,022
|
|
|
$
|
28,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M.P. Salomone
|
|
|
N/A
|
|
|
$
|
6,230
|
|
|
|
N/A
|
|
|
$
|
7,706
|
|
|
$
|
82,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R.L. Killion
|
|
|
N/A
|
|
|
$
|
7,350
|
|
|
|
N/A
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W.D. Nash
|
|
$
|
32,040
|
|
|
$
|
6,220
|
|
|
|
N/A
|
|
|
$
|
441
|
|
|
|
|
|
SERP Contribution. The amounts reported
represent contributions made by McDermott prior to the spin-off
to the McDermott SERP. In connection with the spin-off, we
adopted the B&W SERP and assumed all liabilities of
McDermotts plan attributable to participating Named
Executives and other B&W employees. We did not make any
contributions to our SERP in 2010. See the Nonqualified
Deferred Compensation table for more information regarding
these amounts and our SERP.
Thrift Match and Service-Based Thrift
Contribution. The amounts in this column
include the following contributions by McDermott to the
McDermott Thrift Plan prior to the spin-off: Mr. Bethards:
$4,900; Mr. Taff: $15,021; Ms. Salomone: $6,230;
Mr. Killion:
$6,025; and Mr. Nash: $5,760. In connection with the
spin-off, McDermott transferred the aggregate assets and
liabilities (other than amounts attributable to the McDermott
common stock fund) credited to our Named Executives and other
persons who would be affiliated with B&W following the
spin-off from its plan to our Thrift Plan. The amounts reported
in excess of McDermotts contributions were contributed by
us. Under our Thrift Plan, we will match 50% of employees
contributions, up to six percent. For information regarding our
Thrift Plan matching contributions and service-based
contributions, see Compensation Discussion and
Analysis Post-Employment Compensation
Retirement Plans above.
50
Tax
Gross-Ups. The
tax
gross-ups
reported for 2010 under All Other Compensation are
attributable to the following:
|
|
|
Mr. Bethards received tax
gross-ups
associated with income imputed to him as a result of his
relocation from Virginia to North Carolina in connection with
the spin-off and as a result of his spouse accompanying him on
business travel.
|
|
|
|
Mr. Taff received tax
gross-ups
associated with income imputed to him in connection with a
temporary auto lease and as a result of his spouse accompanying
him on business travel. $646 of the tax
gross-ups
reported was incurred prior to the spin-off.
|
|
|
|
Ms. Salomone received tax
gross-ups
associated with income imputed to her as a result of her
relocation from Ohio to North Carolina in connection with the
spin-off.
|
|
|
Mr. Nash received a tax
gross-up on
a gift card and as a result of his spouse accompanying him on
business travel.
|
Perquisites. Perquisites and other
personal benefits received by a Named Executive are not included
if their aggregate value does not exceed $10,000. For
Messrs. Bethards and Taff and Ms. Salomone the values
of the perquisites and other personal benefits reported for 2010
are as follows:
|
|
|
Mr. Bethards: $21,485 is attributable to the
costs of providing him relocation assistance in connection with
his move from Virginia to North Carolina in connection with the
spin-off. The remainder is attributable to the cost of club
dues, airline club membership, financial planning, annual
physical and accompanying medical costs, personal use of
corporate aircraft and the costs associated with his spouse
accompanying him on business travel. $29,899 of the perquisites
reported were incurred prior to the spin-off.
|
|
|
Mr. Taff: $14,852 is attributable to the cost of
McDermott paying for financial planning services prior to the
spin-off. The remainder is attributable to the cost of an annual
physical, financial planning, his spouse accompanying him on
business travel, airline club membership, tax preparation fees
and a temporary car lease. $21,132 of the perquisites reported
were incurred prior to the spin-off.
|
|
|
|
Ms. Salomone: $73,550 is attributable to the
costs of providing her relocation assistance in connection with
her move from Ohio to North Carolina in
|
|
|
|
connection with the spin-off. The remainder is attributable to
the cost of an annual physical, cash incentive awarded under our
wellness program and cash payments paid to former employees of
Marine Mechanical Corporation in connection with our acquisition
of that company to partially offset the increased costs of our
medical benefits.
|
Following the spin-off, we maintained our consolidated
accounting, tax and certain treasury functions in Houston,
Texas. Mr. Taff, who continued to reside in Houston
following the spin-off, maintains an office in each of our
Houston, Texas and Charlotte, North Carolina offices. As a
result, no expenses are reported in the Summary Compensation
Table relating to Mr. Taffs travel between offices.
Messrs. Killion and Nash were headquartered in Ohio and
Virginia, respectively, before and after the spin-off and, as a
result, they incurred no relocation expense.
We calculate all perquisites and personal benefits based on the
incremental cost we incur to provide such benefits. For
relocation, that includes costs paid to the employee and to
third parties for the benefit of the employee, without regard to
whether those costs are deductible to the employee. However, we
exclude any payments by us to the third party that manages our
relocation program, which would have been incurred without the
employees relocation and therefore are not
incremental. For personal use of corporate aircraft,
we compute incremental cost based on the actual cost incurred by
us for the flight, including:
|
|
|
the cost of fuel;
|
|
|
a usage charge equal to the hourly rate charged by our flight
operator multiplied by the flight time;
|
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dead head costs, if applicable, of flying aircraft
without passengers to and from locations; and
|
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the dollar amount of increased income taxes we incur as a result
of disallowed deductions under IRS rules.
|
Since the aircraft are used primarily for business travel,
incremental costs generally exclude fixed costs such as the
purchase price of our interests in the aircraft, aircraft
management fees, depreciation, maintenance and insurance. Our
cost for flights, whether business or personal, is not affected
by the number of passengers. As a result, we do not assign any
amount, other than the amount of any disallowed deduction, when
computing incremental costs for the presence of guests
accompanying a Named Executive on such flights.
51
Grants
of Plan-Based Awards
The following table summarizes awards made to our Named
Executives during the year ended December 31, 2010,
including awards originally granted by McDermott in 2010 prior
to the spin-off, which were converted to awards granted under
our long-term incentive plan in connection with the spin-off
(indicated by *). The table does not show any stock or option
awards granted by McDermott prior to 2010, which were converted
to awards granted under our long-term incentive plan in
connection with the spin-off. Please see the Outstanding Equity
Awards at Fiscal Year-End Table and accompanying narrative
thereto for more information regarding those awards. The
Estimated Future Payouts Under Equity Incentive Plan
Awards column has been omitted from the following table as
no equity incentive awards required to be reported in that
column were awarded to any of our Named Executives during 2010.
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All Other
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All Other
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Stock
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Option
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Awards:
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Awards:
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Exercise
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Grant Date
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Estimated Possible Payouts Under
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Number of
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Number of
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or Base
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Fair Value
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Committee
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Non-Equity Incentive Plan Awards
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Shares of
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Securities
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Price of
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of Stock and
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Action
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(1)
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Stock
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Underlying
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Option
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Option
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Name
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Grant Date
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Date
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Threshold
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Target
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Maximum
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or Units(2)
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Options(3)
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Awards
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Awards(4)
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B.C. Bethards
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08/11/10
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*
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08/11/10
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$
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212,500
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$
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850,000
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$
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1,700,000
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08/02/10
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*
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08/02/10
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75,496
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$
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24.55
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$
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865,320
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08/09/10
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*
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08/02/10
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50,915
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$
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1,249,963
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08/09/10
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(5)
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08/02/10
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39,607
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$
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941,062
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M.S. Taff
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08/11/10
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*
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08/11/10
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$
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248,776
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$
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361,454
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$
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514,269
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08/02/10
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*
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08/02/10
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18,300
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$
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24.55
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$
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209,751
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08/09/10
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*
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08/02/10
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12,342
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$
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302,996
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08/09/10
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(5)
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08/02/10
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25,464
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$
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605,025
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M.P. Salomone
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08/11/10
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*
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08/11/10
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$
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62,200
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$
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248,800
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$
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497,600
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08/02/10
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*
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08/02/10
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18,121
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$
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24.55
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$
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207,699
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08/09/10
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*
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08/02/10
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12,221
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$
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300,026
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R.L. Killion
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08/11/10
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*
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08/11/10
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$
|
49,804
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|
|
$
|
199,217
|
|
|
$
|
398,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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08/02/10
|
*
|
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08/02/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
14,450
|
|
|
$
|
24.55
|
|
|
$
|
165,623
|
|
|
|
|
08/09/10
|
*
|
|
|
08/02/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,744
|
|
|
|
|
|
|
|
|
|
|
$
|
239,215
|
|
W.D. Nash
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/11/10
|
*
|
|
|
08/11/10
|
|
|
$
|
48,375
|
|
|
$
|
193,500
|
|
|
$
|
387,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
08/02/10
|
*
|
|
|
08/02/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,136
|
|
|
$
|
24.55
|
|
|
$
|
150,562
|
|
|
|
|
08/09/10
|
*
|
|
|
08/02/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,860
|
|
|
|
|
|
|
|
|
|
|
$
|
217,513
|
|
|
|
(1)
|
Amounts shown represents the range of potential payouts under
our annual incentive compensation plan. See Estimated
Possible Payouts Under Non-Equity Incentive Plan Awards
below for a discussion of the amounts included in this column.
The actual amounts paid to our Named Executives are included in
the Non-Equity Incentive Plan Compensation column of the
Summary Compensation Table above.
|
(2)
|
Amounts shown represent shares of our common stock underlying
time-based restricted stock and/or restricted stock units. See
All Other Stock and Option Awards below for a
discussion of the amounts included in this column.
|
(3)
|
Amounts shown represent the number of shares of our common stock
that may be issued to the Named Executive on the exercise of
stock options. See All Other Stock and Option Awards
below for a discussion of the amounts included in this column.
|
(4)
|
See Grant Date Fair Value of Stock and Option Awards
below for a discussion of the amounts included in this column.
|
(5)
|
Amounts represent restricted stock granted under the Retention
Agreements.
|
52
Estimated
Possible Payouts Under Non-Equity Incentive Plan
Awards
We maintain an annual cash incentive plan, which we refer to as
the Executive Incentive Compensation Plan, or EICP, which our
Compensation Committee administers. Under the EICP, our
Compensation Committee determines target award opportunities for
eligible officers, expressed as a percentage of the
officers base salary. Except as discussed below, an
officers award is funded based on the attainment of
short-term financial goals, which determine principal payout
levels, including threshold payout (25% of target award), target
payout (100% of target award) and maximum payout (200% of target
award). Notwithstanding the level of financial results attained,
our Compensation Committee may decrease an annual incentive
compensation award in its discretion. However, if the financial
goal to fund threshold payout is not achieved, no amount is paid
under the plan.
In February 2010, the McDermott Compensation Committee granted
non-equity incentive awards under its annual cash incentive plan
to eligible officers of McDermott and its subsidiaries,
including our Named Executives (the McDermott Bonus
Awards). B&W assumed the rights and obligations of
the McDermott Bonus Awards under our EICP in respect of our
officers, including the Named Executives, pursuant to the
Employee Matters Agreement. Following the spin-off, in August
2010, our Compensation Committee reviewed the total direct
compensation of our officers and adjusted the target percentages
used to determine target annual incentive compensation for
selected officers, including Messrs. Bethards, Killion and
Nash and Ms. Salomone, with all but Mr. Bethards
target prorated based on the period from the spin-off through
December 31, 2010. For Mr. Bethards, our Compensation
Committee did not prorate his adjusted target opportunity,
rather it established his 2010 target annual incentive
compensation as 100% of his adjusted annual base salary.
The amounts shown in these columns reflect the adjustments to
Named Executives target awards under the EICP made by our
Compensation Committee following the spin-off. As a result of
these adjustments, the threshold, target and maximum amounts
reported in the above table were calculated based on the
following target award opportunities:
|
|
|
|
|
|
|
|
|
Target Award Opportunity
|
|
|
(% of Salary)
|
Named Executive
|
|
Pre Spin-Off
|
|
Post Spin-Off
|
B. C. Bethards
|
|
|
N/A
|
|
|
100%
|
M. S. Taff
|
|
|
70
|
%
|
|
70%
|
M. P. Salomone
|
|
|
55
|
%
|
|
70%
|
R. L. Killion
|
|
|
55
|
%
|
|
60%
|
W. D. Nash
|
|
|
50
|
%
|
|
60%
|
The amounts reflected in the target column of the
Grants of Plan Based Awards table represent the
value of the Named Executives target award opportunity as
approved by our Compensation Committee following the spin-off.
The amounts shown in the maximum column represent
the maximum amount of annual incentive compensation the Named
Executive was eligible to receive at the time the awards were
approved by our Compensation Committee, which for all Named
Executives, other than Mr. Taff, was 200% of the target
award opportunity. The amounts shown in the
threshold column represent the amount of annual
incentive compensation the Named Executive was eligible to
receive at the time the awards were approved by our Compensation
Committee assuming financial performance at the threshold payout
level, which for all Named Executives other than Mr. Taff
was 25% of the target award opportunity.
At the time the McDermott Compensation Committee granted the
initial annual incentive compensation awards, it established two
distinct award structures depending on whether the officer was
principally functioning within one of McDermotts operating
segments, such as Messrs. Bethards, Killion and Nash and
Ms. Salomone, or a corporate officer, such as
Mr. Taff. The McDermott Compensation Committee determined
that its corporate officers would be eligible to earn a prorated
target award based on the effective date of the spin-off and
that their award opportunity for the balance of 2010 would
follow the structure of McDermotts operating segment
officers. At the time our Compensation Committee reviewed the
officers compensation, Mr. Taff was eligible to earn
7/12th of his target award opportunity based on the
July 30, 2010 effective date of the spin-off. As a result,
only 5/12th of Mr. Taffs target award opportunity was
subject to the threshold and maximum payouts and the amounts
reported in the respective columns reflect that limitation.
53
All threshold, target and maximum amounts reported in the table
above assume that our Compensation Committee exercises no
discretion over the annual incentive compensation award
ultimately paid.
See Compensation Discussion and Analysis
Annual Incentive Compensation above for more information
about the 2010 EICP awards and performance goals.
All
Other Stock and Option Awards
Prior to the spin-off, the McDermott Committee granted its
annual equity-based awards under its long-term incentive plan to
selected employees of McDermott and its subsidiaries, including
the Named Executives. The awards to the Named Executives
consisted of 50% stock options to purchase shares of McDermott
common stock (McDermott Options) and 50% restricted
stock units payable in shares of McDermott common stock
(McDermott RSUs).
McDermott Options. The McDermott Options were
granted with an exercise price equal to the closing price of
McDermott common stock on the date of grant and were generally
scheduled to vest and become exercisable in one-third increments
on the first, second and third anniversaries of the date of
grant, with an exercise term of seven years. In connection with
the spin-off, the McDermott Options held by our Named Executives
were converted to stock options to purchase shares of our common
stock (B&W Options) in accordance with the
Employee Matters Agreement. The B&W Options were granted
under our 2010 LTIP. The number of shares underlying the
B&W Options and the exercise price of such options were
granted on terms intended to preserve the intrinsic value of the
McDermott Options at the time of the spin-off and remained
subject to the same vesting schedule as the McDermott Options.
McDermott RSUs. The McDermott RSUs represented
the right to receive one share of McDermott common stock for
each unit that vests and were generally scheduled to vest in
one-third increments on the first, second and third
anniversaries of the date of grant. In connection with the
spin-off, the McDermott RSUs held by our Named Executives were
converted to restricted stock units payable in shares of our
common stock (B&W RSUs) in accordance with the
Employee Matters Agreement. The B&W RSUs were granted under
our 2010 LTIP on terms intended to preserve the intrinsic value
of the McDermott RSUs at the time of the spin-off and remained
subject to the same vesting schedule as the McDermott RSUs.
On August 2, 2010, our Compensation Committee approved and
authorized, among other awards, the grants of the B&W
Options and B&W RSUs as contemplated by the Employee
Matters Agreement. The share amounts reported in the table above
are presented giving effect to the spin-off and reflect the
conversion of the McDermott Options and McDermott RSUs to
B&W Options and B&W RSUs.
Post Spin-Off Awards. Additionally, on
August 2, 2010, our Compensation Committee granted to
Messrs. Bethards and Taff restricted shares of our common
stock due them under the Retention Agreements (Post
Spin-Off Awards). Under the terms of the agreements, in
the event the officer remained employed with McDermott or
B&W through the spin-off, the officer would receive a
one-time bonus generally payable in restricted stock equal in
value to the sum of the of the officers annual base salary
and target annual incentive compensation in effect immediately
prior to the spin-off. For Mr. Taff, one-third of his bonus
was payable in cash. Under the terms of the Employee Matters
Agreement, we assumed the rights and obligations arising under
those agreements in respect of Messrs. Bethards and Taff.
See Compensation Discussion and Analysis
Post-Employment Compensation Employment, Severance
and Retention Arrangements above for more information
about the Retention Agreements.
Grant
Date Fair Value of Stock and Option Awards
The amounts included in the Grant Date Fair Value of Stock
and Option Awards column represent the full grant date
fair values of the equity awards computed in accordance with
FASB ASC Topic 718. Under FASB ASC Topic 718, the fair value of
equity awards is determined on the date of grant. The grant date
fair value of the Post Spin-Off Awards was determined using the
closing price of our common stock on the date of grant. Because
the intrinsic value of the McDermott Options and McDermott RSUs
were preserved in the conversion to B&W Options and
B&W RSUs, the grant date fair values reported for the
B&W Options and B&W RSUs represent the grant date fair
value based on the date initially granted by McDermott. For
these awards, the grant date fair values were determined based
on the closing price of McDermotts common stock on the
date of grant, as adjusted to reflect the spin-off. The amounts
reported for Mr. Taff represent the grant date fair value
of the stock and option awards attributable to the one-half of
his McDermott Options and McDermott RSUs that converted to
awards based on our common stock. A Black-Scholes option-pricing
54
model was used for determining the grant date fair value of
stock options. The determination of the fair value of an award
on the date of grant using an option-pricing model requires
various assumptions, such as the expected life of the award and
stock price volatility. For more information regarding the
compensation expense related to 2010 awards, and a discussion of
valuation assumptions utilized in option pricing, see
Note 9 to our consolidated financial statements included in
our annual report on
Form 10-K
for the year ended December 31, 2010.
See Proposal 4 below for more information regarding the
amended and restated 2010 LTIP and Proposal 5 below for
more information regarding the amended and restated EICP.
55
Outstanding
Equity Awards at Fiscal Year-End
The following Outstanding Equity Awards at Fiscal Year-End table
summarizes the equity awards we have made to our Named
Executives which were outstanding as of December 31, 2010.
The information presented below reflects the conversion of
equity granted by McDermott prior to the spin-off to equity
granted by us in connection with the spin-off, which we refer to
below as Pre-Spin Awards (marked by *).
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Market Value of
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Shares or Units of
|
|
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
|
Stock That
|
|
|
Stock That Have
|
|
|
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Expiration
|
|
|
|
Have Not
|
|
|
Not Vested
|
|
Name
|
|
|
Grant Date(1)
|
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Options
|
|
|
Price
|
|
|
Date
|
|
|
|
Vested
|
|
|
(2)
|
|
B.C. Bethards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock*
|
|
|
|
03/03/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,354
|
(3)
|
|
$
|
34,649
|
|
RSUs*
|
|
|
|
03/03/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,982
|
(3)
|
|
$
|
127,489
|
|
Restricted Stock*
|
|
|
|
11/10/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,956
|
(4)
|
|
$
|
229,184
|
|
RSU*
|
|
|
|
03/05/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,543
|
(5)
|
|
$
|
653,645
|
|
RSU*
|
|
|
|
03/05/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,809
|
(6)
|
|
$
|
506,912
|
|
Stock Options*
|
|
|
|
03/05/09
|
|
|
|
|
|
|
|
|
48,328
|
(7)
|
|
|
|
|
|
$
|
10.58
|
|
|
|
03/05/16
|
|
|
|
|
|
|
|
|
|
|
Stock Options*
|
|
|
|
03/04/10
|
|
|
|
|
|
|
|
|
75,496
|
(8)
|
|
|
|
|
|
$
|
24.55
|
|
|
|
03/04/17
|
|
|
|
|
|
|
|
|
|
|
RSU*
|
|
|
|
03/04/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,915
|
(8)
|
|
$
|
1,302,915
|
|
Restricted Stock
|
|
|
|
08/09/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,607
|
(9)
|
|
$
|
1,013,543
|
|
M.S. Taff
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options*
|
|
|
|
06/08/05
|
|
|
|
|
11,884
|
|
|
|
|
|
|
|
|
|
|
$
|
6.96
|
|
|
|
06/08/15
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock*
|
|
|
|
03/03/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,187
|
(3)
|
|
$
|
30,375
|
|
RSUs*
|
|
|
|
03/03/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,845
|
(3)
|
|
$
|
328,704
|
|
RSU*
|
|
|
|
03/05/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,865
|
(5)
|
|
$
|
508,345
|
|
RSU*
|
|
|
|
03/05/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,245
|
(6)
|
|
$
|
441,300
|
|
Stock Options*
|
|
|
|
03/05/09
|
|
|
|
|
14,094
|
|
|
|
28,190
|
(7)
|
|
|
|
|
|
$
|
10.58
|
|
|
|
03/05/16
|
|
|
|
|
|
|
|
|
|
|
Stock Options*
|
|
|
|
03/04/10
|
|
|
|
|
|
|
|
|
18,300
|
(8)
|
|
|
|
|
|
$
|
24.55
|
|
|
|
03/04/17
|
|
|
|
|
|
|
|
|
|
|
RSU*
|
|
|
|
03/04/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,342
|
(8)
|
|
$
|
315,832
|
|
Restricted Stock
|
|
|
|
08/09/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,464
|
(9)
|
|
$
|
651,624
|
|
M.P. Salomone
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock*
|
|
|
|
03/03/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
483
|
(3)
|
|
$
|
12,360
|
|
RSUs*
|
|
|
|
03/03/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,736
|
(3)
|
|
$
|
44,424
|
|
RSU*
|
|
|
|
03/05/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,741
|
(5)
|
|
$
|
121,322
|
|
Stock Options*
|
|
|
|
03/05/09
|
|
|
|
|
|
|
|
|
2,883
|
(7)
|
|
|
|
|
|
$
|
10.58
|
|
|
|
03/05/16
|
|
|
|
|
|
|
|
|
|
|
Stock Options*
|
|
|
|
03/04/10
|
|
|
|
|
|
|
|
|
18,121
|
(8)
|
|
|
|
|
|
$
|
24.55
|
|
|
|
03/04/17
|
|
|
|
|
|
|
|
|
|
|
RSU*
|
|
|
|
03/04/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,221
|
(8)
|
|
$
|
312,735
|
|
R.L. Killion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock*
|
|
|
|
03/03/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
641
|
(3)
|
|
$
|
16,403
|
|
RSUs*
|
|
|
|
03/03/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,360
|
(3)
|
|
$
|
60,392
|
|
Restricted Stock*
|
|
|
|
11/10/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,503
|
(4)
|
|
$
|
89,642
|
|
RSU*
|
|
|
|
03/05/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,409
|
(5)
|
|
$
|
240,776
|
|
RSU*
|
|
|
|
03/05/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,296
|
(6)
|
|
$
|
186,705
|
|
Stock Options*
|
|
|
|
03/05/09
|
|
|
|
|
8,901
|
|
|
|
17,804
|
(7)
|
|
|
|
|
|
$
|
10.58
|
|
|
|
03/05/16
|
|
|
|
|
|
|
|
|
|
|
Stock Options*
|
|
|
|
03/04/10
|
|
|
|
|
|
|
|
|
14,450
|
(8)
|
|
|
|
|
|
$
|
24.55
|
|
|
|
03/04/17
|
|
|
|
|
|
|
|
|
|
|
RSU*(8)
|
|
|
|
03/04/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,744
|
(8)
|
|
$
|
249,349
|
|
W.D. Nash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock*
|
|
|
|
03/03/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
958
|
(3)
|
|
$
|
24,515
|
|
RSUs*
|
|
|
|
03/03/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,520
|
(3)
|
|
$
|
90,077
|
|
RSU*
|
|
|
|
03/05/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,488
|
(5)
|
|
$
|
217,208
|
|
RSU*
|
|
|
|
03/05/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,582
|
(6)
|
|
$
|
168,433
|
|
Stock Options*
|
|
|
|
03/05/09
|
|
|
|
|
2,063
|
|
|
|
16,060
|
(7)
|
|
|
|
|
|
$
|
10.58
|
|
|
|
03/05/16
|
|
|
|
|
|
|
|
|
|
|
Stock Options*
|
|
|
|
03/04/10
|
|
|
|
|
|
|
|
|
13,136
|
(8)
|
|
|
|
|
|
$
|
24.55
|
|
|
|
03/04/17
|
|
|
|
|
|
|
|
|
|
|
RSU*
|
|
|
|
03/04/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,860
|
(8)
|
|
$
|
226,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The dates presented in this column represent the date the awards
were granted (a) by McDermott for Pre-Spin Awards and
(b) by us for all other awards. The Pre-Spin Awards were
converted to B&W equity in connection |
56
|
|
|
|
|
with the spin-off with new grant dates of August 2, 2010
for stock options and August 9, 2010 for stock awards.
However, when the Pre-Spin Awards were converted to B&W
equity, they remained subject to the same general vesting
schedule. Therefore, to assist in understanding the vesting
dates associated with the Pre-Spin Awards, we are presenting the
McDermott grant dates. |
|
(2) |
|
Market values in these columns are based on the closing price of
our common stock as of December 31, 2010 ($25.59), as
reported on the NYSE. |
|
(3) |
|
These shares of restricted stock or restricted stock units vest
100% on March 3, 2011. |
|
(4) |
|
These shares of restricted stock vest 100% on November 10,
2011. |
|
(5) |
|
These restricted stock units vest 50% on March 5, 2011 and
50% on March 5, 2012. |
|
(6) |
|
These restricted stock units vest 100% on March 5, 2012. |
|
(7) |
|
These stock options vest 50% on March 5, 2011 and 50% on
March 5, 2012. |
|
(8) |
|
These shares of stock options and restricted stock units vest
one-third on each of March 4, 2011, 2012 and 2013. |
|
(9) |
|
These shares of restricted stock vest 100% on July 30, 2011. |
57
Option
Exercises and Stock Vested B&W
The following Option Exercises and Stock Vested table provides
additional information about the value realized by our Named
Executives on exercises of B&W option awards and vesting of
B&W stock awards during the year ended December 31,
2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
Shares
|
|
|
|
Shares
|
|
|
|
|
Acquired
|
|
Value Realized
|
|
Acquired
|
|
Value Realized
|
Name
|
|
on Exercise (#)
|
|
on Exercise
|
|
on Vesting (#)
|
|
on Vesting
|
B.C. Bethards
|
|
|
|
|
|
|
N/A
|
|
|
|
28,386
|
|
|
$
|
669,436
|
|
M.S. Taff
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
N/A
|
|
M.P. Salomone
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
N/A
|
|
R.L. Killion
|
|
|
|
|
|
|
N/A
|
|
|
|
11,682
|
|
|
$
|
275,603
|
|
W.D. Nash
|
|
|
5,966
|
|
|
$
|
74,098
|
|
|
|
10,078
|
|
|
$
|
239,453
|
|
Option Awards. Each stock option
exercise reported in the Option Exercises and Stock
Vested B&W table was effected as a simultaneous
exercise and sale. The value realized on exercise was calculated
based on the difference between the exercise price of the stock
option and the price at which the shares were sold.
Stock Awards. For each Named Executive,
the amounts reported in the number of shares acquired on vesting
column in the Option Exercises and Stock Vested
B&W table represent the aggregate number of shares of our
common stock acquired by the Named
Executive in connection with restricted stock and restricted
stock units awarded under our 2010 LTIP in connection with the
spin-off and which vested in 2010. The amounts reported in the
value realized on vesting column was calculated by multiplying
the number of shares acquired on the vesting by the closing
price of our common stock on the date of vesting.
The following table sets forth the amount of shares and
associated value realized attributable to restricted stock and
restricted stock units for each Named Executive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
Restricted Stock Units
|
|
|
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
Shares
|
|
|
|
Shares
|
|
|
|
|
Acquired
|
|
Value Realized
|
|
Acquired
|
|
Value Realized
|
Name
|
|
on Vesting
|
|
on Vesting
|
|
on Vesting
|
|
on Vesting
|
B.C. Bethards
|
|
|
8,956
|
|
|
$
|
207,779
|
|
|
|
19,430
|
|
|
$
|
461,657
|
|
M.S. Taff
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
N/A
|
|
M.P. Salomone
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
N/A
|
|
R.L. Killion
|
|
|
3,503
|
|
|
$
|
81,270
|
|
|
|
8,179
|
|
|
$
|
194,333
|
|
W.D. Nash
|
|
|
|
|
|
|
N/A
|
|
|
|
10,078
|
|
|
$
|
239,453
|
|
The number of shares acquired in connection with the vesting of
restricted stock awards and restricted stock units includes
12,048, 4,818 and 4,252 shares withheld by us for
Messrs. Bethards, Killion and Nash, respectively, to
satisfy the minimum statutory withholding tax due upon vesting.
58
Option
Exercises and Stock Vested McDermott
The following Option Exercises and Stock Vested table provides
additional information about the value realized by our Named
Executives on exercises of McDermott option awards and vesting
of McDermott stock awards prior to the spin-off during the year
ended December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
Shares
|
|
|
|
Shares
|
|
|
|
|
Acquired
|
|
Value Realized
|
|
Acquired
|
|
Value Realized
|
Name
|
|
on Exercise (#)
|
|
on Exercise
|
|
on Vesting (#)
|
|
on Vesting
|
B.C. Bethards
|
|
|
23,383
|
|
|
$
|
332,156
|
|
|
|
70,427
|
|
|
$
|
1,783,606
|
|
M.S. Taff
|
|
|
|
|
|
|
N/A
|
|
|
|
59,019
|
|
|
$
|
1,471,141
|
|
M.P. Salomone
|
|
|
1,395
|
|
|
$
|
19,795
|
|
|
|
2,760
|
|
|
$
|
70,494
|
|
R.L. Killion
|
|
|
320
|
|
|
$
|
7,161
|
|
|
|
24,725
|
|
|
$
|
626,379
|
|
W.D. Nash
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
32,474
|
|
|
$
|
823,708
|
|
Option Awards. The amounts reported in
the number of shares acquired on exercise column in the Option
Exercises and Stock Vested McDermott table represent
the aggregate number of shares of McDermott common stock
acquired by the Named Executive on the exercise of stock options
awarded under McDermotts long-term incentive plans. At the
time of the exercise, the shares acquired were retained by the
Named Executive, less shares withheld to cover the exercise
price and applicable taxes, if any. As a result, the amount
reported as the value realized on exercise does not represent
cash proceeds, but rather the difference between the exercise
price of the stock options and the average of the highest and
lowest reported trading price of McDermott common stock on the
date of exercise which is the definition of fair
market value of McDermott common stock under the applicable
McDermott long-term incentive plan.
Stock Awards. For each Named Executive,
the amounts reported in the number of shares acquired on vesting
column in the Option Exercises and Stock Vested
McDermott table represent the aggregate number of shares of
McDermott common stock acquired by the Named Executive in
connection with performance shares, restricted stock, restricted
stock units awarded under McDermotts long-term incentive
plans and which vested prior to the spin-off in 2010. For
Messrs. Taff and Nash, the amounts also include the number
of deferred stock units awarded under McDermotts long-term
incentive plans and which vested prior to the spin-off in 2010.
The deferred stock units were payable entirely in cash in an
amount equal to the number of vested units multiplied by the
average of the highest and lowest price of McDermott common
stock on the date of vesting. As a result, in respect of the
deferred stock units no shares of McDermott stock were actually
acquired upon the vesting and the amount included in the value
realized column represents the actual amount of cash proceeds
paid to the Named Executive before deducting applicable
withholding taxes. In respect of shares of McDermott common
stock acquired on the vesting of performance shares, restricted
stock and restricted stock units, the value realized was
calculated by multiplying the number of shares acquired on the
vesting by the average of the highest and lowest price of
McDermott common stock on the date of vesting.
The following table sets forth the amounts attributable to
performance shares, restricted stock, restricted stock units and
deferred stock units for each Named Executive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Shares
|
|
Restricted Stock
|
|
Restricted Stock Units
|
|
Deferred Stock Units
|
|
|
|
|
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
Shares
|
|
Value
|
|
Shares
|
|
Value
|
|
Shares
|
|
Value
|
|
Shares
|
|
Value
|
|
|
Acquired on
|
|
Realized
|
|
Acquired
|
|
Realized
|
|
Acquired
|
|
Realized
|
|
Acquired
|
|
Realized
|
Name
|
|
Vesting
|
|
on Vesting
|
|
on Vesting
|
|
on Vesting
|
|
on Vesting
|
|
on Vesting
|
|
on Vesting
|
|
on Vesting
|
B.C. Bethards
|
|
|
44,400
|
|
|
$
|
1,119,324
|
|
|
|
1,310
|
|
|
$
|
33,628
|
|
|
|
24,717
|
|
|
$
|
630,654
|
|
|
|
0
|
|
|
|
N/A
|
|
M.S. Taff
|
|
|
33,000
|
|
|
$
|
831,930
|
|
|
|
2,296
|
|
|
$
|
58,938
|
|
|
|
19,223
|
|
|
$
|
490,475
|
|
|
|
4,500
|
|
|
$
|
89,798
|
|
M.P. Salomone
|
|
|
0
|
|
|
|
N/A
|
|
|
|
466
|
|
|
$
|
11,962
|
|
|
|
2,294
|
|
|
$
|
58,531
|
|
|
|
0
|
|
|
|
N/A
|
|
R.L. Killion
|
|
|
15,000
|
|
|
$
|
378,150
|
|
|
|
620
|
|
|
$
|
15,915
|
|
|
|
9,105
|
|
|
$
|
232,314
|
|
|
|
N/A
|
|
|
|
N/A
|
|
W.D. Nash
|
|
|
20,700
|
|
|
$
|
521,847
|
|
|
|
926
|
|
|
$
|
23,770
|
|
|
|
8,214
|
|
|
$
|
209,580
|
|
|
|
2,634
|
|
|
$
|
68,510
|
|
59
The number of shares acquired in connection with the exercise of
stock options held, to the extent applicable, and the vesting of
performance shares, restricted stock awards and restricted stock
units includes the following number of shares withheld by
McDermott to satisfy the minimum statutory withholding tax due
upon exercise or vesting, as applicable.
|
|
|
|
|
|
|
Shares Withheld by McDermott
|
|
Shares Withheld by McDermott
|
Name
|
|
on Exercise of Stock Options
|
|
on Vesting of Stock Awards
|
|
|
B.C. Bethards
|
|
15,744
|
|
27,163
|
M.S. Taff
|
|
N/A
|
|
17,777
|
M.P. Salomone
|
|
858
|
|
978
|
R.L. Killion
|
|
0
|
|
8,024
|
W.D. Nash
|
|
N/A
|
|
9,917
|
60
Pension
Benefits
The following Pension Benefits table shows the present value of
accumulated benefits payable to each of our Named Executives
under our qualified and nonqualified pension plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Years
|
|
Present Value
|
|
Payments
|
|
|
|
|
Credited
|
|
of Accumulated
|
|
During
|
Name
|
|
Plan Name
|
|
Service
|
|
Benefit
|
|
2010
|
B.C. Bethards
|
|
B&W Governmental Operations Qualified Retirement Plan
|
|
37.00
|
|
$1,246,422
|
|
$0
|
|
|
B&W Governmental Operations Excess Plan
|
|
37.00
|
|
$1,719,768
|
|
$0
|
M.S. Taff
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
M.P. Salomone
|
|
B&W Governmental Operations Qualified Retirement Plan
|
|
28.417
|
|
$1,250,764
|
|
$0
|
|
|
B&W Governmental Operations Excess Plan
|
|
28.417
|
|
$ 488,835
|
|
$0
|
R.L. Killion
|
|
B&W Commercial Operations Qualified Retirement Plan
|
|
40.583
|
|
$1,385,468
|
|
$0
|
|
|
B&W Commercial Operations Excess Plan
|
|
40.583
|
|
$ 550,774
|
|
$0
|
W.D. Nash
|
|
B&W Governmental Operations Qualified Retirement Plan
|
|
41.333
|
|
$1,288,883
|
|
$0
|
|
|
B&W Governmental Operations Excess Plan
|
|
41.333
|
|
$ 963,716
|
|
$0
|
Overview of Qualified Plans. We
maintain retirement plans that are funded by trusts and cover
certain eligible regular full-time employees, described below in
the section entitled Participation and Eligibility,
except certain nonresident 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. Participation in
our retirement plans by our Named Executives is summarized below.
|
|
|
|
|
Messrs. Bethards and Nash and Ms. Salomone participate
in the Retirement Plan for Employees of Babcock &
Wilcox Government Operations (the B&W Government
Operations Qualified Retirement Plan) for the benefit of
eligible employees of the company and our Governmental
Operations segment.
|
|
|
|
Mr. Killion participates in the Retirement Plan for
Employees of Babcock & Wilcox Commercial Operations
(the B&W Commercial Operations Qualified Retirement
Plan) for the benefit of eligible employees of our Power
Generation Systems segment.
|
|
|
|
Due to Mr. Taffs date of employment, he is not
eligible to participate in our defined benefit plans. For more
information on our retirement plans, see Compensation
Discussion and Analysis Post-Employment
Compensation Retirement Plans.
|
Participation and
Eligibility. Generally, employees over the
age of 21 years, who were hired before April 1, 2005,
participate in the B&W Commercial Operations Qualified
Retirement Plan or B&W Governmental Operations Qualified
Retirement Plan.
|
|
|
|
|
For participants with less than five years of service as of
March 31, 2006, benefit accruals were frozen as of that
date. Affected employees receive annual service-based company
cash contributions to their Thrift Plan account.
|
|
|
|
For participants with more than five but less than ten years of
service as of January 1, 2007, benefit accruals were frozen
as of March 31, 2007. If the participant so elected, they
now receive annual service-based company cash contributions to
their Thrift Plan accounts.
|
|
|
|
Frozen accrued benefits of affected employees under these plans
will increase annually in line with increases in the Consumer
Price Index, up to a maximum of 8% for each year the employee
remains employed. For further discussion on the service-based
company cash contributions under the Thrift Plan, see
Compensation Discussion and Analysis
Post-Employment Compensation Retirement Plans.
|
61
Benefits. Benefits under these plans
are calculated as follows:
|
|
|
|
|
For participating employees originally hired by our Power
Generation Systems or Government Operations segment before
April 1, 1998, which we refer to as the B&W
Tenured Employees, benefits are based on years of credited
service and final average cash compensation (including bonuses
and commissions); and
|
|
|
|
For participating employees originally hired by McDermott or its
subsidiaries and affiliates other than B&W before
April 1, 1998, which we refer to as McDermott Tenured
Employees, and for participating employees hired on or
after April 1, 1998, benefits are based on years of
credited service, final average cash compensation (excluding
bonuses and commissions) and either anticipated social security
benefits or the social security taxable wage base. Final average
cash compensation is based on each employees average
annual earnings during the 60 successive months out of the 120
successive months before retirement in which such earnings were
highest.
|
The present value of accumulated benefits reflected in the
Pension Benefit Table above is based on a 5.6% discount rate and
the 1994 Group Annuity Mortality Table projected to 2010.
Retirement and Early Retirement. Under
each of these plans, normal retirement is age 65. The
normal form of payment is a single-life annuity or a 50% joint
and survivor annuity, depending on the employees marital
status when payments are scheduled to begin. Early retirement
eligibility and benefits under these plans depend on the
employees date of hire. Messrs. Bethards, Killion and
Nash and Ms. Salomone are each currently eligible for early
retirement.
For B&W Tenured Employees (which includes
Messrs. Bethards, Killion and Nash and Ms. Salomone):
|
|
|
|
|
an employee is eligible for early retirement if the employee has
completed at least 15 years of credited service and
attained the age of 50; and
|
|
|
|
early retirement benefits are based on the same formula as
normal retirement, but the
|
|
|
|
|
|
pension benefit is unreduced if the sum of the employees
age and years of service equals 75 or greater at the date
benefits commence; otherwise the pension benefit is reduced 4%
for each point less than 75.
|
For McDermott Tenured Employees:
|
|
|
|
|
an employee is eligible for early retirement after completing at
least 10 years of credited service and attaining at least
age 50; and
|
|
|
|
early retirement benefits are based on the same formula as
normal retirement, but the pension benefit is generally reduced
0.6% for each month that benefits commence before age 60.
|
For employees hired on or after April 1, 1998:
|
|
|
|
|
an employee is eligible for early retirement after completing at
least 15 years of credited service and attaining the age of
55; and
|
|
|
|
early retirement benefits are based on the same formula as
normal retirement, but the pension benefit is generally reduced
0.4% for each month that benefits commence before age 62.
|
Overview of Nonqualified Plans. To the
extent 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 our applicable
subsidiaries under the terms of unfunded excess benefit plans
(the Excess Plans) maintained by them. Effective
January 1, 2006, the Excess Plans were amended to limit the
annual bonus payments taken into account in calculating the
Tenured Employees Excess Plan benefits to the lesser of
the actual bonus paid or 25% of the prior years base
salary.
|
|
|
|
|
Messrs. Bethards and Nash and Ms. Salomone participate
in the Restoration of Retirement Income Plan for Certain
Participants in the Retirement Plan for Employees of
Babcock & Wilcox Governmental Operations; and
|
|
|
|
Mr. Killion participates in the Restoration of Retirement
Income Plan for Certain Participants in the Retirement Plan for
Employees of Babcock & Wilcox Commercial Operations.
|
62
Nonqualified
Deferred Compensation
The following Nonqualified Deferred Compensation table
summarizes our Named Executives compensation under our
nonqualified supplemental retirement plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions in
|
|
Contributions in
|
|
Earnings
|
|
Withdrawals/
|
|
Balance at
|
Name
|
|
2010
|
|
2010
|
|
in 2010
|
|
Distributions
|
|
12/31/10
|
B.C. Bethards
|
|
N/A
|
|
$52,275
|
|
$25,782
|
|
$0
|
|
$524,588
|
M.S. Taff
|
|
N/A
|
|
$37,810
|
|
$20,439
|
|
$0
|
|
$198,227
|
M.P. Salomone(1)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
R.L. Killion(1)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
W.D. Nash
|
|
N/A
|
|
$32,040
|
|
$48,472
|
|
$0
|
|
$372,149
|
|
|
|
(1) |
|
No information is provided for Ms. Salomone or
Mr. Killion because neither executive was a participant in
the B&W SERP for 2010. Ms. Salomone and
Mr. Killion are now participants in the B&W SERP. |
Prior to the spin-off, McDermott maintained the McDermott SERP,
in which selected officers of McDermott and its subsidiaries
participated, including Messrs. Bethards, Taff and Nash.
McDermott established a grantor trust to support its obligations
under the McDermott SERP, which we refer to as the
McDermott Rabbi Trust. In connection with the
spin-off, we adopted our SERP and established a grantor trust to
support our SERP obligations, which trust we refer to as our
Rabbi Trust. Our SERP assumed all liabilities of the
McDermott SERP attributable to our post spin-off employees,
including Messrs. Bethards, Taff and Nash. As a result of
the spin-off, those individuals ceased participating in the
McDermott SERP and were credited under our SERP with service for
any period of employment with McDermott and its subsidiaries
prior to the spin-off. Assets of the McDermott Rabbi Trust
attributable to the McDermott SERP liabilities assumed by us
were transferred to our Rabbi Trust. Our SERP assumed all
liabilities of the McDermott SERP attributable to our post
spin-off employees, including Messrs. Bethards, Taff and
Nash, and such persons ceased participating in the McDermott
SERP and were credited under our SERP with service for any
period of employment with McDermott and its subsidiaries prior
to the spin-off.
Our SERP is an unfunded, nonqualified defined contribution plan
through which we provide annual contributions to
participants notional accounts. Participants include our
Chief Executive Officer and other officers selected by our
Compensation Committee. Benefits under our SERP are based on the
participating officers vested percentage in his or her
notional account balance at the time of retirement (as defined
in the plan) or termination. An officer generally vests in his
or her SERP account 20% each year, subject to
accelerated vesting for death, disability, termination without
cause, retirement or on a change in control.
In addition and as a result of certain amendments made on
December 8, 2010, participants may, if permitted by the
Compensation Committee, elect to defer the payment of certain
compensation earned from us. For purposes of compensation
deferral, members of our Board are also participants in our
SERP. Under our SERP, an officer selected by our Compensation
Committee may elect to defer up to 50% of his or her annual
salary
and/or up to
100% of any bonus earned in any plan year and a member of the
Board may elect to defer up to 100% of his or her retainers and
fees earned in any plan year.
Executive Contributions in
2010. Employee contributions were not
permitted under our SERP in 2010.
Registrant Contributions in 2010. We
make annual notional contributions to participating
employees accounts equal to a percentage determined by our
Compensation Committee of the employees prior-year
compensation. Under the terms of our SERP, the contribution
percentage does not need to be the same for each participant.
Additionally, our Compensation Committee may make a
discretionary contribution to a participants account at
any time.
For 2010, the contributions reported in the table above reflect
notional contributions made to McDermott SERP accounts prior to
the spin-off, which were transferred to our SERP in connection
with the spin-off. The 2010 contributions equaled 5% of the
Named Executives base salaries and annual incentive
compensation awards paid by McDermott and its subsidiaries in
2009. No additional contributions were made
63
in 2010. All 2010 contributions are included in the Summary
Compensation Table above as All Other Compensation.
Aggregate Earnings in 2010. The amounts
reported in this table as earnings represent hypothetical
amounts credited as earnings during 2010 on each Named
Executives account. Our SERP accounts are
participant-directed, meaning each participating
officer personally directs the investment of contributions made
on his or her behalf. Any gains or losses attributable to the
performance of the directed investments are then credited to the
Named Executives account.
No amount of the earnings shown is reported as compensation in
the Summary Compensation Table.
Aggregate Balance at
12/31/10. The
balance of a participating officers account consists of
contributions made by us and hypothetical credited gains or
losses. The balances shown represent the accumulated account
values (including gains and losses) for each
Named Executive as of December 31, 2010.
Messrs. Bethards, Taff and Nash are each 100% vested in
their SERP balance shown above.
The balances include contributions from previous years, which
have been reported as compensation to the Named Executives in
the Summary Compensation Table for those years to
the extent a Named Executive was included in the Summary
Compensation Table during those years. The amounts and years
reported are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
Named Executive
|
|
Year
|
|
Reported
|
B.C. Bethards
|
|
|
2009
|
|
|
$
|
44,948
|
|
|
|
|
2008
|
|
|
$
|
31,042
|
|
M.S. Taff
|
|
|
2009
|
|
|
$
|
41,378
|
|
|
|
|
2008
|
|
|
$
|
31,125
|
|
W.D. Nash
|
|
|
2009
|
|
|
$
|
30,361
|
|
|
|
|
2008
|
|
|
|
N/A
|
|
64
Potential
Payments Upon Termination or Change in Control
The following tables show potential payments to our Named
Executives under existing contracts, agreements, plans or
arrangements, whether written or unwritten, for various
scenarios under which a payment would be due (assuming each is
applicable) in the event of a change in control or termination
of employment of each of our Named Executives, assuming a
December 31, 2010 termination date. Where applicable, the
amounts listed below use the closing price of our common stock
of $25.59 (as reported on the NYSE) as of December 31,
2010. These tables do not reflect amounts that would be payable
to the Named Executives pursuant to benefits or awards that are
already vested.
The amounts reported in the below tables for stock options,
restricted stock and restricted stock units represent the value
of unvested and accelerated shares or units, as applicable,
calculated by:
|
|
|
|
|
for stock options: multiplying the number of accelerated options
by the difference between the exercise price and $25.59 (the
closing price of our common stock on December 31, 2010, as
reported on the NYSE); and
|
|
|
|
for restricted stock and restricted stock units: multiplying the
number of accelerated shares or units by $25.59 (the closing
price of our common stock on December 31, 2010, as reported
on the NYSE).
|
Estimated
Value of Benefits to Be Received Upon Involuntary Termination
Without Cause
The following table shows the estimated value of payments and
other benefits due the Named Executives assuming their
involuntary termination without cause as of December 31,
2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B.C. Bethards
|
|
M.S. Taff
|
|
M.P. Salomone
|
|
R.L. Killion
|
|
W.D. Nash
|
Severance Payments
|
|
$
|
3,400,000
|
|
|
$
|
1,768,510
|
|
|
$
|
109,846
|
|
|
$
|
95,582
|
|
|
$
|
96,923
|
|
EICP
|
|
$
|
850,000
|
|
|
$
|
364,105
|
|
|
$
|
242,829
|
|
|
$
|
193,639
|
|
|
$
|
172,409
|
|
Supplemental Executive Retirement Plan (SERP)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Benefits
|
|
$
|
23,376
|
|
|
$
|
38,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thrift Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options (unvested and accelerated)
|
|
$
|
803,919
|
|
|
$
|
442,164
|
|
|
$
|
10,822
|
|
|
$
|
66,810
|
|
|
$
|
60,265
|
|
Restricted Stock (unvested and accelerated)
|
|
$
|
1,277,376
|
|
|
$
|
681,999
|
|
|
$
|
6,193
|
|
|
$
|
53,048
|
|
|
$
|
12,258
|
|
Restricted Stock Units (unvested and accelerated)
|
|
$
|
2,590,962
|
|
|
$
|
1,594,180
|
|
|
$
|
59,676
|
|
|
$
|
161,703
|
|
|
$
|
169,380
|
|
Tax Gross-Up
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,945,633
|
|
|
$
|
4,889,369
|
|
|
$
|
429,366
|
|
|
$
|
570,782
|
|
|
$
|
511,235
|
|
Severance Payment. For
Messrs. Bethards and Taff, the severance payments reported
represent payments that would have been paid under the Retention
Agreements. These payments are in lieu of any other severance
benefits payable under any other severance policy. For more
information on the amounts payable to Messrs. Bethards and
Taff, see Retention Agreements below.
For Ms. Salomone and Messrs. Killion and Nash, the
severance payments reported represent payment that would have
been made under the Babcock & Wilcox Severance Plan.
Through this severance plan, our full-time employees are
entitled to receive a severance benefit in the event their
employment is terminated because of the elimination of a
previously required position or previously required service, or
due to the consolidation of departments, abandonment
of plants or offices, or technological change or declining
business activities, where such termination is intended to be
permanent. The amount of severance benefit is determined based
on the length of service and the employees base salary. In
general, an eligible employee is entitled to a severance benefit
of one-half week of base salary for each year of service,
subject to a maximum of 14 weeks of pay.
EICP. For Messrs. Bethards and
Taff, the EICP payments reported represent payments that would
have been paid under the Retention Agreements. For more
information on the amounts payable to Messrs. Bethards and
Taff, see Retention Agreements below.
For Ms. Salomone and Messrs. Killion and Nash, the
amounts reported under EICP represent the annual incentive
compensation each person earned under the
65
EICP for 2010 based on the attainment of applicable financial
and individual results. For participants in the EICP who have an
accrued pension benefit, our practice has been to pay the
prorated amount of an EICP award that would have been earned
during the year in which the employee is involuntarily
terminated without cause. The EICP payment is contingent on the
participant executing a general release of claims. See
Compensation Discussion and Analysis Annual
Incentive Compensation 2010 Annual Incentive
Compensation Payments above for information regarding the
EICP payments.
SERP. Pursuant to our SERP, an
executives SERP account becomes fully vested on, among
other events, the date of the executives termination for
any reason other than cause. Messrs. Bethards, Taff and
Nash were each 100% vested in their respective SERP accounts as
of December 31, 2010 and no amounts would be accelerated on
their termination without cause. Ms. Salomone and
Mr. Killion were not participants in our SERP during 2010,
but have been selected by our Compensation Committee to be
participants beginning for the year ending December 31,
2011.
Under our SERP, cause means:
|
|
|
|
|
the willful and continued failure of a participant to perform
substantially his or her duties (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 Compensation Committee or our Chief Executive Officer, which
specifically identifies the manner in which the Compensation
Committee or the Chief Executive Officer believes that the
participant has not substantially performed his or her duties,
after which the participant will have 30 days to defend or
remedy such failure to substantially perform his or her duties;
|
|
|
|
the willful engaging by a participant in illegal conduct or
gross misconduct, which is materially and demonstrably injurious
to our company; or
|
|
|
|
the conviction of a participant with no further possibility of
appeal, or plea of nolo contendere by the participant to, any
felony or crime of falsehood.
|
Equity Awards. Generally, our stock and
option award provide for accelerated vesting of at least a part
of an executives outstanding options, shares or units if
the executives employment is involuntarily terminated due
to a reduction in force. The amount that is accelerated depends
on whether the termination occurred during the second or third
year of the award. For options, restricted stock and most
restricted stock units, 25% of the then unvested options or
then-outstanding shares or units, as applicable, vests if
termination occurs during the second year of the award and 50%
of the then unvested options or then-outstanding shares or
units, as applicable, vests if termination occurs during the
third year of the award. For outstanding restricted stock units
that were converted in the spin-off from performance shares
based on McDermott common stock, 33% of the then-outstanding
units vests if termination occurs during the second year of the
award and 66% of the then-outstanding units vests if termination
occurs during the third year of the award.
Retention
Agreements
In contemplation of the spin-off, McDermott entered into the
Retention Agreements with Messrs. Bethards and Taff. Under
the terms of the Employee Matters Agreement, we assumed the
rights and obligations arising under the Retention Agreements in
respect of Messrs. Bethards and Taff on the spin-off.
In general, the Retention Agreements provide certain severance
payments in the event of a qualifying termination of the
executive prior to July 30, 2011, the first anniversary of
the spin-off. Under the Retention Agreement, a qualifying
termination includes the termination of employment with us
either (1) by us for any reason other than cause or
disability or (2) by the employee for good reason. In the
event of such termination, the executive would be entitled to
receive the payments described below, assuming a
December 31, 2010 termination date. The definition of
cause under the Retention Agreements is
substantially similar to the definition used in our SERP.
Under the Retention Agreements, good reason is
defined as:
|
|
|
|
|
any action by us which results in a material diminution in the
employees position, authority, duties or responsibilities
immediately prior to December 10, 2009; but, for the
avoidance of doubt, if the employee has a position with us
following the spin-off, a
|
66
|
|
|
|
|
material diminution in position, authority, duties or
responsibilities will not have occurred if the employee has a
position, authority, duties and responsibilities substantially
the same as those attendant to the employees position
immediately prior to December 9, 2009;
|
|
|
|
|
|
requiring an employee, without the employees consent, to
be based at any office or location other than the office or
location at which employee was employed immediately following
December 10, 2009; provided, however, that any such
relocation requests shall not be grounds for resignation with
good reason if such relocation is within a fifty mile radius of
the location at which the employee was employed immediately
following December 10, 2009 or such relocation does not
result in an increase in the employees actual commuting
distance from his principal residence to the employees new
office or location;
|
|
|
|
a material reduction in the employees annual base salary
in effect immediately prior to December 10, 2009 or a
material reduction in the target percentage used to calculate
the annual bonus awarded to the employee below the target
percentage used to calculate the bonus paid to the employee
under the EICP immediately prior to December 10, 2009,
provided, however that in either case a material reduction in
the annual base salary or the target percentage shall not be
considered good reason with respect to any year for
which such reduction is part of a reduction uniformly applicable
to all similarly situated employees;
|
|
|
|
a material adverse change in an employees eligibility to
participate in long-term incentive compensation plans as in
effect immediately prior to December 10, 2009 or in a
comparable plan; or
|
|
|
|
any material breach of the Retention Agreement by the us,
excluding for this purpose an isolated, insubstantial or
inadvertent action not taken in bad faith and which is remedied
by us promptly after receipt of notice thereof given by an
employee.
|
In recognition of Mr. Taffs agreement to serve as our
chief financial officer following the spin-off, under his
Retention Agreement it was agreed that such service would not
constitute good reason, but that Mr. Taff may
elect to terminate his employment with us on the first
anniversary of the effective date of the spin-off and that such
termination shall be treated as good reason for
purposes of the Retention Agreement.
Severance Payment. Assuming a
termination by us other than for cause or by the employee for
good reason on December 31, 2010, each of
Messrs. Bethards and Taff would have been entitled to a
cash payment equal to 200% of the sum of his annual base salary
and his target annual incentive compensation, each as in effect
immediately prior to the date of termination. Severance payments
under a restructuring transaction are in lieu of any payment
under any severance policy generally applicable to our salaried
employees. The severance payment was calculated based on the
following:
|
|
|
|
|
Mr. Bethards: $850,000 annual base salary and $850,000
target annual incentive compensation (100% of his annual base
salary); and
|
|
|
|
Mr. Taff: $520,150 annual base salary and $364,105 target
annual incentive compensation (70% of his annual base salary).
|
EICP Payment. The EICP is an annual
cash-based performance incentive plan under which payments are
made in the year following the year in which performance is
measured. For example, 2010 EICP awards are paid in 2011 for
performance achieved in 2010. As a result, depending on the
timing of the termination relative to the payment of an EICP
award, Messrs. Bethards and Taff could receive up to two
EICP payments in connection with termination resulting from a
restructuring transaction, as follows:
|
|
|
|
|
If an EICP award for the year prior to termination is paid to
other EICP participants after the date of his termination, each
of Messrs. Bethards and Taff would be entitled to a cash
payment equal to the product of his EICP target percentage and
his annual base salary for the applicable period. The 2009 EICP
awards had already were paid before December 31, 2010. As a
result, no payment would have been due to Messrs. Bethards
or Taff in this respect.
|
67
|
|
|
|
|
Each of Messrs. Bethards and Taff would be entitled to a
prorated target EICP payment for the year in which the
termination occurs. Based on a December 31, 2010
termination, each of Messrs. Bethards and Taff would have
been entitled to an EICP payment equal to 100% of his 2010
target EICP, as in effect immediately prior to the date of
termination, as follows: Mr. Bethards: $850,000 (100% of
$850,000) and Mr. Taff: $364,105 (70% of $520,150).
|
SERP. The Retention Agreements provide
for accelerated vesting in the executives SERP account
balance. Messrs. Bethards and Taff were each 100% vested in
their respective SERP account balance as of December 31,
2010.
Benefits. As provided in the Retention
Agreements, the amounts reported represent two times the
full annual cost of coverage for medical, dental and vision
benefits provided to Messrs. Bethards and Taff and his
covered dependents for the year ended December 31, 2010.
Equity Awards. The Retention Agreements
provide for the vesting of any outstanding equity that had been
granted prior to December 10, 2009, the date of the
Retention Agreement. In the case of Mr. Taff, it also
provided for the vesting of any equity granted in 2010 provided
he remained employed for at least one year following the grant
date of such equity. The amounts reported for stock options,
restricted stock and restricted stock units represent the value
of B&W stock options, restricted stock and restricted stock
units that would be accelerated by the terms of the Retention
Agreement. Mr. Taff would also be entitled to accelerated
equity of any outstanding McDermott equity awards.
68
Estimated
Value of Benefits to Be Received Upon Normal
Retirement
The following table shows the estimated value of payments and
other benefits due the Named Executives assuming their
retirement as of December 31, 2010. This table does not
reflect amounts that would be payable to the Named Executives
pursuant to benefits or awards that are already vested (for
example, pension benefits). See the Pension Benefits
table above for more information on pension benefits.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B.C. Bethards
|
|
M.S. Taff
|
|
M.P. Salomone
|
|
R.L. Killion
|
|
W.D. Nash
|
Severance Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EICP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Executive Retirement Plan (SERP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options (unvested and accelerated)
|
|
$
|
181,351
|
|
|
|
|
|
|
|
|
|
|
$
|
66,810
|
|
|
$
|
60,265
|
|
Restricted Stock (unvested and accelerated)
|
|
$
|
131,916
|
|
|
|
|
|
|
|
|
|
|
$
|
53,048
|
|
|
$
|
12,258
|
|
Restricted Stock Units (unvested and accelerated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
313,267
|
|
|
|
|
|
|
|
|
|
|
$
|
119,858
|
|
|
$
|
72,523
|
|
SERP. Under the terms of our SERP, an
executives account shall become fully vested on, among
other events, the date of the executives retirement. For
purposes of our SERP, retirement is defined as separation from
service with us on or after the first day of the calendar month
coincident with or following the executives attainment of
the age of 65. Mr. Nash is eligible for retirement under
the terms of our SERP and was 100% vested as of
December 31, 2010.
Equity Awards. Certain awards provide
for accelerated vesting either on retirement or upon becoming
eligible for retirement. The 2010 restricted stock and
restricted stock unit awards do not contain any vesting terms
relating to retirement.
Generally, the terms of B&W stock and option award grants
define retirement as a voluntary termination of employment after
attaining age 60 and completing 10 years of service.
Under this definition, the Named Executives eligible for
retirement as of a December 31, 2010 were
Messrs. Bethards, Killion and Nash.
The vesting associated with retirement varies by award type, as
follows:
|
|
|
|
|
Stock Options: 25% of then-unvested options will become vested
in the event a Named Executive retires during the second year of
an awards three-year vest term, and 50% will become vested
if the retirement occurs during the third year.
|
|
|
|
|
|
Eligible Restricted Stock: 25% of then-outstanding shares will
become vested in the event a Named Executive retires during the
second year of an awards three-year vest term, and 50%
will become vested if the retirement occurs during the third
year; provided in either instance that our Compensation
Committee, in its sole discretion, authorizes such acceleration.
The amounts shown in the table above assume our Compensation
Committee exercised such discretion to permit accelerated
vesting.
|
|
|
|
Eligible Restricted Stock Units: 25% of then-outstanding units
will become vested when the Named Executive first becomes
eligible for retirement during the second year of the three-year
vest cycle and 50% when the Named Executive first becomes
eligible for retirement during the third year. If the restricted
stock units represent outstanding units converted on the
spin-off from performance shares based on McDermott common
stock, the applicable percentages are 33% and 66%. Because the
Messrs. Bethards, Killion and Nash had already become
eligible for retirement prior to December 31, 2010, no
payments would have been due under their restricted stock units
as a result of their retirement on that date.
|
69
Estimated
Value of Benefits to Be Received Upon Termination Due to Death
or Disability
The following table shows the value of payments and other
benefits due the Named Executives assuming the termination of
their employment by reason of death or disability as of
December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B.C. Bethards
|
|
|
M.S. Taff
|
|
|
M.P. Salomone
|
|
|
R.L. Killion
|
|
|
W.D. Nash
|
|
Severance Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EICP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Executive Retirement Plan (SERP)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Stock Options (unvested and accelerated)
|
|
$
|
803,919
|
|
|
$
|
442,164
|
|
|
$
|
62,120
|
|
|
$
|
282,266
|
|
|
$
|
254,722
|
|
Restricted Stock (unvested and accelerated)
|
|
$
|
1,277,376
|
|
|
$
|
681,999
|
|
|
$
|
12,360
|
|
|
$
|
106,045
|
|
|
$
|
24,515
|
|
Restricted Stock Units (unvested and accelerated)
|
|
$
|
2,590,962
|
|
|
$
|
1,594,180
|
|
|
$
|
478,482
|
|
|
$
|
737,222
|
|
|
$
|
702,446
|
|
Tax Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,672,257
|
|
|
$
|
2,718,343
|
|
|
$
|
552,962
|
|
|
$
|
1,125,533
|
|
|
$
|
981,683
|
|
SERP. Under the terms of our SERP, an
executives account shall become fully vested on, among
other events, the executives death or disability.
Messrs. Bethards, Taff and Nash were each 100% vested in
their respective B&W SERP accounts as of December 31,
2010 and no amounts would have been accelerated.
Ms. Salomone and Mr. Killion were not participants in
our SERP during 2010.
Equity Awards. Under the terms of the
awards outstanding for each Named Executive as of
December 31, 2010, all unvested stock awards become vested
and all unvested option awards become vested and exercisable in
the event the Named Executives employment terminates by
reason of his or her death or disability.
70
Estimated
Value of Benefits to Be Received Upon Change in
Control
The following table shows the estimated value of payments and
other benefits due the Named Executives assuming a change in
control and termination as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B.C. Bethards
|
|
|
M.S. Taff
|
|
|
M.P. Salomone
|
|
|
R.L. Killion
|
|
|
W.D. Nash
|
|
Severance Payments
|
|
$
|
5,083,000
|
|
|
$
|
1,768,510
|
|
|
$
|
1,387,200
|
|
|
$
|
1,136,064
|
|
|
$
|
1,152,000
|
|
EICP
|
|
$
|
850,000
|
|
|
$
|
364,105
|
|
|
$
|
285,600
|
|
|
$
|
213,012
|
|
|
$
|
216,000
|
|
Supplemental Executive Retirement Plan (SERP)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Benefits
|
|
$
|
35,064
|
|
|
$
|
57,617
|
|
|
$
|
37,401
|
|
|
$
|
28,653
|
|
|
$
|
29,193
|
|
Stock Options (unvested and accelerated)
|
|
$
|
803,919
|
|
|
$
|
442,164
|
|
|
$
|
62,120
|
|
|
$
|
282,266
|
|
|
$
|
254,722
|
|
Restricted Stock (unvested and accelerated)
|
|
$
|
1,277,376
|
|
|
$
|
681,999
|
|
|
$
|
12,360
|
|
|
$
|
106,045
|
|
|
$
|
24,515
|
|
Restricted Stock Units (unvested and accelerated)
|
|
$
|
2,590,962
|
|
|
$
|
1,594,180
|
|
|
$
|
478,482
|
|
|
$
|
737,222
|
|
|
$
|
702,446
|
|
Tax Gross-Up
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
Total
|
|
$
|
10,640,321
|
|
|
$
|
4,908,575
|
|
|
$
|
2,263,163
|
|
|
$
|
2,503,262
|
|
|
$
|
2,378,876
|
|
We have change in control agreements with various officers,
including each of our Named Executives. Generally, under these
agreements, if a Named Executive is terminated within one year
following a change in control either (1) by the company for
any reason other than cause or death or disability; or
(2) by the Named Executive for good reason, the Named
Executive is entitled to receive:
|
|
|
|
|
accelerated vesting in the executives SERP account;
|
|
|
|
accelerated vesting in any outstanding equity awards;
|
|
|
|
a cash severance payment;
|
|
|
|
a prorated target EICP payment;
|
|
|
|
payment of the prior years EICP payment, if unpaid at
termination; and
|
|
|
|
a cash payment for health benefits coverage.
|
In addition to these payments, the Named Executive would be
entitled to various accrued benefits earned through the date of
termination, such as earned but unpaid salary, earned but unused
vacation and reimbursements.
Under these agreements, a change in control will be
deemed to have occurred on the occurrence of any of the
following:
|
|
|
|
|
any person, other than an ERISA-regulated pension plan
established by us or our affiliate makes an acquisition of
outstanding voting stock and is, immediately thereafter, the
beneficial owner of 30% or more of the
|
|
|
|
|
|
then outstanding voting stock, unless such acquisition is made
directly from us in a transaction approved by a majority of the
incumbent directors; or any group is formed that is the
beneficial owner of 30% or more of the outstanding voting stock
(other than a group formation for the purpose of making an
acquisition directly from the company and approved (prior to
such group formation) by a majority of the incumbent directors);
|
|
|
|
individuals who are incumbent directors cease for any reason to
constitute a majority of the members of our board of directors;
|
|
|
|
consummation of a business combination unless, immediately
following such business combination, (i) all or
substantially all of the individuals and entities that were the
beneficial owners of the outstanding voting stock immediately
before such business combination beneficially own, directly or
indirectly, more than 51% of the then outstanding shares of
voting stock of the parent corporation resulting from such
business combination in substantially the same relative
proportions as their ownership, immediately before such business
combination, of the outstanding voting stock, (ii) if the
business combination involves the issuance or payment by the
company of consideration to another entity or its stockholders,
the total fair market value of such consideration plus the
principal amount of the consolidated long-term debt of the
entity or business
|
71
|
|
|
|
|
being acquired (in each case, determined as of the date of
consummation of such business combination by a majority of the
incumbent directors) does not exceed 50% of the sum of the fair
market value of the outstanding voting stock plus the principal
amount of the companys consolidated long-term debt (in
each case, determined immediately before such consummation by a
majority of the incumbent directors), (iii) no person
(other than any corporation resulting from such business
combination) beneficially owns, directly or indirectly, 30% or
more of the then outstanding shares of voting stock of the
parent corporation resulting from such business combination and
(iv) a majority of the members of the board of directors of
the parent corporation resulting from such business combination
were incumbent directors of our company immediately before
consummation of such business combination; or
|
|
|
|
|
|
consummation of a major asset disposition unless, immediately
following such major asset disposition, (i) individuals and
entities that were beneficial owners of the outstanding voting
stock immediately before such major asset disposition
beneficially own, directly or indirectly, more than 70% of the
then outstanding shares of our voting stock (if it continues to
exist) and of the entity that acquires the largest portion of
such assets (or the entity, if any, that owns a majority of the
outstanding voting stock of such acquiring entity) and
(ii) a majority of the members of our board of directors
(if it continues to exist) and of the entity that acquires the
largest portion of such assets (or the entity, if any, that owns
a majority of the outstanding voting stock of such acquiring
entity) were incumbent directors of the company immediately
before consummation of such major asset disposition.
|
Severance Payment. The severance
payment made to each Named Executive, with the exception of
Mr. Bethards, in connection with a change in control is a
cash payment equal to 200% of the sum of his annual base salary
prior to termination and his target annual incentive
compensation award applicable to the year in which the
termination occurs. The severance payment made to
Mr. Bethards in connection with a change in control is a
cash payment equal to 299% of the sum of his annual base salary
prior to termination
and his target annual incentive compensation award applicable to
the year in which the termination occurs. Assuming a termination
as of December 31, 2010, the severance payment under a
change in control would have been calculated based on the
following:
|
|
|
|
|
Mr. Bethards: $850,000 base salary and $850,000 target
annual incentive compensation (100% of his annual base salary);
|
|
|
|
Mr. Taff: $520,150 base salary and $364,105 target annual
incentive compensation (70% of his annual base salary);
|
|
|
|
Ms. Salomone: $408,000 base salary and $285,600 target
annual incentive compensation (70% of her annual base salary);
|
|
|
|
Mr. Killion: $355,020 base salary and $213,012 target
annual incentive compensation (60% of his annual base
salary); and
|
|
|
|
Mr. Nash: $360,000 base salary and $216,000 target annual
incentive compensation (60% of his annual base salary).
|
EICP Payment. Depending on the timing
of the termination relative to the payment of an EICP award, the
applicable executive could receive up to two EICP payments in
connection with termination resulting from a restructuring
transaction, as follows:
|
|
|
|
|
If an EICP award for the year prior to termination is paid to
other EICP participants after the date of the executives
termination, the executive would be entitled to receive the
actual amount of the award determined under the EICP for such
prior year (without the exercise of any downward discretion).
The 2009 EICP awards were paid before December 31, 2010. As
a result, no payment would have been due to
Messrs. Bethards, Taff, Killion or Nash or
Ms. Salomone in this respect.
|
|
|
|
The executive would be entitled to a prorated target EICP
payment equal to the product of the Named Executives
annual base salary and EICP target percentage, with the product
prorated based on the number of days the Named Executive was
employed during the year in which the termination occurs. Based
on a December 31, 2010 termination, each Named Executive
would have been entitled to an EICP payment equal to 100% of his
2010 target EICP, as in effect immediately prior to the date of
termination.
|
72
SERP. Under the terms of our SERP, an
executives account shall become fully vested on, among
other events, the date a change in control occurs.
Messrs. Bethards, Taff and Nash were each 100% vested in
their respective SERP accounts as of December 31, 2010 and
no amounts would have been accelerated. Ms. Salomone and
Mr. Killion were not participants in our SERP during 2010.
Under the SERP, a change in control occurs under the
same circumstances described above with respect to our change in
control agreements.
Benefits. The amounts reported
represent three times the full annual cost of coverage for
medical, dental and vision benefits provided to the Named
Executive and the Named Executives covered dependents for
the year ended December 31, 2010.
Tax
Gross-Up. The
agreements do not provide any tax
gross-up on
the benefits. Instead, the
agreements contain a modified cutback provision,
which acts to reduce the benefits payable to a Named Executive
to the extent necessary so that no excise tax would be imposed
on the benefits paid, but only if doing so would result in the
Named Executive retaining a larger after-tax amount.
Equity Awards. Under the terms of the
awards outstanding, all unvested restricted stock and restricted
stock units would become vested on a change in control,
regardless of whether there is a subsequent termination of
employment. All unvested stock options would become vested and
exercisable on a change in control, regardless of whether there
is a subsequent termination of employment. Under our Amended
2010 LTIP, a change in control occurs under the same
circumstances described above with respect to our
change-in-control
agreements.
73
Security
Ownership of Directors and Executive Officers
The following table sets forth the number of shares of our
common stock beneficially owned as of March 14, 2011 by
each director or nominee as a director, and each Named Executive
and all our directors and executive officers as a group,
including shares that those persons have the right to acquire
within 60 days on the vesting of restricted stock units or
the exercise of stock options.
|
|
|
|
|
|
|
Shares
|
|
|
|
Beneficially
|
|
Name
|
|
Owned
|
|
Brandon C. Bethards (1)
|
|
|
183,049
|
|
John A. Fees (2)
|
|
|
103,645
|
|
Robert W. Goldman (3)
|
|
|
15,550
|
|
Stephen G. Hanks
|
|
|
5,378
|
|
Richard L. Killion (4)
|
|
|
62,105
|
|
Oliver D. Kingsley, Jr. (5)
|
|
|
33,099
|
|
D. Bradley McWilliams (6)
|
|
|
32,404
|
|
Adm. Richard W. Mies
|
|
|
6,042
|
|
Winfred D. Nash (7)
|
|
|
36,053
|
|
Anne R. Pramaggiore
|
|
|
1,957
|
|
Mary Pat Salomone (8)
|
|
|
9,084
|
|
Michael S. Taff (9)
|
|
|
147,934
|
|
Larry L. Weyers
|
|
|
2,248
|
|
All directors and executive officers as a group
(20 persons) (10)
|
|
|
760,768
|
|
|
|
|
(1) |
|
Shares owned by Mr. Bethards include 48,563 restricted
shares of common stock as to which he has sole voting power but
no dispositive power and 404 shares of common stock held in
our Thrift Plan. |
|
(2) |
|
Shares owned by Mr. Fees include 8,896 shares of
common stock held in our Thrift Plan. |
|
(3) |
|
Shares owned by Mr. Goldman include 5,115 shares of
common stock that he may acquire on the exercise of stock
options. |
|
(4) |
|
Shares owned by Mr. Killion include 22,619 shares of
common stock that he may acquire on the exercise of stock
options, 3,503 restricted shares of common stock as to which he
has sole voting power but no dispositive power and
1,927 shares of common stock held in our Thrift Plan. |
|
(5) |
|
Shares owned by Mr. Kingsley include 20,616 shares of
common stock that he may acquire on the exercise of stock
options. |
|
(6) |
|
Shares owned by Mr. McWilliams include 18,938 shares
of common stock that he may acquire on the exercise of stock
options. |
|
(7) |
|
Shares owned by Mr. Nash include 8,030 shares of
common stock that he may acquire on the exercise of stock
options and 470 shares of common stock held in our Thrift
Plan. |
|
(8) |
|
Shares owned by Ms. Salomone include 308 shares of
common stock held in our Thrift Plan. |
|
(9) |
|
Shares owned by Mr. Taff include 46,166 shares of
common stock that he may acquire on the exercise of stock
options, 25,464 restricted shares of common stock as to which he
has sole voting power but no dispositive power and
968 shares of common stock held in our Thrift Plan. |
|
(10) |
|
Shares owned by all directors and executive officers as a group
include 157,955 shares of common stock that may be acquired
on the exercise of stock options, as described above, 98,740
restricted shares of common stock as to which they have sole
voting power but no dispositive power and 17,866 shares of
common stock held in our Thrift Plan. |
Shares beneficially owned by each of our directors and officers
individually in each case constituted less than one percent of
the outstanding shares of common stock on March 14, 2011,
as determined in accordance with
74
Rule 13d-3(d)(1)
under the Securities Exchange Act of 1934. The aggregate shares
beneficially owned by all of our directors and officers as a
group constituted approximately 0.6% of the outstanding shares
of common stock measured as of the same date and on the same
basis.
Security
Ownership of Certain Beneficial Owners
The following table furnishes information concerning all persons
known by us to beneficially own 5% or more of our outstanding
shares of common stock, which is our only class of voting stock
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and
|
|
|
|
|
|
|
|
|
Nature of
|
|
|
|
|
|
|
|
|
Beneficial
|
|
|
|
Percent of
|
|
Name and Address of Beneficial Owner
|
|
|
Ownership
|
|
|
|
Class(1)
|
|
T. Rowe Price
|
|
|
|
14,422,422(2
|
)
|
|
|
|
12.3
|
%
|
100 E. Pratt Street
|
|
|
|
|
|
|
|
|
|
|
Baltimore, MD 21202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mason Capital
|
|
|
|
11,659,531(3
|
)
|
|
|
|
9.9
|
%
|
110 East 59th Street, 30th Floor
|
|
|
|
|
|
|
|
|
|
|
New York, New York 10022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRIMECAP Management Company
|
|
|
|
8,627,430(4
|
)
|
|
|
|
7.3
|
%
|
225 South Lake Ave., #400,
|
|
|
|
|
|
|
|
|
|
|
Pasadena, CA 91101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Percent is based on outstanding shares of our common stock on
March 14, 2011. |
|
(2) |
|
As reported on Schedule 13G/A filed with the SEC on
February 10, 2011. The Schedule 13G/A reports beneficial
ownership of 14,422,422 shares of our common stock by T.
Rowe Price Associates, Inc. (Price Associates),
which has sole voting power over 3,309,567 shares and sole
dispositive power over 14,422,422 shares. These securities
are owned by various individual and institutional investors,
including T. Rowe Price Mid-Cap Growth Fund, for which Price
Associates serves as an investment adviser. Price Associates
expressly disclaims that it beneficially owns such securities.
The Schedule 13G/A reports that T. Rowe Price Mid-Cap
Growth Fund has sole voting power of 6,500,000 shares and
sole dispositive power over no shares. |
|
(3) |
|
As reported on Schedule 13G filed with the SEC on
March 18, 2011. The Schedule 13G reports beneficial
ownership of 11,659,531 shares of our common stock by Mason
Capital Management LLC, which has sole voting and dispositive
power over 11,659,531 shares. The Schedule 13G reports
beneficial ownership of 8,517,665 shares of our common
stock by Mason Capital Master Fund, L.P. and Mason Management
LLC, which have shared voting and dispositive power over
8,517,665 shares. The Schedule 13G reports beneficial
ownership of 11,659,531 shares of our common stock by
Kenneth M. Garschina and Michael E. Martino, which
have shared voting and dispositive power over
11,659,531 shares. |
|
(4) |
|
As reported on Schedule 13G/A filed with the SEC on
February 14, 2011. The Schedule 13G/A reports beneficial
ownership of 8,627,430 shares of our common stock by
PRIMECAP Management Company, which has sole voting power over
5,052,580 shares and sole dispositive power over
8,627,430 shares. |
75
Audit &
Finance Committee Report
The following report of the Audit & Finance
Committee shall not be deemed to be soliciting
material or to otherwise be considered filed
with the SEC or be subject to Regulation 14A or 14C (other
than as provided in Item 407 of
Regulation S-K)
or to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended (the Exchange Act),
nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or
the Exchange Act, except to the extent that B&W
specifically incorporates it by reference into such filing.
As described more fully in its charter, the purpose of the
Audit & Finance Committee is to assist the Board in
its oversight of B&Ws financial reporting process,
internal control system and audit functions. The
Audit & Finance Committee also provides oversight of
(i) our compliance with legal and regulatory financial
requirements; (ii) policies and procedures relating to
financial risks; (iii) financial strategies and capital
structure and (iv) aspects of our compliance and ethics
program relating to financial matters, books and records and
accounting and as required by applicable laws, rules and
regulations. Our principal responsibility is one of oversight.
B&Ws management is responsible for the preparation,
presentation and integrity of its financial statements and
Deloitte & Touche LLP (Deloitte),
B&Ws independent registered public accounting firm,
is responsible for auditing and reviewing those financial
statements. Deloitte reports directly to the Audit &
Finance Committee, which is responsible for the appointment,
compensation, retention and oversight of the independent
registered public accounting firm.
In this context, we have reviewed and discussed B&Ws
audited consolidated financial statements for the year ended
December 31, 2010 with B&Ws management and
Deloitte. This review included discussions with Deloitte
regarding those matters required to be discussed by the
Statement on Auditing Standards No. 61, as amended,
including information regarding the scope and results of the
audit, significant estimates and judgments, accounting
principles and critical accounting estimates. In addition, we
received from Deloitte the written disclosures and the letter
required by the applicable requirements of the Public Company
Accounting Oversight Board regarding Deloittes
communications with the Audit & Finance Committee
concerning independence and discussed with Deloitte their
independence from B&W and its management. We also
considered whether the provision of non-audit services to
B&W is compatible with Deloittes independence.
We reviewed and discussed with management its assessment and
report on the effectiveness of B&Ws internal control
over financial reporting as of December 31, 2010, which it
made using the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal
Control Integrated Framework. We have also
reviewed and discussed with Deloitte its review and report on
B&Ws internal control over financial reporting.
Based on these reviews and discussions and the reports of
Deloitte, the Audit & Finance Committee recommended to
the Board that the audited financial statements be included in
B&Ws Annual Report on
Form 10-K
for the year ended December 31, 2010, for filing with the
Securities and Exchange Commission.
THE AUDIT & FINANCE COMMITTEE
Robert W. Goldman, Chairman
Stephen G. Hanks
D. Bradley McWilliams
Anne R. Pramaggiore
76
Approval
of Material Terms for Performance-Based Awards
for Section 162(m) Purposes under the Amended and
Restated
2010 Long-Term Incentive Plan
(Proposal 4)
We are asking our stockholders to approve the material terms for
performance-based awards under the amended and restated 2010
Long-Term Incentive Plan of The Babcock & Wilcox
Company (the Amended 2010 LTIP). Stockholder
approval of these terms of the plan is necessary for us to make
awards under the Amended 2010 LTIP that will be tax-deductible
by us as performance-based compensation under
Section 162(m) of the Code.
Section 162(m) of the Code limits the deductibility for
federal income tax purposes of compensation in excess of
$1 million per year for the chief executive officer and
certain other officers, unless such compensation qualifies as
performance-based compensation under the Code. Various
requirements must be satisfied in order for awards to qualify as
performance-based compensation. One requirement is that the
material terms relating to such awards must be approved by the
shareholders of the public company. In the case of certain
corporations that become separate public companies as a result
of a spin-off, a special transition rule delays the time by
which such shareholder approval must be obtained until no later
than the first regularly scheduled meeting of shareholders that
occurs more than 12 months after the date the corporation
becomes a separate public corporation.
If the shareholders approve the proposal, the Amended 2010 LTIP
will enable the Compensation Committee to continue to grant
awards under the Amended 2010 LTIP that, assuming other
conditions are met, will qualify as performance-based
compensation.
The 2010 Long-Term Incentive Plan of The Babcock &
Wilcox Company (the 2010 LTIP) was adopted by our
Board and approved by McDermott, our sole stockholder, on
July 2, 2010 prior to our spin-off from McDermott. On
February 22, 2011, our Board approved amendments to the
2010 LTIP to (1) modify the definition of Change in
Control and Disability to conform with the
definition used in our other benefit plans; (2) clarify our
ability to forfeit awards granted or recover awards paid under
the Amended 2010 LTIP; (3) add return on invested
capital as one
of the performance measures under the plan; and (4) make
other administrative changes.
A summary of the Amended 2010 LTIP is set forth below and is
qualified in its entirety to the text of the Amended 2010 LTIP,
which is attached as Appendix A to this proxy statement.
Summary
Description of the Amended 2010 LTIP
Administration. The Amended 2010 LTIP
is administered by the Compensation Committee of our Board of
Directors (the Compensation Committee). The
Compensation Committee selects the participants and determines
the type or types of awards and the number of shares or units to
be optioned or granted to each participant under the Amended
2010 LTIP. All or part of the award may be subject to conditions
established by the Compensation Committee, which may include
continued service with our company, achievement of specific
business objectives, increases in specified indices, attainment
of specified growth rates or other comparable measures of
performance. The Compensation Committee has full and final
authority to implement and interpret the Amended 2010 LTIP and
may, from time to time, adopt rules and regulations in order to
carry out the terms of the Amended 2010 LTIP. As permitted by
law, the Compensation Committee may delegate its duties under
the Amended 2010 LTIP to our Chief Executive Officer and other
senior officers.
Eligibility. Members of the Board of
Directors, officers and employees of our company and its
subsidiaries, as well as consultants, are eligible to
participate in the Amended 2010 LTIP. Any participant may
receive more than one award under the Amended 2010 LTIP.
Presently, 131 current and former employees and 9 current
members of the Board of Directors participate in the Amended
2010 LTIP. Because the Amended 2010 LTIP provides for broad
discretion in selecting participants and in making awards, the
total number of persons who will participate in the Amended 2010
LTIP going forward and the respective benefits to be awarded to
them will vary from time to time and is undeterminable at this
time.
77
Shares Available for Issuance Through the Amended
2010 LTIP. Subject to the provisions we
describe below, up to 10,000,000 shares of our common stock
may be issued under the Amended 2010 LTIP. Shares which are
subject to awards that are cancelled, terminated, forfeited or
expired will become available for issuance under the Amended
2010 LTIP. As of March 7, 2011, 6,526,322 shares
remained available for issuance under the Amended 2010 LTIP.
The Compensation Committee, in its discretion, will make
appropriate adjustments in the number and kind of shares that
may be issued, the number and kind of shares subject to
outstanding awards, the exercise or other applicable price and
other value determinations applicable to outstanding awards
under the Amended 2010 LTIP to reflect any amendment to the
Amended 2010 LTIP, stock split, stock dividend,
recapitalization, merger, consolidation, reorganization,
combination or exchange of shares or other similar event. Types
of Awards Under the Amended 2010 LTIP. The Compensation
Committee may award to participants incentive and nonqualified
stock options, restricted stock, restricted stock units and
performance shares and performance units. The forms of awards
are described in greater detail below.
Stock Options. The Compensation
Committee has discretion to award incentive stock options and
nonqualified stock options. A stock option is a right to
purchase a specified number of shares of our common stock at a
specified exercise price. An incentive stock option is intended
to qualify as such under Section 422 of the Internal
Revenue Code of 1986, as amended (the Code). Under
the Amended 2010 LTIP, no participant may be granted options
during any fiscal year that are exercisable for more than
1,200,000 shares of our common stock. Incentive stock
options may only be granted to employees. The exercise price of
an option may not be less than the fair market value of a share
of our common stock on the date of grant. Subject to the
specific terms of the Amended 2010 LTIP, the Compensation
Committee has discretion to determine the number of shares, the
exercise price, the terms and conditions of exercise, whether an
option will qualify as an incentive stock option under the Code
and set such additional limitations on and terms of option
grants as it deems appropriate. The stock option award agreement
will specify, among other things, the exercise price, duration
and number of shares applicable to the award as well as whether
than award is of nonqualified or incentive stock options.
Options granted to participants under the Amended 2010 LTIP will
expire at such times as the Compensation Committee determines at
the time of the grant, but no option will be exercisable later
than seven years from the date of grant. Each option award
agreement will set forth the extent to which the participant
will have the right to exercise the option following termination
of the participants employment or service. The termination
provisions will be determined within the discretion of the
Compensation Committee, need not be uniform among all
participants and may reflect distinctions based on the reasons
for termination of employment or service. Dividend equivalents
do not attach to stock options.
Upon the exercise of an option granted under the Amended 2010
LTIP, the option price is payable in full to us: (1) in
cash; (2) if permitted, by tendering shares of our common
stock having a fair market value at the time of exercise equal
to the total option price (provided such shares have been held
for at least six months prior to their tender); (3) if
permitted, by a combination of (1) and (2); or (4) by
any other method approved by the Compensation Committee in its
sole discretion.
Restricted Stock. The Compensation
Committee also is authorized to award restricted shares of our
common stock under the Amended 2010 LTIP on such terms and
conditions as it shall establish. Although recipients will have
the right to vote restricted shares from the date of grant, they
will not have the right to sell or otherwise transfer the shares
during the applicable period of restriction or until earlier
satisfaction of other conditions imposed by the Compensation
Committee in its sole discretion. The restricted stock award
agreement will specify the periods of restriction, restrictions
based on achievement of specific performance objectives,
restrictions under applicable federal or state securities laws
and such other terms the Compensation Committee deems
appropriate. Unless the Compensation Committee otherwise
determines, participants will receive cash dividends on their
shares of restricted stock. The Compensation Committee in its
discretion may apply any restrictions to the dividends that it
deems appropriate. Under the terms of our outstanding restricted
stock awards, dividend rights are subject to the forfeiture
provisions applicable to the award.
Each award agreement for restricted stock will set forth the
extent to which the participant will have the right to retain
unvested shares of restricted stock following termination of the
participants employment or
78
service. These provisions will be determined in the sole
discretion of the Compensation Committee, need not be uniform
among all participants and may reflect distinctions based on the
reasons for termination of employment or service.
Restricted Stock Units. An award of a
restricted stock unit constitutes an agreement by us to deliver
shares of our common stock or to pay an amount equal to the fair
market value of a share of our common stock for each restricted
stock unit to a participant in the future. Restricted stock
units may be granted by the Compensation Committee on such terms
and conditions as it may establish. The restricted stock unit
award agreement will specify the vesting period or periods, the
specific performance objectives and such other conditions as may
apply to the award. During the applicable vesting period,
participants will have no voting rights with respect to the
shares of our common stock underlying a restricted stock unit
grant. However, participants shall, unless the Compensation
Committee otherwise determines, receive dividend equivalents on
the shares underlying their restricted stock unit grants in the
form of cash or additional restricted stock units if a cash
dividend is paid with respect to shares of our common stock.
Such dividend equivalents are subject to the vesting
requirements applicable to the award.
Each award agreement for restricted stock units will set forth
the extent to which the participant will have the right to
retain unvested restricted stock units following termination of
employment or service. These provisions will be determined in
the sole discretion of the Compensation Committee, need not be
uniform among all participants and may reflect distinctions
based on reasons for termination of employment or service.
No more than 1,200,000 shares of our common stock may be
granted in the form of awards of restricted stock and restricted
stock units to any participant in any fiscal year.
Performance Units and Performance
Shares. Performance units and performance
shares are forms of performance awards that are subject to the
attainment of one or more pre-established performance goals
during a designated performance period. Performance units and
performance shares may be granted by the Compensation Committee
at any time in such amounts and on such terms as the
Compensation Committee determines. Each performance unit will
have an initial value that is established by the Compensation
Committee at the time of the grant. Each
performance share will have an initial value equal to the fair
market value of a share of our common stock on the date of the
grant. The Compensation Committee in its discretion will
determine the applicable performance period and will establish
performance goals for any given performance period. When the
performance period expires, the holder of performance units or
performance shares will be entitled to receive a payout on the
units and/or
shares earned over the performance period based on the extent to
which the performance goals have been achieved. Amended 2010
LTIP participants holding performance units
and/or
performance shares are not entitled to receive dividend units
for dividends declared with respect to shares of our common
stock.
Payments may be made in cash or in shares of our common stock
that have an aggregate fair market value equal to the earned
performance units or performance shares. Subject to any
permissible deferral, payment of all earned performance units
and performance shares will be made no later than March 15
following the end of the calendar year in which the awards vest
(or as soon as administratively practicable thereafter if
payment is delayed due to unforeseen events). Each award
agreement will set forth the extent to which the participant
will have the right to receive a payout of these performance
shares
and/or
performance units following termination of the
participants employment or service. The termination
provisions will be determined by the Compensation Committee in
its sole discretion, need not be uniform among all participants
and may reflect distinctions based on the reasons for
termination of employment or service.
No more than 1,200,000 shares of our common stock may be
granted in the form of awards of performance shares to any
participant in any fiscal year. No more than $6,000,000 may be
paid in cash to any participant with respect to performance
units granted in any fiscal year, as valued on the date of each
grant.
Performance Measures. The Compensation
Committee may grant awards under the Amended 2010 LTIP to
eligible employees subject to the attainment of specified
performance measures. The number of performance-based awards
granted to an officer or employee in any year will be determined
by the Compensation Committee in its sole discretion, subject to
the limitations set forth in the Amended 2010 LTIP. The value of
each performance-based award will be determined based on the
achievement of the pre-established, objective performance goals
during each performance period. The duration of a performance
79
period is set by the Compensation Committee. A new performance
period may begin every year, or at more frequent or less
frequent intervals, as determined by the Compensation Committee.
The Compensation Committee will establish, in writing, the
objective performance goals applicable to the valuation of
performance-based awards granted in each performance period, the
performance measures that will be used to determine the
achievement of those performance goals and any formulas or
methods to be used to determine the value of the
performance-based awards.
Performance measures will be defined by the Compensation
Committee on a consolidated, segment, group, subsidiary or
division basis
and/or in
comparison to one or more peer groups or indices. The
Compensation Committee may include or exclude from the
performance measures research and development expenses,
acquisition costs, operating expenses from acquired businesses
or corporate transactions and other unusual or extraordinary
items. Performance measures selected by the Compensation
Committee will be based on one or more of the following: cash
flow; cash flow return on capital; cash flow return on assets;
cash flow return on equity; net income; return on capital;
return on invested capital; return on assets; return on equity;
share price; earnings per share (basic or diluted); earnings
before interest and taxes; earnings before interest, taxes,
depreciation and amortization; total and relative return to
stockholders; operating income; return on net assets; gross or
operating margins; safety and economic value added. Following
the end of a performance period, the Compensation Committee will
determine the value of the performance-based awards granted for
the period based on its determination of the degree of
attainment of the pre-established performance goals. The
Compensation Committee will also have discretion to reduce (but
not to increase) the value of any awards designated as a
qualified performance-based award by the Compensation Committee
for purposes of the Section 162(m) of the Code.
Deferrals. The Compensation Committee
will have the discretion to provide for the deferral of an award
or to permit participants to elect to defer payment of some or
all types of awards in a manner consistent with the requirements
of Section 409A of the Code.
Change in Control. The treatment of
outstanding awards upon the occurrence of a change in control
(as defined in the Amended 2010 LTIP) will be determined in the
sole discretion of the Compensation
Committee and will be described in the applicable award
agreements and need not be uniform among all awards granted
under the Amended 2010 LTIP.
Adjustment and Amendments. The Amended
2010 LTIP provides for appropriate adjustments in the number of
shares of our common stock subject to awards and available for
future awards, as well as the maximum award limitations under
the Amended 2010 LTIP, in the event of changes in our
outstanding common stock by reason of a merger, stock split, or
certain other events. The Amended 2010 LTIP may be modified,
altered, suspended or terminated by the Board of Directors at
any time and for any purpose that the Board of Directors deems
appropriate, but no amendment to the Amended 2010 LTIP may
adversely affect any outstanding awards without the affected
participants consent, and stockholder approval may be
required if the changes materially alter the terms of the plan
or by applicable law, regulation or stock exchange requirements.
Additionally, the Compensation Committee may make adjustments in
the terms, conditions or criteria of an award in recognition of
certain unusual or nonrecurring events.
Clawbacks. The ability of us
and/or our
Board of Directors to forfeit awards granted or recover awards
paid under the Amended 2010 LTIP may be determined in the sole
discretion of the Compensation Committee, unless otherwise
specifically prohibited under applicable laws, or by the rules
and regulations of any governing governmental agencies or
national securities exchanges. The forfeiture and recovery
rights will be described in the applicable award agreements and
need not be uniform among all awards granted under the Amended
2010 LTIP.
Transferability. Except as otherwise
specified in a participants award agreement, no award
granted pursuant to, and no right to payment under, the Amended
2010 LTIP will be assignable or transferable by an Amended 2010
LTIP participant except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations
order, and any right granted to a participant under the Amended
2010 LTIP will be exercisable during the participants
lifetime only by the participant or by the participants
guardian or legal representative.
Restrictions. Shares of our common
stock delivered under the Amended 2010 LTIP, if any, may be
subject to stop-transfer orders and other restrictions as the
Compensation Committee may deem advisable under the rules,
regulations and other requirements of the SEC, any securities
exchange or
80
transaction reporting system on which our common stock is then
listed or to which it is admitted for quotation and any
applicable federal or state securities law.
Tax Withholding. We have the right to
deduct applicable taxes from any award payment and withhold, at
the time of delivery or vesting of cash or shares of our common
stock under the Amended 2010 LTIP, or at the time applicable law
otherwise requires, an appropriate amount of cash or number of
shares of our common stock or combination thereof for payment of
taxes required by law or to take such other action as may be
necessary in our opinion to satisfy all obligations for
withholding of those taxes. The Compensation Committee may
permit withholding to be satisfied by the transfer to us of
shares of our common stock previously owned by the holder of the
award for which withholding is required.
Unfunded Plan. Insofar as it provides
for awards for cash, shares of our common stock or rights
thereto, the Amended 2010 LTIP will be unfunded. Although we may
establish bookkeeping accounts with respect to plan participants
who are entitled to cash, shares of our common stock or rights
thereto under the Amended 2010 LTIP, we will use any such
accounts merely as a bookkeeping convenience. We are not
required to segregate any assets to assure payment of any
amounts payable under the Amended 2010 LTIP, nor shall we, our
Board of Directors or the Compensation Committee be deemed to be
a trustee of any cash, shares of our common stock or rights
thereto to be granted under the Amended 2010 LTIP. Any liability
or obligation we may have to any participant with respect to an
award of cash, shares of our common stock or rights thereto
under the Amended 2010 LTIP will be based solely on any
contractual obligations that the Amended 2010 LTIP and any
applicable award agreement create, and no such liability or
obligation of ours will be deemed to be secured by any pledge or
other encumbrance on any of our property.
Duration of the Amended 2010 LTIP. The
Amended 2010 LTIP will remain in effect until all options and
rights granted under the plan have been satisfied or terminated
under the terms of the Amended 2010 LTIP and all performance
periods for performance-based awards granted under the plan have
been completed. However, in no event will any award be granted
under the Amended 2010 LTIP on or after July 2, 2020.
Regulations Not Applicable to Plan. The
Amended 2010 LTIP is not intended to be subject to
the provisions of the Employee Retirement Income Security Act of
1974 and is not qualified under Section 401(a) of the Code.
United
States Federal Income Tax Consequences
The following summary is based on current interpretations of
existing United States federal income tax laws. The discussion
below does not purport to be complete, and it does not discuss
the tax consequences arising in the context of a
participants death or the income tax laws of any local,
state or foreign country in which a participants income or
gain may be taxable. Differences in participants financial
situations may cause federal, state and local tax consequences
of participation in the Amended 2010 LTIP to vary. Therefore,
each participant is urged to consult his or her own accountant,
legal counsel or other financial advisor regarding individual
tax consequences of participation in the Amended 2010 LTIP.
Stock Options. Some of the options
issuable under the Amended 2010 LTIP may constitute incentive
stock options within the meaning of Section 422 of the
Code, while other options granted under the Amended 2010 LTIP
may be nonqualified stock options. The Code provides for tax
treatment of stock options qualifying as incentive stock options
that may be more favorable to employees than the tax treatment
accorded nonqualified stock options.
Generally, upon the grant or exercise of an incentive stock
option, the optionee will recognize no income for United States
federal income tax purposes. The difference between the exercise
price of the incentive stock option and the fair market value of
the stock at the time of exercise is an adjustment in computing
alternative minimum taxable income that may require payment of
an alternative minimum tax. If a participant disposes of shares
acquired by exercise of an incentive stock option either before
the expiration of two years from the date the options are
granted or within one year after the issuance of shares upon
exercise of the incentive stock option (the holding
periods), the participant generally will recognize in the
year of disposition: (1) ordinary income to the extent that
the lesser of either (a) the fair market value of the
shares on the date of option exercise or (b) the amount
realized upon disposition exceeds the option price and
(2) capital gain to the extent the amount realized upon
disposition exceeds the fair market value of the shares on the
date of option exercise. If the shares are sold after expiration
of the holding periods, the participant generally will recognize
capital gain or
81
loss equal to the difference between the amount realized upon
disposition and the option price.
An optionee will recognize no income on the grant of a
nonqualified stock option. Upon the exercise of a nonqualified
stock option, the optionee will recognize ordinary taxable
income (subject to withholding for employees) in an amount equal
to the difference between the fair market value of the shares on
the date of exercise and the exercise price. Upon any sale of
such shares by the optionee, any difference between the sale
price and the fair market value of the shares on the date of
exercise of the nonqualified option will be treated generally as
capital gain or loss.
No deduction is available to us upon the grant or exercise of an
incentive stock option (although a deduction may be available if
the employee sells the shares so purchased before the applicable
holding period expires), whereas upon exercise of a nonqualified
stock option, we are entitled to a deduction in an amount equal
to the income recognized by the optionee. Except with respect to
death or disability of an optionee, an optionee has three months
after termination of employment in which to exercise an
incentive stock option and retain favorable tax treatment at
exercise. An option exercised more than three months after an
optionees termination of employment (other than upon death
or disability) cannot qualify for the tax treatment accorded
incentive stock options; such options would be treated as
nonqualified stock options instead.
Restricted Stock. A participant
generally recognizes no taxable income at the time of an award
of restricted stock. A participant may, however, make an
election under Section 83(b) of the Code within
30 days of grant to have the grant taxed as compensation
income at the date of receipt, with the result that any future
appreciation or depreciation in the value of the shares of stock
granted may be taxed as capital gain or loss on a subsequent
sale of the shares. If the participant does not make a
Section 83(b) election, the grant will be taxed as
compensation income at the full fair market value on the date
the restrictions imposed on the shares expire. Unless a
participant makes a Section 83(b) election, any dividends
paid to the participant on the shares of restricted stock will
generally be compensation income to the participant and
deductible by us as compensation expense. In general, we will
receive an income tax deduction for any compensation income
taxed to the participant. To the extent a participant realizes
capital gains, as
described above, we will not be entitled to any deduction for
federal income tax purposes.
Restricted Stock Units. A participant
who is granted a restricted stock unit will recognize no income
upon grant of the restricted stock unit. At the time the
underlying shares of our common stock (or cash in lieu thereof)
are delivered to a participant, the participant will realize
compensation income equal to the full fair market value of the
shares received (or the cash received). We will be entitled to
an income tax deduction corresponding to the compensation income
recognized by the participant.
Performance Share or Performance Unit
Awards. A participant who is granted a
performance share or a performance unit award will recognize no
income upon grant of the performance share or a performance unit
award. At the time the cash
and/or
common stock is received as payment in respect of a performance
share or performance unit award, the participant will realize
compensation income equal to the sum of the cash and the fair
market value of the shares received. We will be entitled to an
income tax deduction corresponding to the compensation income
recognized by the participant.
Section 409A. Section 409A of
the Code generally provides that any deferred compensation
arrangement must satisfy specific requirements, both in
operation and in form, regarding: (1) the timing of
payment; (2) the election of deferrals; and
(3) restrictions on the acceleration of payment. Failure to
comply with Section 409A of the Code may result in the
early taxation (plus interest) to the participant of deferred
compensation and the imposition of a 20% penalty on the
participant on such deferred amounts included in the
participants income. We intend to structure awards under
the Amended 2010 LTIP in a manner that is designed to be exempt
from or comply with Section 409A of the Code.
Change in Control. The acceleration of
the exercisability or the vesting of a grant or award upon the
occurrence of a change in control may result in an excess
parachute payment within the meaning of Section 280G
of the Code. A parachute payment occurs when an
employee receives payments contingent on a change in control
that exceed an amount equal to three times his or her base
amount. The term base amount generally means
the average annual compensation paid to such employee during the
five-year period preceding the change in control. An
excess parachute payment is the excess of all
parachute payments made to the employee on account of a
82
change in control over the employees base amount. If any
amount received by an employee is characterized as an excess
parachute payment, the employee is subject to a 20% excise tax
on the amount of the excess, and the employer is denied a
deduction with respect to such excess payment.
We currently anticipate that the Compensation Committee will at
all times consist of outside directors as required
for purposes of Section 162(m) of the Code, and that the
Compensation Committee will take the effect of
Section 162(m) of the Code into consideration in
structuring awards under the Amended 2010 LTIP.
The following table summarizes information as of
December 31, 2010, about outstanding awards and shares of
common stock reserved for future issuance under the Amended 2010
LTIP.
Equity
Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
Number of
|
|
|
to be Issued Upon
|
|
Weighted-Average
|
|
Securities
|
|
|
Exercise of
|
|
Exercise Price of
|
|
Remaining
|
|
|
Outstanding Options
|
|
Outstanding Options
|
|
Available for
|
Plan Category
|
|
and Rights
|
|
and Rights
|
|
Future Issuance
|
Equity compensation plans approved by security holders
|
|
|
1,094,678
|
|
|
$
|
14.21
|
|
|
|
7,424,674
|
|
Recommendation
and Vote Required
Our Board of Directors unanimously recommends a vote
FOR approval of this proposal. The proxy holders
will vote all proxies received for approval of this proposal
unless instructed otherwise. Approval of this proposal requires
the affirmative vote of a majority of the outstanding shares of
common stock present in person or represented by proxy and
entitled to vote on this proposal at the Annual Meeting.
Because abstentions are counted as present for purposes of the
vote on this matter but are not votes FOR this
proposal, they have the same effect as votes AGAINST
this proposal. In general, brokers do not have discretionary
authority on proposals relating to equity compensation plans.
Therefore, absent instructions from you, your broker may not
vote your shares on this proposal. Broker non-votes will have no
effect on the vote.
83
Approval
of Material Terms for Performance-Based Awards
for Section 162(m) Purposes under the Amended and
Restated
Executive Incentive Compensation Plan
(Proposal 5)
We are asking our stockholders to approve the material terms for
performance-based awards granted under the amended and restated
Executive Incentive Compensation Plan (the Amended
EICP). Stockholder approval of these terms of the plan is
necessary for us to make awards under the Amended EICP that will
be tax-deductible by us as performance-based compensation under
Section 162(m) of the Code.
Section 162(m) of the Code limits the deductibility for
federal income tax purposes of compensation in excess of
$1 million per year for the chief executive officer and
certain other officers, unless such compensation qualifies as
performance-based compensation under the Code. Various
requirements must be satisfied in order for awards to qualify as
performance-based compensation. One requirement is that the
material terms relating to such awards must be approved by the
shareholders of the public company. In the case of certain
corporations that become separate public companies as a result
of a spin-off, a special transition rule delays the time by
which such shareholder approval must be obtained until no later
than the first regularly scheduled meeting of shareholders that
occurs more than 12 months after the date the corporation
becomes a separate public corporation.
If the shareholders approve the proposal, the Amended EICP will
enable the Compensation Committee to continue to grant awards
under the Amended EICP that, assuming other conditions are met,
will qualify as performance-based compensation.
The Executive Incentive Compensation Plan (the EICP)
was originally adopted by our Board and approved by McDermott,
our sole stockholder, on July 2, 2010 prior to our spin-off
from McDermott. On February 22, 2011, our Board approved
amendments to the EICP to (1) generally conform the
performance measures to the Amended 2010 LTIP by adding
earnings per share (basic or diluted), return
on invested capital, safety, share
price and total and relative shareholder
return as performance measures under the plan;
(2) clarify our ability to recover awards paid under the
Amended EICP; and (3) make other administrative changes.
A summary of the Amended EICP is set forth below and is
qualified in its entirety to the text of the Amended EICP, which
is attached as Appendix B to this proxy statement.
Summary
Description of the Amended EICP
Administration. The Compensation
Committee administers the Amended EICP. The Compensation
Committee annually selects the participants and establishes the
amount of the award opportunity that each participant may earn
based on the level of attainment of performance goals previously
determined by the Compensation Committee. The Compensation
Committee has full and final authority to implement and
interpret the Amended EICP. Except as prohibited by law, the
Compensation Committee may delegate its duties under the Amended
EICP to our Chief Executive Officer and other executive officers.
Eligibility. All of our full-time
salaried employees are eligible to participate in the Amended
EICP. Other than our Chief Executive Officer, who automatically
participates, the Compensation Committee selects the
participants for the Amended EICP. During 2010,
21 employees participated in the EICP.
Performance Goals. The Compensation
Committee establishes, for each plan year, performance goals
based upon any combination of corporate, segment, group,
subsidiary, divisional
and/or
individual goals. For any award that is intended to qualify as a
performance-based award under Section 162(m) of the Code,
the amount paid out will be based on: (a) the
participants target award and (b) the company,
segment, group, subsidiary or division performance relative to
the pre-established performance goals. Performance measures
which may be used in such qualified performance-based awards are
generally limited to: cash flow, cash flow return on capital,
cash flow return on assets, cash flow return on equity, earnings
per share (basic or diluted), economic value added, net income,
operating income, return on assets, return on capital, return on
invested capital, return on equity, safety, share price,
relative shareholder return and total shareholder return. At the
time the performance goals are established, the Compensation
Committee, in a manner consistent with Code
84
Section 162(m), may specify that such performance measures
shall be adjusted to exclude any negative impact caused by
research and development expenses, acquisition costs, operating
expenses from acquired businesses or corporate transactions,
changes in accounting principles and such other unusual,
nonrecurring or extraordinary items specified by the
Compensation Committee in its sole discretion. The Committee has
the discretion to decrease or eliminate the amount of any award
otherwise payable.
No Adjustment of Performance Goals or Award
Opportunities. Performance goals may not be
changed following their establishment where such action would
cause the award to no longer qualify as qualified
performance-based compensation under Section 162(m)
of the Code.
Award Payments. Following the end of
each plan year, awards are computed for each plan participant.
Final individual awards may vary above or below the target
award, based on the level of achievement of the preestablished
performance goal
and/or the
exercise of the Compensation Committees discretion. The
maximum award that may be paid out to any one participant in any
given plan year under the Amended EICP is three million dollars
($3,000,000). Awards earned will be paid no later than the March
15 following the end of the plan year during which the award is
earned, or as soon as administratively practicable thereafter in
the event payment is delayed due to unforeseeable events.
Clawbacks. For awards granted under the
Amended EICP on or after February 22, 2011, we have the
general right to recover certain payments under the Amended EICP
to individuals that knowingly engaged in fraud, in the event we
are required to prepare an accounting restatement due to the
material
noncompliance with any financial reporting requirement as a
result of such fraud. We may recover from such persons any
amounts paid during the three years prior to the determination
to prepare a restatement that were in excess what would have
been earned by such persons under the restatement.
Amended EICP Benefits. Because the
Amended EICP provides for broad discretion in selecting
participants and in making and paying awards, the total number
of persons who will participate in the Amended EICP going
forward and the respective benefits to be awarded to them will
vary from time to time and is undeterminable at this time. On
February 22, 2011, the Compensation Committee set 2011
target award opportunities under the Amended EICP for 22
participants.
Recommendation
and Vote Required
Our Board of Directors unanimously recommends a vote
FOR approval of this proposal. The proxy holders
will vote all proxies received for approval of this proposal
unless instructed otherwise. Approval of this proposal requires
the affirmative vote of a majority of the outstanding shares of
common stock present in person or represented by proxy and
entitled to vote on this proposal at the Annual Meeting. Because
abstentions are counted as present for purposes of the vote on
this matter but are not votes FOR this proposal,
they have the same effect as votes AGAINST this
proposal. In general, brokers do not have discretionary
authority on proposals relating to equity compensation plans.
Therefore, absent instructions from you, your broker may not
vote your shares on this proposal. Broker non-votes will have no
effect on the vote.
85
Ratification
of Appointment of Independent Registered Public Accounting
Firm
for Year Ending December 31, 2011
(Proposal 6)
Our Board of Directors has ratified the decision of the
Audit & Finance Committee to appoint
Deloitte & Touche LLP (Deloitte) to serve
as the independent registered public accounting firm to audit
our financial statements for the year ending December 31,
2011. Although we are not required to seek stockholder approval
of this appointment, we intend to seek stockholder approval of
our registered public accounting firm annually. No determination
has been made as to what action the Audit & Finance
Committee and the Board of Directors would take if our
stockholders fail to ratify the appointment. Even if the
appointment is ratified, the Audit & Finance Committee
retains discretion to appoint a new independent registered
public accounting firm at any time
if the Audit & Finance Committee concludes such a
change would be in our best interests. We expect that
representatives of Deloitte will 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.
For the year ended December 31, 2010 following the spin-off
on July 30, 2010, we paid Deloitte fees, including expenses
and taxes, totaling $3,015,116, which are categorized below.
Prior to the spin-off, McDermott paid any audit, audit-related,
tax and other fees of Deloitte. As a result, the amounts
reported below are not necessarily representative of the fees we
expect to pay Deloitte in future years.
|
|
|
|
|
|
|
|
|
|
|
2010(1)
|
|
|
2009
|
|
Audit
|
|
|
|
|
|
|
|
|
The Audit fees for the year ended December 31, 2010
following the spin-off were for professional services rendered
for the audits of the combined and consolidated financial
statements of B&W, the audit of B&Ws internal
control over financial reporting, statutory and subsidiary
audits, reviews of the quarterly combined and consolidated
financial statements of B&W and assistance with review of
documents filed with the SEC
|
|
$
|
2,677,029
|
|
|
|
N/A
|
|
Audit-Related
|
|
|
|
|
|
|
|
|
The Audit-Related fees for the year ended December 31, 2010
following the spin-off were for assurance and related services,
employee benefit plan audits and advisory services related to
Sarbanes-Oxley Section 404 compliance
|
|
$
|
79,061
|
|
|
|
N/A
|
|
Tax
|
|
|
|
|
|
|
|
|
The Tax fees for the year ended December 31, 2010 following
the spin-off were for professional services rendered for
consultations on various U.S. federal, state and international
tax compliance assistance, consultation and advice on various
foreign tax matters and transfer pricing assistance
|
|
$
|
171,477
|
|
|
|
N/A
|
|
All Other
|
|
|
|
|
|
|
|
|
The fees for All Other services for the year ended
December 31, 2010 following the spin-off were for
professional services rendered for international payroll and
benefit administration and other advisory or consultation
services not related to audit or tax
|
|
$
|
87,549
|
|
|
|
N/A
|
|
Total
|
|
$
|
3,015,116
|
|
|
|
N/A
|
|
|
|
|
(1) |
|
This table excludes the following amounts reported by McDermott
as having been paid prior to the spin-off: (1) $215,000 for
audit services related to our Form 10; (2) $480,205
for B&W audit-related services; (3) $91,800 for
B&W tax services; and (4) $140,000 for B&W other
services. In addition, we estimate that approximately $782,000
of audit fees paid by McDermott to Deloitte prior to the
spin-off is attributable to B&W audit fees. |
It is the policy of our Audit & Finance Committee to
preapprove all audit engagement fees, terms and services and
permissible non-audit services to be performed by our
independent registered public accounting firm.
Annually, the independent registered public accounting firm and
the Vice President of Internal Audit present to the
Audit & Finance Committee the anticipated services to
be performed by the firm during the year. The Audit &
Finance Committee reviews and, as it
86
deems appropriate, pre-approves those services. The separate
Audit, Audit-Related, Tax and All Other services and estimated
fees are presented to the Audit & Finance Committee
for consideration. The Audit & Finance Committee
reviews on at least a quarterly basis the proposed services and
fees for additional services that have occurred and are outside
the scope of the services and fees initially pre-approved by the
Audit & Finance Committee. In order to respond to
time-sensitive requests for services that may arise between
regularly scheduled meetings, the Audit & Finance
Committee has pre-approved specific audit, audit-related, tax
and other services and individual and aggregate fees for such
services. The Audit & Finance Committee did not
approve any audit, audit-related, tax or other services pursuant
to the de minimis exception described in
Section 10A(i)(1)(B) of the Exchange Act of 1934.
Recommendation
and Vote Required
Our Board of Directors recommends that stockholders vote
FOR the ratification of the decision of our
Audit & Finance Committee to appoint
Deloitte & Touche LLP as our independent registered
public accounting firm for the year ending December 31,
2011. The proxy holders will vote all proxies received for
approval of this proposal unless instructed otherwise. Approval
of this proposal requires the affirmative vote of a majority of
the outstanding shares of common stock present in person or
represented by proxy and entitled to vote on this proposal at
the Annual Meeting. Because abstentions are counted as present
for purposes of the vote on this matter but are not votes
FOR this proposal, they have the same effect as
votes AGAINST this proposal.
Certain
Relationships and Related Transactions
Pursuant to our Code of Business Conduct, all employees
(including our Named Executives) who have, or whose immediate
family members have, any direct or indirect financial or other
participation in any business that competes with us, supplies
goods or services to us, or is our customer, are required to
disclose to us and receive written approval from our Corporate
Ethics and Compliance department prior to transacting such
business. Our employees are expected to make reasoned and
impartial decisions in the workplace. As a result, approval of
the business is denied if we believe that the employees
interest in such business could influence decisions relative to
our business, or have the potential to adversely affect our
business or the objective performance of the employees
work. Our Corporate Ethics and Compliance department implements
our Code of Business Conduct and related policies and the
Governance Committee of our Board is responsible for overseeing
our Ethics and Compliance Program, including compliance with our
Code of Business Conduct. Our Board members are also responsible
for complying with our Code of Business Conduct. Additionally,
our Governance Committee is responsible for reviewing the
professional occupations and associations of our Board members
and reviews transactions between us and other companies with
which our Board members are affiliated. To obtain a copy of our
Code of Business Conduct, please see the Corporate
Governance section above in this proxy statement.
Ms. Salomone served as the President and Chief Executive
Officer of Marine Mechanical Corporation (MMC)
before we acquired MMC in 2007. Prior to our acquisition, the
shares of Class A common stock of MMC were owned by an
employee stock ownership trust (the ESOP), and
Ms. Salomone was a participant in the ESOP. In addition,
among other former MMC employees, Ms. Salomone owned shares
of Class B common stock of MMC and certain options to
purchase shares of Class B common stock of MMC. In
connection with the acquisition, we deposited a portion of the
acquisition price for the Class A shares, the Class B
shares and the options in an escrow account, as a means of
providing a fund for resolution of any post-closing claims under
the indemnification provisions of the acquisition agreement. As
of January 31, 2011, the balance of the escrow account was
approximately $5.6 million. Under the terms of the escrow
arrangement, and subject to certain exceptions, any remaining
balance in the escrow account as of May 2011 is scheduled to be
released to the ESOP participants and former holders of the
Class B shares and the options, including
Ms. Salomone, after such date. Ms. Salomone has an
approximate 5.2% interest in the funds in the escrow account
based on her participation interest in the ESOP and her former
ownership of Class B shares and options.
87
Section 16(a)
Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires our directors and executive officers, and persons who
own 10% or more of our voting stock, to file reports of
ownership and changes in ownership of our equity securities with
the SEC and the NYSE. Directors, executive officers and 10% or
more holders are required by SEC regulations to furnish us with
copies of all Section 16(a) forms they file. Based solely
on a review of the copies of those forms furnished to us, or
written representations that no forms
were required, we believe that, during the year ended
December 31, 2010, all Section 16(a) filing
requirements applicable to our directors, executive officers and
10% or more beneficial owners were satisfied other than
(i) one late Form 4 filed by Mr. John A. Fees
with respect to one transaction involving 5,431 shares of
our common stock and (ii) one late Form 4 filed by
Mr. Christofer M. Mowry with respect to one transaction
involving 1,259 shares of our common stock.
Stockholders
Proposals
Any stockholder who wishes to have a qualified proposal
considered for inclusion in our proxy statement for our 2012
Annual Meeting must send notice of the proposal to our Corporate
Secretary at our principal executive office no later than
December 3, 2011. If you make such a proposal, you must
provide your name, address, the number of shares of common stock
you hold of record or beneficially, the date or dates on which
such common stock was acquired and documentary support for any
claim of beneficial ownership.
In addition, any stockholder who intends to submit a proposal
for consideration at our 2012 Annual
Meeting, but not for inclusion in our proxy materials, or who
intends to submit nominees for election as directors at the
meeting must notify our Corporate Secretary. Under our bylaws,
such notice must (1) be received at our principal executive
offices no earlier than close of business on January 13,
2012 or later than February 12, 2012 and (2) satisfy
specified requirements set forth in our bylaws. A copy of the
pertinent By-Law provisions can be found on our Web site at
www.babcock.com at Investor Relations
Corporate Governance Highlights.
By Order of the Board of Directors,
JAMES D. CANAFAX
Secretary
Dated: April 1, 2011
88
APPENDIX A
2010
LONG-TERM INCENTIVE PLAN
OF THE BABCOCK & WILCOX COMPANY
AS AMENDED & RESTATED FEBRUARY 22, 2011
ARTICLE I
Establishment,
Objectives and Duration
1.1 Establishment of the
Plan. The Babcock & Wilcox Company,
a corporation organized and existing under the laws of the State
of Delaware (hereinafter referred to as the
Company), hereby establishes an incentive
compensation plan to be known as the 2010 Long-Term Incentive
Plan of The Babcock & Wilcox Company (hereinafter
referred to as this Plan), as set forth in this
document. This Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, Restricted Stock, Restricted
Stock Units, Performance Shares and Performance Units (each as
hereinafter defined).
The original effective date of this Plan was July 2, 2010.
The Plan is amended and restated effective February 22,
2011 (the Effective Date) and shall remain in effect
as provided in Section 1.3 hereof.
1.2 Objectives. This Plan is
designed to promote the success and enhance the value of the
Company by linking the personal interests of Participants (as
hereinafter defined) to those of the Companys
stockholders, and by providing Participants with an incentive
for outstanding performance. This Plan is further intended to
provide flexibility to the Company in its ability to motivate,
attract and retain the employment
and/or
services of Participants.
1.3 Duration. This Plan, as
amended and restated, shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in
effect, subject to the right of the Board of Directors (as
hereinafter defined) to amend or terminate this Plan at any time
pursuant to Article 15 hereof, until all Shares (as
hereinafter defined) subject to it shall have been purchased or
acquired according to this Plans provisions; provided,
however, that in no event may an Award (as hereinafter defined)
be granted under this Plan on or after July 2, 2020.
ARTICLE 2
Definitions
As used in this Plan, the following terms shall have the
respective meanings set forth below:
2.1 Award means a grant
under this Plan of any Nonqualified Stock Option, Incentive
Stock Option, Restricted Stock, Restricted Stock Unit,
Performance Share or Performance Unit.
2.2 Award Agreement means
an agreement entered into by the Company and a Participant,
setting forth the terms and provisions applicable to an Award
granted under this Plan.
2.3 Award Limitations has
the meaning ascribed to such term in Section 4.2.
2.4 Beneficial Owner or
Beneficial Ownership shall have the
meaning ascribed to such term in
Rule 13d-3
of the General Rules and Regulations under the Exchange Act.
2.5 Board or
Board of Directors means the Board of
Directors of the Company.
2.6 Change in Control
means, for purposes of this Plan and any Awards, the
occurrence of any of the following:
(a) 30% Ownership
Change: Any Person, other than an
ERISA-regulated pension plan established by the Company, makes
an acquisition of Outstanding Voting Stock and is, immediately
thereafter, the beneficial owner of 30% or more of the then
Outstanding Voting Stock, unless such acquisition is made
directly from the Company in a transaction approved by a
majority of the Incumbent Directors; or any group is formed that
is the beneficial owner of 30% or more of the Outstanding Voting
Stock (other than a group formation for the
A-1
APPENDIX A
purpose of making an acquisition directly from the Company and
approved (prior to such group formation) by a majority of the
Incumbent Directors); or
(b) Board Majority
Change: Individuals who are Incumbent
Directors cease for any reason to constitute a majority of the
members of the Board; or
(c) Major Mergers and
Acquisitions: Consummation of a Business
Combination unless, immediately following such Business
Combination, (i) all or substantially all of the
individuals and entities that were the beneficial owners of the
Outstanding Voting Stock immediately before such Business
Combination beneficially own, directly or indirectly, more than
51% of the then outstanding shares of voting stock of the parent
corporation resulting from such Business Combination in
substantially the same relative proportions as their ownership,
immediately before such Business Combination, of the Outstanding
Voting Stock, (ii) if the Business Combination involves the
issuance or payment by the Company of consideration to another
entity or its shareholders, the total fair market value of such
consideration plus the principal amount of the consolidated
long-term debt of the entity or business being acquired (in each
case, determined as of the date of consummation of such Business
Combination by a majority of the Incumbent Directors) does not
exceed 50% of the sum of the fair market value of the
Outstanding Voting Stock plus the principal amount of the
Companys consolidated long-term debt (in each case,
determined immediately before such consummation by a majority of
the Incumbent Directors), (iii) no Person (other than any
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 30% or more of the
then outstanding shares of voting stock of the parent
corporation resulting from such Business Combination and
(iv) a majority of the members of the board of directors of
the parent corporation resulting from such Business Combination
were Incumbent Directors of the Company immediately before
consummation of such Business Combination; or
(d) Major Asset
Dispositions: Consummation of a Major Asset
Disposition unless, immediately following such Major Asset
Disposition, (i) individuals and entities that were
beneficial owners of the Outstanding Voting Stock immediately
before such Major Asset Disposition beneficially own, directly
or indirectly, more than 70% of the then outstanding shares of
voting stock of the Company (if it continues to exist) and of
the entity that acquires the largest portion of such assets (or
the entity, if any, that owns a majority of the outstanding
voting stock of such acquiring entity) and (ii) a majority
of the members of the Board (if it continues to exist) and of
the entity that acquires the largest portion of such assets (or
the entity, if any, that owns a majority of the outstanding
voting stock of such acquiring entity) were Incumbent Directors
of the Company immediately before consummation of such Major
Asset Disposition.
For purposes of this definition of Change
in Control,
(1) Person means an
individual, entity or group;
(2) group is used as it is
defined for purposes of Section 13(d)(3) of the Exchange
Act;
(3) beneficial owner is
used as it is defined for purposes of
Rule 13d-3
under the Exchange Act;
(4) Outstanding Voting Stock
means outstanding voting securities of the Company
entitled to vote generally in the election of directors; and any
specified percentage or portion of the Outstanding Voting Stock
(or of other voting stock) is determined based on the combined
voting power of such securities;
(5) Incumbent Director
means a director of the Company (x) who was a
director of the Company on the effective date of this Agreement
or (y) who becomes a director after such date and whose
election, or nomination for election by the Companys
shareholders, was approved by a vote of a majority of the
Incumbent Directors at the time of such election or nomination,
except that any such director will not be deemed an Incumbent
Director if his or her initial assumption of office occurs as a
result of an actual or threatened election contest or other
actual or threatened solicitation of proxies by or on behalf of
a Person other than the Board;
(6) election contest is
used as it is defined for purposes of
Rule 14a-11
under the Exchange Act;
A-2
APPENDIX A
(7) Business Combination
means
(x) a merger or consolidation involving the Company or its
stock or
(y) an acquisition by the Company, directly or through one
or more subsidiaries, of another entity or its stock or assets;
(8) parent corporation resulting from a
Business Combination means the Company if its
stock is not acquired or converted in the Business Combination
and otherwise means the entity which as a result of such
Business Combination owns the Company or all or substantially
all the Companys assets either directly or through one or
more subsidiaries; and
(9) Major Asset Disposition
means the sale or other disposition in one transaction
or a series of related transactions of 70% or more of the assets
of the Company and its subsidiaries on a consolidated basis; and
any specified percentage or portion of the assets of the Company
will be based on fair market value, as determined by a majority
of the Incumbent Directors.
However, in no event shall a Change in Control be deemed to have
occurred under this Plan with respect to a Participant if the
Participant is part of a purchasing group which consummates a
transaction resulting in a Change in Control. 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: (i) passive ownership of less than three percent (3%)
of the stock of the purchasing company; or (ii) 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
directors).
2.7 Code means the Internal
Revenue Code of 1986, as amended from time to time.
2.8 Committee means the
Compensation Committee of the Board, or such other committee of
the Board appointed by the Board to administer this Plan (or the
entire Board if so designated by the Board by written
resolution), as specified in Article 3 hereof.
2.9 Company means The
Babcock & Wilcox Company, a corporation organized and
existing under the laws of the State of Delaware, and, except
where the context otherwise indicates, shall include the
Companys Subsidiaries and, except with respect to the
definition of Change in Control set forth above
and the application of any defined terms used in such
definition, any successor to any of such entities as provided in
Article 18 hereof.
2.10 Consultant means a
natural person who is neither an Employee nor a Director and who
performs services for the Company or a Subsidiary pursuant to a
contract, provided that those services are not in connection
with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or
maintain a market for the Companys securities.
2.11 Director means any
individual who is a member of the Board of Directors;
provided, however, that any member of the Board of
Directors who is employed by the Company shall be considered an
Employee under this Plan.
2.12 Disability means, as
determined by the Committee in its sole discretion, a
Participants inability to engage in any substantial
gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in
death or can be expected to last for a continuous period of not
less than twelve (12) months.
2.13 Economic Value Added
means net operating profit after tax minus the product
of capital and the cost of capital.
2.14. Effective Date shall
have the meaning ascribed to such term in Section 1.1
hereof.
2.15 Employee means any
person who is employed by the Company.
2.16 Exchange Act means the
Securities Exchange Act of 1934, as amended from time to time.
A-3
APPENDIX A
2.17 ERISA means the
Employee Retirement Income Security Act of 1974, as amended from
time to time.
2.18 Fair Market Value of a
Share shall mean, as of a particular date, (a) if Shares
are listed on a national securities exchange, the closing sales
price per Share on the consolidated transaction reporting system
for the principal national securities exchange on which Shares
are listed on that date, or, if no such sale is so reported on
that date, on the last preceding date on which such a sale was
so reported, (b) if no Shares are so listed but are traded
on an
over-the-counter
market, the mean between the closing bid and asked prices for
Shares on that date, or, if there are no such quotations
available for that date, on the last preceding date for which
such quotations are available, as reported by the National
Quotation Bureau Incorporated, or (c) if no Shares are
publicly traded, the most recent value determined by an
independent appraiser appointed by the Company for that purpose.
2.19 Fiscal Year means the
year commencing January 1 and ending December 31.
2.20 Incentive Stock Option
or ISO means an Option to
purchase Shares granted under Article 6 hereof and which is
designated as an Incentive Stock Option and is intended to meet
the requirements of Code Section 422, or any successor
provision.
2.21 Nonqualified Stock Option
or NQSO means an option to
purchase Shares granted under Article 6 hereof and which is
not an Incentive Stock Option.
2.22 Officer means an
Employee of the Company included in the definition
of Officer under Section 16 of the
Exchange Act and rules and regulations promulgated thereunder or
such other Employees who are designated
as Officers by the Board.
2.23 Option means an
Incentive Stock Option or a Nonqualified Stock Option.
2.24 Option Price means the
price at which a Share may be purchased by a Participant
pursuant to an Option, as determined by the Committee.
2.25 Participant means an
eligible Officer, Director, Consultant or Employee who has been
selected for participation in this Plan in accordance with
Section 5.2.
2.26 Performance-Based Award
means an Award that is designed to qualify for the
Performance-Based Exception.
2.27 Performance-Based
Exception means the performance-based exception
from the deductibility limitations of Code Section 162(m).
2.28 Performance Period
means, with respect to a Performance-Based Award, the period of
time during which the performance goals specified in such Award
must be met in order to determine the degree of payout
and/or
vesting with respect to that Performance-Based Award.
2.29 Performance Share
means an Award designated as such and granted to an Employee, as
described in Article 8 hereof.
2.30 Performance Unit means
an Award designated as such and granted to an Employee, as
described in Article 8 herein.
2.31 Period of Restriction
means the period during which the transfer of Shares of
Restricted Stock is limited in some way (based on the passage of
time, the achievement of performance goals, or upon the
occurrence of other events as determined by the Committee, in
its sole discretion) as set forth in the related Award
Agreement,
and/or the
Shares are subject to a substantial risk of forfeiture, as
provided in Article 7 hereof.
2.32 Person shall have the
meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act and used in Section 13(d) and 14(d) thereof,
including a group (as that term is used in
Section 13(d)(3) thereof).
2.33 Restricted Stock means
an Award designated as such and granted to a Participant
pursuant to Article 7 hereof.
A-4
APPENDIX A
2.34 Restricted Stock Unit
or RSU means a contractual
promise to distribute to a Participant one Share or cash equal
to the Fair Market Value of one Share, determined in the sole
discretion of the Committee, which shall be delivered to the
Participant upon satisfaction of the vesting and any other
requirements set forth in the related Award Agreement.
2.35 Retirement shall have
the meaning ascribed to such term by the Committee, as set forth
in the applicable Award Agreement.
2.36 Shares means the
common stock, par value $0.01 per share, of the Company.
2.37 Subsidiary means any
corporation, partnership, joint venture, affiliate or other
entity in which the Company has a majority voting interest and
which the Committee designates as a participating entity in this
plan.
2.38 Vesting Period means
the period during which an Award granted hereunder is subject to
a service or performance-related restriction, as set forth in
the related Award Agreement.
ARTICLE 3
Administration
3.1 The Committee. This Plan
shall be administered by the Committee. The members of the
Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors.
3.2 Authority of the
Committee. Except as limited by law or by the
Articles of Incorporation or Amended and Restated By-Laws of the
Company (each as amended from time to time), the Committee shall
have full and exclusive power and authority to take all actions
specifically contemplated by this Plan or that are necessary or
appropriate in connection with the administration hereof and
shall also have full and exclusive power and authority to
interpret this Plan and to adopt such rules, regulations and
guidelines for carrying out this Plan as the Committee may deem
necessary or proper. The Committee shall have full power and
sole discretion to: select Officers, Directors, Consultants and
Employees who shall be granted Awards under this Plan; determine
the sizes and types of Awards; determine the time when Awards
are to be granted and any conditions that must be satisfied
before an Award is granted; determine the terms and conditions
of Awards in a manner consistent with this Plan; determine
whether the conditions for earning an Award have been met and
whether a Performance-Based Award will be paid at the end of an
applicable performance period; determine the guidelines
and/or
procedures for the payment or exercise of Awards; and determine
whether a Performance-Based Award should qualify, regardless of
its amount, as deductible in its entirety for federal income tax
purposes, including whether a Performance-Based Award granted to
an Officer should qualify as performance-based compensation. The
Committee may, in its sole discretion, accelerate the vesting or
exercisability of an Award, eliminate or make less restrictive
any restrictions contained in an Award, waive any restriction or
other provision of this Plan or any Award or otherwise amend or
modify any Award in any manner that is either (a) not
adverse to the Participant to whom such Award was granted or
(b) consented to in writing by such Participant, and
(c) consistent with the requirements of Code
Section 409A, if applicable. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in
this Plan or in any Award in the manner and to the extent the
Committee deems necessary or desirable to further this
Plans objectives. Further, the Committee shall make all
other determinations that may be necessary or advisable for the
administration of this Plan. As permitted by law and the terms
of this Plan, the Committee may delegate its authority as
identified herein.
3.3 Delegation of
Authority. To the extent permitted under
applicable law, the Committee may delegate to the Chief
Executive Officer and to other senior officers of the Company
its duties under this Plan pursuant to such conditions or
limitations as the Committee may establish; provided however,
the Committee may not delegate any authority to grant Awards to
a Director.
3.4 Decisions Binding. All
determinations and decisions made by the Committee pursuant to
the provisions of this Plan and all related orders and
resolutions of the Committee shall be final, conclusive and
binding on
A-5
APPENDIX A
all persons concerned, including the Company, its stockholders,
Officers, Directors, Employees, Consultants, Participants and
their estates and beneficiaries.
ARTICLE 4
Shares Subject
to this Plan
4.1 Number of Shares Available for Grants
of Awards. Subject to adjustment as provided
in Section 4.3 hereof, there is reserved for issuance of
Awards under this Plan ten million (10,000,000) Shares. Shares
subject to Awards under this Plan that are cancelled, forfeited,
terminated or expire unexercised, shall immediately become
available for the granting of Awards under this Plan.
Additionally, the Committee may from time to time adopt and
observe such procedures concerning the counting of Shares
against this Plan maximum as it may deem appropriate.
4.2 Limits on Grants in Any Fiscal
Year. The following rules (Award
Limitations) shall apply to grants of Awards under this
Plan:
(a) Options. The maximum aggregate number
of Shares issuable pursuant to Awards of Options that may be
granted in any one Fiscal Year of the Company to any one
Participant shall be one million two hundred thousand
(1,200,000).
(b) Restricted Stock and Restricted Stock
Units. The maximum aggregate number of Shares
subject to Awards of Restricted Stock and RSUs that may be
granted in any one Fiscal Year to any one Participant shall be
one million two hundred thousand (1,200,000).
(c) Performance Shares. The maximum
aggregate number of Shares subject to Awards of Performance
Shares that may be granted in any one Fiscal Year to any one
Participant shall be one million two hundred thousand
(1,200,000).
(d) Performance Units. The maximum
aggregate cash payout with respect to Performance Units granted
in any one Fiscal Year to any one Participant shall be six
million dollars, with such cash value determined as of the date
of each grant.
4.3 Adjustments in Authorized
Shares. The existence of outstanding Awards
shall not affect in any manner the right or power of the Company
or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the
capital stock of the Company or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures,
preferred or prior preference stock (whether or not such issue
is prior to, on a parity with or junior to the Shares) or the
dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business or any
other corporate act or proceeding of any kind, whether or not of
a character similar to that of the acts or proceedings
enumerated above.
If there shall be any change in the Shares of the Company or the
capitalization of the Company through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split,
reverse stock split,
split-up,
spin-off, combination of shares, exchange of shares, dividend in
kind or other like change in capital structure or distribution
(other than normal cash dividends) to stockholders of the
Company, the Committee, in its sole discretion, in order to
prevent dilution or enlargement of Participants rights
under this Plan, shall adjust, in such manner as it deems
equitable, as applicable, the number and kind of Shares that may
be granted as Awards under this Plan, the number and kind of
Shares subject to outstanding Awards, the exercise or other
price applicable to outstanding Awards, the Awards Limitations,
the Fair Market Value of the Shares and other value
determinations applicable to outstanding Awards; provided,
however, that the number of Shares subject to any Award
shall always be a whole number. In the event of a corporate
merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation, the Committee shall
be authorized, in its sole discretion, to: (a) grant or
assume Awards by means of substitution of new Awards, as
appropriate, for previously granted Awards or to assume
previously granted Awards as part of such adjustment;
(b) make provision, prior to the transaction, for the
acceleration of the vesting and exercisability of, or lapse of
restrictions with respect to, Awards and the termination of
Options that remain unexercised at the time of such transaction;
(c) provide for the acceleration of the vesting and
exercisability of
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APPENDIX A
Options and the cancellation thereof in exchange for such
payment as the Committee, in its sole discretion, determines is
a reasonable approximation of the value thereof; (d) cancel
any Awards and direct the Company to deliver to the Participants
who are the holders of such Awards cash in an amount that the
Committee shall determine in its sole discretion is equal to the
fair market value of such Awards as of the date of such event,
which, in the case of any Option, shall be the amount equal to
the excess of the Fair Market Value of a Share as of such date
over the per-share exercise price for such Option (for the
avoidance of doubt, if such exercise price is less than such
Fair Market Value, the Option may be canceled for no
consideration); or (e) cancel Awards that are Options and
give the Participants who are the holders of such Awards notice
and opportunity to exercise prior to such cancellation.
ARTICLE 5
Eligibility
and Participation
5.1 Eligibility. Persons
eligible to participate in this Plan include all Officers,
Directors, Employees and Consultants, as determined in the sole
discretion of the Committee.
5.2 Actual
Participation. Subject to the provisions of
this Plan, the Committee may, from time to time, select from all
Officers, Directors, Employees and Consultants, those to whom
Awards shall be granted and shall determine the nature and
amount of each Award. No Officer, Director, Employee or
Consultant shall have the right to be selected for Participation
in this Plan, or, having been so selected, to be selected to
receive a future award.
ARTICLE 6
Options
6.1 Grant of
Options. Subject to the terms and provisions
of this Plan, Options may be granted to Participants in such
number, upon such terms, at any time, and from time to time, as
shall be determined by the Committee; provided, however,
that ISOs may be awarded only to Employees. Subject to the
terms of this Plan, the Committee shall have discretion in
determining the number of Shares subject to Options granted to
each Participant.
6.2 Option Award
Agreement. Each Option grant shall be
evidenced by an Award Agreement that shall specify the Option
Price, the duration of the Option, the number of Shares to which
the Option pertains, and such other provisions as the Committee
shall determine that are not inconsistent with the terms of this
Plan. The Award Agreement also shall specify whether the Option
is intended to be an ISO or an NQSO (provided that, in the
absence of such specification, the Option shall be an NQSO).
6.3 Option Price. The Option
Price for each grant of an Option under this Plan shall be as
determined by the Committee; provided, however, that,
subject to any subsequent adjustment that may be made pursuant
to the provisions of Section 4.3 hereof, the Option Price
shall be not less than one hundred percent (100%) of the Fair
Market Value of a Share on the date the Option is granted.
Except as otherwise provided in Section 4.3 hereof, without
prior stockholder approval no repricing of Options awarded under
this Plan shall be permitted such that the terms of outstanding
Options may not be amended to reduce the Option Price and
further Options may not be replaced or regranted through
cancellation, in exchange for cash, other Awards, or if the
effect of the replacement or regrant would be to reduce the
Option Price of the Options or would constitute a repricing
under generally accepted accounting principles in the United
States (as applicable to the Companys public reporting).
6.4 Duration of
Options. Subject to any earlier expiration
that may be effected pursuant to the provisions of
Section 4.3 hereof, each Option shall expire at such time
as the Committee shall determine at the time of grant;
provided, however, that an Option shall not be
exercisable later than the seventh (7th) anniversary date of its
grant.
6.5 Exercise of
Options. Options granted under this Plan
shall be exercisable at such times and be subject to such
restrictions and conditions as the Committee shall in each
instance approve, which need not be the same for each grant or
for each Participant.
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APPENDIX A
6.6 Payment. Any Option
granted under this Article 6 shall be exercised by the
delivery of a notice of exercise to the Company in the manner
prescribed in the related Award Agreement, setting forth the
number of Shares with respect to which the Option is to be
exercised, and either (i) accompanied by full payment of
the Option Price for the Shares issuable on such exercise or
(ii) exercised in a manner that is in accordance with
applicable law and the cashless exercise procedures
(if any) approved by the Committee involving a broker or dealer.
The Option Price upon exercise of any Option shall be payable to
the Company in full: (a) in cash; (b) by tendering
previously acquired Shares valued at their Fair Market Value per
Share at the time of exercise (provided that the Shares which
are tendered must have been held by the Participant for at least
six (6) months prior to their tender); (c) by a
combination of (a) and (b); or (d) any other method
approved by the Committee, in its sole discretion.
Subject to any governing rules or regulations, as soon as
practicable after receipt of a notification of exercise and full
payment, the Company shall deliver to the Participant, in the
Participants name, Share certificates in an appropriate
amount based upon the number of Shares purchased under the
Option.
6.7 Restrictions on Share
Transferability. The Committee may impose
such restrictions on any Shares acquired pursuant to the
exercise of an Option granted under this Plan as it may deem
advisable, including, without limitation, restrictions under
applicable U.S. federal securities laws, under the
requirements of any stock exchange or market upon which such
Shares are then listed
and/or
traded, and under any blue sky or state securities laws
applicable to such Shares.
6.8 Termination of Employment, Service or
Directorship. Each Option Award Agreement
shall set forth the extent to which the Participant shall have
the right to exercise the Option following termination of the
Participants employment, service or directorship with the
Company
and/or its
Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in each Award
Agreement entered into with a Participant with respect to an
Option Award, need not be uniform among all Options granted
pursuant to this Article 6 and may reflect distinctions
based on the reasons for termination.
6.9 Transferability of Options.
(a) Incentive Stock Options. No ISO
granted under this Plan may be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or
Title I of ERISA, or the regulations thereunder. Further,
all ISOs granted to a Participant under this Plan shall be
exercisable during his or her lifetime only by such Participant.
(b) Nonqualified Stock Options. Except as
otherwise provided in a Participants Award Agreement,
NQSOs granted under this Plan may not be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by
the Code or Title I of ERISA, or the regulations thereunder.
Further, except as otherwise provided in a Participants
Award Agreement, all NQSOs granted to a Participant under this
Plan shall be exercisable during his or her lifetime only by
such Participant.
ARTICLE 7
Restricted
Stock
7.1 Grant of Restricted
Stock. Subject to the terms and provisions of
this Plan, the Committee at any time, and from time to time, may
grant Shares as Restricted Stock (Shares of Restricted
Stock) to Participants in such amounts as the Committee
shall determine.
7.2 Restricted Stock Award
Agreement. Each Award of Restricted Stock
shall be evidenced by an Award Agreement that shall specify the
Period of Restriction, the number of Shares of Restricted Stock
granted, and such other provisions as the Committee shall
determine.
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APPENDIX A
7.3 Transferability. Except
as provided in the Participants related Award Agreement
and/or this
Article 7, the Shares of Restricted Stock granted to a
Participant under this Plan may not be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated until
the end of the applicable Period of Restriction established by
the Committee and specified in the related Award Agreement
entered into with that Participant, or upon earlier satisfaction
of any other conditions, as specified by the Committee in its
sole discretion and set forth in the Award Agreement. During the
applicable Period of Restriction, all rights with respect to the
Restricted Stock granted to a Participant under this Plan shall
be available during his or her lifetime only to such
Participant. Any attempted assignment of Restricted Stock in
violation of this Section 7.3 shall be null and void.
7.4 Other Restrictions. The
Committee may impose such other conditions
and/or
restrictions on any Shares of Restricted Stock granted pursuant
to this Plan as it may deem advisable, including, without
limitation, a requirement that Participants pay a stipulated
purchase price for each Share of Restricted Stock, restrictions
based upon the achievement of specific performance goals,
time-based restrictions on vesting following the attainment of
the performance goals
and/or
restrictions under applicable U.S. federal or state
securities laws.
To the extent deemed appropriate by the Committee, the Company
may retain the certificates representing Shares of Restricted
Stock in the Companys possession until such time as all
conditions
and/or
restrictions applicable to such Shares have been satisfied or
have lapsed.
7.5 Removal of
Restrictions. Except as otherwise provided in
this Article 7, Shares of Restricted Stock covered by each
Restricted Stock Award made under this Plan shall become freely
transferable by the Participant after all conditions and
restrictions applicable to such Shares have been satisfied or
have lapsed.
7.6 Voting Rights. To the
extent permitted by the Committee or required by law,
Participants holding Shares of Restricted Stock granted
hereunder may exercise full voting rights with respect to those
Shares during the applicable Period of Restriction.
7.7 Dividends. During the
applicable Period of Restriction, Participants holding Shares of
Restricted Stock granted hereunder shall, unless the Committee
otherwise determines, be credited with cash dividends paid with
respect to the Shares, in a manner determined by the Committee
in its sole discretion. The Committee may apply any restrictions
to the dividends that it deems appropriate.
7.8 Termination of Employment, Service or
Directorship. Each Restricted Stock Award
Agreement shall set forth the extent to which the Participant
shall have the right to receive unvested Shares of Restricted
Stock following termination of the Participants
employment, service or directorship with the Company
and/or its
Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in each Award
Agreement entered into with a Participant with respect to Shares
of Restricted Stock, need not be uniform among all Shares of
Restricted Stock granted pursuant to this Article 7 and may
reflect distinctions based on the reasons for termination.
ARTICLE 8
Performance
Units and Performance Shares
8.1 Grant of Performance
Units/Shares. Subject to the terms of this
Plan, Performance Units and Performance Shares may be granted to
Participants in such amounts and upon such terms, and at any
time and from time to time, as shall be determined by the
Committee.
8.2 Value of Performance
Units/Shares. Each Performance Unit shall
have an initial value that is established by the Committee at
the time of grant. Each Performance Share shall have an initial
value equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date of grant. The Committee shall set
performance goals in its discretion that, depending on the
extent to which they are met, will determine the number
and/or value
of Performance Units/Shares which will be paid out to the
Participant.
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APPENDIX A
8.3 Earning of Performance
Units/Shares. Subject to the terms of this
Plan, after the applicable Performance Period has ended, the
holder of Performance Units/Shares shall be entitled to receive
payment of the number and value of Performance Units/Shares
earned by the Participant over the Performance Period, to be
determined as a function of the extent to which the
corresponding performance goals have been achieved.
8.4 Form and Timing of Payment of Performance
Units/Shares. Subject to the provisions of
Article 12 hereof, Payment of earned Performance
Units/Shares to a Participant shall be made no later than March
15 following the end of the calendar year in which such
Performance Units/Shares vest, or as soon as administratively
practicable thereafter if payment is delayed due to
unforeseeable events. Subject to the terms of this Plan, the
Committee, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash or in Shares (or in a
combination thereof) that have an aggregate Fair Market Value
equal to the value of the earned Performance Units/Shares at the
close of the applicable Performance Period. Any Shares issued or
transferred to a Participant for this purpose may be granted
subject to any restrictions that are deemed appropriate by the
Committee.
8.5 Termination of Employment, Service or
Directorship. Each Award Agreement providing
for a Performance Unit/Share shall set forth the extent to which
the Participant shall have the right to receive a payout of cash
or Shares with respect to unvested Performance Unit/Shares
following termination of the Participants employment,
service or directorship with the Company
and/or its
Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award
Agreement entered into with the Participant, need not be uniform
among all Awards of Performance Units/Shares granted pursuant to
this Article 8 and may reflect distinctions based on the
reasons for termination.
8.6 Transferability. Except
as otherwise provided in a Participants related Award
Agreement, Performance Units/Shares may not be sold,
transferred, pledged, assigned or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order
as defined by the Code or Title I of ERISA, or the
regulations thereunder. Further, except as otherwise provided in
a Participants related Award Agreement, a
Participants rights with respect to Performance
Units/Shares granted to that Participant under this Plan shall
be exercisable during the Participants lifetime only by
the Participant. Any attempted assignment of Performance
Units/Shares in violation of this Section 8.6 shall be null
and void.
ARTICLE 9
Restricted
Stock Units
9.1 Grant of RSUs. Subject
to the terms and provisions of this Plan, the Committee at any
time, and from time to time, may grant RSUs to eligible
Participants in such amounts as the Committee shall determine.
9.2 RSU Award
Agreement. Each RSU Award to a Participant
shall be evidenced by an RSU Award Agreement entered into with
that Participant, which shall specify the Vesting Period, the
number of RSUs granted, and such other provisions as the
Committee shall determine in its sole discretion.
9.3 Transferability. Except
as provided in a Participants related Award Agreement,
RSUs granted hereunder may not be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or
Title I of ERISA, or the regulations thereunder. Further,
except as otherwise provided in a Participants related
Award Agreement, a Participants rights with respect to an
RSU Award granted to that Participant under this Plan shall be
available during his or her lifetime only to such Participant.
Any attempted assignment of an RSU Award in violation of this
Section 9.3 shall be null and void.
9.4 Form and Timing of
Delivery. If a Participants RSU Award
Agreement provides for payment in cash, payment equal to the
Fair Market Value of the Shares underlying the RSU Award,
calculated as of the last day of the applicable Vesting Period,
shall be made in a single lump-sum payment. If a
Participants RSU Award Agreement provides for payment in
Shares, the Shares underlying the RSU Award shall be delivered
to the Participant. Such payment of cash or Shares shall be made
no later than March 15 following the end of the calendar year
during which
A-10
APPENDIX A
the RSU Award vests, or as soon as practicable thereafter if
payment is delayed due to unforeseeable events. Such delivered
Shares shall be freely transferable by the Participant.
9.5 Voting Rights and
Dividends. During the applicable Vesting
Period, Participants holding RSUs shall not have voting rights
with respect to the Shares underlying such RSUs. During the
applicable Vesting Period, Participants holding RSUs granted
hereunder shall, unless the Committee otherwise determines, be
credited with dividend equivalents, in the form of cash or
additional RSUs (as determined by the Committee in its sole
discretion), if a cash dividend is paid with respect to the
Shares. The extent to which dividend equivalents shall be
credited shall be determined in the sole discretion of the
Committee. Such dividend equivalents shall be subject to a
Vesting Period equal to the remaining Vesting Period of the RSUs
with respect to which the dividend equivalents are paid.
9.6 Termination of Employment, Service or
Directorship. Each RSU Award Agreement shall
set forth the extent to which the applicable Participant shall
have the right to receive a payout of cash or Shares with
respect to unvested RSUs following termination of the
Participants employment, service or directorship with the
Company
and/or its
Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in each Award
Agreement entered into with a Participant with respect to RSUs,
need not be uniform among all RSUs granted pursuant to this
Article 9 and may reflect distinctions based on the reasons
for termination.
ARTICLE 10
Performance
Measures
10.1 Performance
Measures. Unless and until the Committee
proposes and shareholders approve a change in the general
performance measures set forth in this Article 10, the
attainment of which may determine the degree of payout
and/or
vesting with respect to Awards which are designed to qualify for
the Performance-Based Exception, the performance measure(s) to
be used for purposes of such grants shall be chosen from among
the following alternatives:
(a) Cash Flow;
(b) Cash Flow Return on Capital;
(c) Cash Flow Return on Assets;
(d) Cash Flow Return on Equity;
(e) Net Income;
(f) Return on Capital
(g) Return on Invested Capital;
(h) Return on Assets;
(i) Return on Equity;
(j) Share Price;
(k) Earnings Per Share (basic or diluted);
(l) Earnings Before Interest and Taxes;
(m) Earnings Before Interest, Taxes, Depreciation and
Amortization;
(n) Total and Relative Shareholder Return;
(o) Operating Income;
(p) Return on Net Assets;
(q) Gross or Operating Margins;
A-11
APPENDIX A
(r) Safety; and
(s) Economic Value Added or EVA.
Subject to the terms of this Plan, each of these measures shall
be defined by the Committee on a consolidated, segment, group,
subsidiary or division basis or in comparison to one or more
peer group companies or indices, and may include or exclude
specified research and development expenses, acquisition costs,
operating expenses from acquired businesses or corporate
transactions, and such other unusual or extraordinary items as
defined by the Committee in its sole discretion.
10.2 Adjustments. The
Committee shall have the sole discretion to adjust
determinations of the degree of attainment of the
pre-established performance goals; provided, however, that,
except in connection with a Change in Control, an Award that is
designed to qualify for the Performance-Based Exception may not
be adjusted in a manner that would result in the Award no longer
qualifying for the Performance-Based Exception. The Committee
shall retain the discretion to adjust such Awards downward.
10.3 Compliance with Code
Section 162(m). In the event that
applicable tax
and/or
securities laws or regulations change to permit Committee
discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee
shall have sole discretion to make such changes without
obtaining shareholder approval; provided that after such change
or changes the Award continues to qualify for the
Performance-Based Exception. In addition, in the event that the
Committee determines that it is advisable to grant Awards which
shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the
requirements of Code Section 162(m) and the regulations
issued thereunder. Any performance-based Awards granted to
Officers or Directors that are not intended to qualify as
qualified performance-based compensation under
Section 162(m) of the Code shall be based on achievement of
such performance measure(s) and be subject to such terms,
conditions and restrictions as the Committee shall determine.
ARTICLE 11
Beneficiary
Designation
Each Participant under this Plan may, from time to time, name
any beneficiary or beneficiaries (who may be named contingently
or successively) to whom any benefit under this Plan is to be
paid in case of the Participants death before he or she
receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be
in a form prescribed by the Company, and will be effective only
when filed by the Participant in writing with the Company during
the Participants lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participants
death shall be paid to the Participants estate.
ARTICLE 12
Deferrals
The Committee may, in its sole discretion, permit selected
Participants to elect to defer payment of some or all types of
Awards, or may provide for the deferral of an Award in an Award
Agreement; provided, however, that the timing of any such
election and payment of any such deferral shall be specified in
the Award Agreement and shall conform to the requirements of
Code Section 409A(a)(2), (3) and (4) and the
regulations and rulings issued thereunder. Any deferred payment,
whether elected by a Participant or specified in an Award
Agreement or by the Committee, may be forfeited if and to the
extent that the applicable Award Agreement so provides.
A-12
APPENDIX A
ARTICLE 13
Rights of
Employees, Directors and Consultants
13.1 Employment or
Service. Nothing in this Plan shall interfere
with or limit in any way the right of the Company to terminate
any Participants employment or service at any time, nor
confer upon any Participant any right to continue in the employ
or service of the Company.
13.2 No Contract of
Employment. Neither an Award nor any benefits
arising under this Plan shall constitute part of a
Participants employment contract with the Company or any
Subsidiary, and accordingly, subject to the provisions of
Article 15 hereof, this Plan and the benefits hereunder may
be terminated at any time in the sole and exclusive discretion
of the Board without giving rise to liability on the part of the
Company or any Subsidiary for severance payments.
13.3 Transfers Between Participating
Entities. For purposes of this Plan, a
transfer of a Participants employment between the Company
and a Subsidiary, or between Subsidiaries, shall not be deemed
to be a termination of employment. Upon such a transfer, the
Committee may make such adjustments to outstanding Awards as it
deems appropriate to reflect the change in reporting
relationships.
ARTICLE 14
Change in
Control
The treatment of outstanding Awards upon the occurrence of a
Change in Control, unless otherwise specifically prohibited
under applicable laws, or by the rules and regulations of any
governing governmental agencies or national securities exchanges
shall be determined in the sole discretion of the Committee and
shall be described in the Award Agreements and need not be
uniform among all Participants or Awards granted pursuant to
this Plan.
ARTICLE 15
Amendment,
Modification and Termination
15.1 Amendment, Modification, and
Termination. The Board may at any time and
from time to time, alter, amend, suspend or terminate this Plan
in whole or in part, provided, however, that shareholder
approval shall be required for any amendment that materially
alters the terms of this Plan or is otherwise required by
applicable legal requirements. No amendment or alteration that
would adversely affect the rights of any Participant under any
Award previously granted to such Participant shall be made
without the consent of such Participant. Notwithstanding
anything in this Plan to the contrary, Participant consent shall
not be required for any amendment to Article 19 hereof that
is deemed necessary or appropriate by the Company to ensure
compliance with the Dodd-Frank Wall Street Reform and Consumer
Protection Act or Section 10D of the Exchange Act, or any
rules or regulations promulgated thereunder.
15.2 Adjustment of Awards Upon the Occurrence
of Certain Unusual or Nonrecurring
Events. Subject to Sections 10.2 and
10.3, the Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including,
without limitation, the events described in Section 4.3
hereof) affecting the Company or the financial statements of the
Company or in recognition of changes in applicable laws,
regulations or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to
prevent unintended dilution or enlargement of the benefits or
potential benefits intended to be made available under this Plan.
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APPENDIX A
ARTICLE 16
Withholding
The Company shall have the right to deduct applicable taxes from
any Award payment and withhold, at the time of delivery or
vesting of cash or Shares under this Plan, or at the time
applicable law otherwise requires, an appropriate amount of cash
or number of Shares or a combination thereof for payment of
taxes required by law or to take such other action as may be
necessary in the opinion of the Company to satisfy all
obligations for withholding of such taxes. The Committee may
permit withholding to be satisfied by the transfer to the
Company of Shares theretofore owned by the holder of the Award
with respect to which withholding is required. If Shares are
used to satisfy tax withholding, such Shares shall be valued at
their Fair Market Value on the date when the tax withholding is
required to be made.
ARTICLE 17
Indemnification
Each person who is or shall have been a member of the Committee,
or of the Board, or an officer of the Company to whom the
Committee has delegated authority in accordance with
Article 3 hereof, shall be indemnified and held harmless by
the Company against and from: (a) any loss, cost,
liability, or expense that may be imposed upon or reasonable
incurred by him or her in connection with or resulting from any
claim, action, suit or proceeding to which he or she may be a
party or in which he or she may be involved by reason of any
action taken or failure to act under this Plan, except for any
such action or failure to act that constitutes willful
misconduct on the part of such person or as to which any
applicable statute prohibits the Company from providing
indemnification; and (b) any and all amounts paid by him or
her in settlement of any claim, action, suit or proceeding as to
which indemnification is provided pursuant to clause (a) of
this sentence, with the Companys approval, or paid by him
or her in satisfaction of any judgment or award in any such
action, suit or proceeding against him or her, provided he or
she shall give the Company an opportunity, at its own expense,
to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf.
The foregoing right of indemnification shall be in addition to
any other rights of indemnification to which such persons may be
entitled under the Companys Articles of Incorporation or
Amended and Restated By-Laws (each, as amended from time to
time), as a matter of law, or otherwise.
ARTICLE 18
Successors
All obligations of the Company under this Plan with respect to
Awards granted hereunder shall be binding on any successor to
the Company, whether the existence of such successor is the
direct or indirect result of a merger, consolidation, purchase
of all or substantially all of the business
and/or
assets of the Company or other transaction.
ARTICLE 19
Clawback
Provisions
The ability of the Company
and/or the
Board to forfeit Awards granted or recover Awards paid under
this Plan, unless otherwise specifically prohibited under
applicable laws, or by the rules and regulations of any
governing governmental agencies or national securities
exchanges, may be determined in the sole discretion of the
Committee and described in the Award Agreements and need not be
uniform among all Participants or Awards granted pursuant to
this Plan.
A-14
APPENDIX A
ARTICLE 20
General
Provisions
20.1 Restrictions and
Legends. No Shares or other form of payment
shall be issued or transferred with respect to any Award unless
the Company shall be satisfied that such issuance or transfer
will be in compliance with applicable U.S. federal and
state securities laws. The Committee may require each person
receiving Shares pursuant to an Award under this Plan to
represent to and agree with the Company in writing that the
Participant is acquiring the Shares for investment without a
view to distribution thereof. Any certificates evidencing Shares
delivered under this Plan (to the extent that such Shares are so
evidenced) may be subject to such stop-transfer orders and other
restrictions as the Committee may deem advisable under the
rules, regulations and other requirements of the Securities and
Exchange Commission, any securities exchange or transaction
reporting system upon which the Shares are then listed or to
which they are admitted for quotation and any applicable
U.S. federal or state securities law. In addition to any
other legend required by this Plan, any certificates for such
Shares may include any legend that the Committee deems
appropriate to reflect any restrictions on transfer of such
Shares.
20.2 Gender and
Number. Except where otherwise indicated by
the context, any masculine term used herein also shall include
the feminine, the plural shall include the singular and the
singular shall include the plural.
20.3 Severability. If any
provision of this Plan shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the
remaining parts of this Plan, and this Plan shall be construed
and enforced as if the illegal or invalid provision had not been
included.
20.4 Requirements of
Law. The granting of Awards and the issuance
of Shares under this Plan shall be subject to all applicable
laws, rules and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be
required.
20.5 Uncertificated
Shares. To the extent that this Plan provides
for issuance of certificates to reflect the transfer of Shares,
the transfer of such Shares may be effected on a noncertificated
basis, to the extent not prohibited by applicable law or the
rules of any stock exchange or transaction reporting system on
which the Shares are listed or to which the Shares are admitted
for quotation.
20.6 Unfunded Plan. Insofar
as this Plan provides for Awards of cash, Shares or rights
thereto, it will be unfunded. Although the Company may establish
bookkeeping accounts with respect to Participants who are
entitled to cash, Shares or rights thereto under this Plan, it
will use any such accounts merely as a bookkeeping convenience.
Participants shall have no right, title or interest whatsoever
in or to any investments that the Company may make to aid it in
meeting its obligations under this Plan. Nothing contained in
this Plan, and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company and any Participant,
beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from
the Company under this Plan, such right shall be no greater than
the right of an unsecured general creditor of the Company. All
payments to be made hereunder shall be paid from the general
funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure
payment of such amounts, except as expressly set forth in this
Plan. This Plan is not intended to be subject to ERISA.
20.7 No Fractional
Shares. No fractional Shares shall be issued
or delivered pursuant to this Plan or any Award. The Committee
shall determine whether cash, Awards or other property shall be
delivered or paid in lieu of fractional Shares or whether such
fractional Shares or any rights thereto shall be forfeited or
otherwise eliminated.
20.8 Governing Law. This
Plan and all determinations made and actions taken pursuant
hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United
States, will be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to any
conflicts of laws provisions thereof that would result in the
application of the laws of any other jurisdiction.
A-15
APPENDIX
B
THE
BABCOCK & WILCOX COMPANY
THE EXECUTIVE INCENTIVE COMPENSATION PLAN
AMENDED & RESTATED AS OF FEBRUARY 22, 2011
APPENDIX
B
Table of
Contents
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ARTICLE 1 PURPOSE
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B-1
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ARTICLE 2 DEFINITIONS
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B-1
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(a)
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Affiliated Company
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B-1
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(b)
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Award Opportunity
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B-1
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(c)
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Board
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B-1
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(d)
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Code
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B-1
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(e)
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Committee
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B-1
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(f)
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Company
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B-1
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(g)
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Consolidated Balance Sheet
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B-1
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(h)
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Consolidated Financial Statements
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B-1
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(i)
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Covered Employee
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B-1
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(j)
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Economic Value Added
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B-1
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(k)
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Employee
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B-1
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(l)
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Equity
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B-1
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(m)
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Final Award
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B-1
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(n)
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Participant
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B-1
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(o)
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Plan
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B-1
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(p)
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Qualified Performance-Based Award
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B-2
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(q)
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Salary
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B-2
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(r)
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Subsidiary
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B-2
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(s)
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Target Incentive Award
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B-2
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ARTICLE 3 UNFUNDED STATUS OF THE PLAN
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B-2
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ARTICLE 4 ADMINISTRATION OF THE PLAN
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B-2
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ARTICLE 5 ELIGIBILITY AND PARTICIPATION
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B-2
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ARTICLE 6 AWARD DETERMINATION
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B-2
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(a)
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Performance Measures and Performance Goals
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B-2
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(b)
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Award Opportunities
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B-3
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(c)
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Adjustment of Performance Goals and Award Opportunities
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B-3
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(d)
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Final Award Determinations
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B-3
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(e)
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Award Limit
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B-3
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(f)
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Threshold Levels of Performance
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B-3
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ARTICLE 7 PAYMENT OF AWARDS
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B-3
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ARTICLE 8 QUALIFIED PERFORMANCE-BASED
AWARDS
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B-4
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(a)
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Applicability of Article 8
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B-4
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(b)
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Establishment of Award Opportunities
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B-4
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(c)
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Components of Award Opportunities
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B-4
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(d)
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No Adjustment of Performance Goals or Award Opportunities
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B-4
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ARTICLE 9 LIMITATIONS
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B-4
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ARTICLE 10 CLAWBACK PROVISIONS
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B-5
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ARTICLE 11 AMENDMENT, SUSPENSION,
TERMINATION, OR ALTERATION OF THE PLAN
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B-5
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ARTICLE 12 COMMENCEMENT OF AWARDS
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B-5
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B-i
APPENDIX
B
Article 1
Purpose
The purpose of the plan is to make provision for the payment of
supplemental compensation to managerial and other key Employees
who contribute materially to the success of the Company or one
or more of its Subsidiary or Affiliated Companies, thereby
affording them an incentive for and a means of participating in
that success.
Article 2
Definitions
For the purpose of the Plan, the following definitions shall be
applicable:
(a) Affiliated Company. Any corporation,
joint venture, or other legal entity in which The
Babcock & Wilcox Company , directly or indirectly,
through one or more Subsidiaries, owns less than fifty percent
(50%) but at least twenty percent (20%) of its voting control.
(b) Award Opportunity. The various levels
of incentive award payouts which a Participant may earn under
the Plan, as established by the Committee pursuant to
Sections 6(a), 6(b) and 8(b) herein.
(c) Board. The Board of Directors of The
Babcock & Wilcox Company.
(d) Code. Code means the
Internal Revenue Code of 1986, as amended.
(e) Committee. Committee
means the Compensation Committee of the Board of Directors. The
Committee shall be constituted so as to permit the Program to
comply with the exemptive provisions of Section 16 of the
Securities Exchange Act of 1934, and the rules promulgated
thereunder, and the rules and regulations approved by national
securities exchanges.
(f) Company. Company means
The Babcock & Wilcox Company, a Delaware corporation
(or any successor thereto).
(g) Consolidated Balance Sheet With respect to each
fiscal year of the Company, the Consolidated Balance Sheet
included in the Companys Consolidated Financial Statements
for such year, as certified by the Companys independent
public accountants, and set forth in the Companys Annual
Report on
Form 10-K
filed with the Securities and Exchange Commission.
(h) Consolidated Financial
Statements. With respect to each fiscal year of
the Company, the Companys Consolidated Balance Sheet and
Consolidated Statement of Income and Retained Earnings for such
year.
(i) Covered Employee. A Participant who
is one of the group of covered employees, as
defined in the Regulations promulgated under Code
Section 162(m)(3) or who the Committee determines is likely
to become one of the group of covered employees
as defined under Code Section 162(m).
(j) Economic Value Added. Economic Value
Added, with respect to each fiscal year of the Company, is
defined as net operating profit after tax minus the product of
capital and the cost of capital.
(k) Employee. Any person who is regularly
employed by the Company or any of its Subsidiary or Affiliated
Companies on a full-time salaried basis, including any Employee
who also is an officer or director of the Company or of any of
its Subsidiary or Affiliated Companies.
(l) Equity. Total stockholders
equity as reported in the Companys Consolidated Balance
Sheet.
(m) Final Award. The actual award earned
during a plan year by a Participant, as determined by the
Committee following the end of a plan year; provided Participant
is still an Employee when payment is to be made pursuant to
Article 7 herein.
(n) Participant. An Employee who has
received an Award Opportunity.
(o) Plan. The Executive Incentive
Compensation Plan of The Babcock & Wilcox Company.
B-1
APPENDIX
B
(p) Qualified Performance-Based Award. An
award or portion of an award granted to a Covered Employee that
is intended to satisfy the requirements for qualified
performance-based compensation under Code
Section 162(m).
(q) Salary. The annual basic compensation
earned during a plan year (including any portion which may have
been deferred).
(r) Subsidiary. Any corporation, joint
venture or other legal entity in which the Company, directly or
indirectly, owns more than fifty percent (50%) of its voting
control.
(s) Target Incentive Award. The award to
be paid to Participants when the Company meets
targeted performance results, as established by the
Committee.
Article 3
Unfunded Status of the Plan
(a) Each Final Award shall be paid from the general funds
of the Participants employer. The entire expense of
administering the Plan shall be borne by the Company. .
(b) No special or separate funds shall be established, or
other segregation of assets made to execute payment of Final
Awards. No Employee, or other person, shall have, under any
circumstances, any interest whatsoever, vested or contingent, in
any particular property or asset of the Company or any
Subsidiary or Affiliated Company by virtue of any Final Award.
Article 4
Administration of the Plan
Full power and authority to construe, interpret and administer
the Plan shall be vested in the Committee. A determination by
the Committee in carrying out or administering the Plan shall be
final and binding for all purposes and upon all interested
persons, their heirs, and personal representative(s). Except as
prohibited by applicable law or limited by Article 8
herein, the Committee may delegate to the Chief Executive
Officer and to executive officers of the Company its duties
under this Plan pursuant to such conditions or limitations as
the Committee may establish.
Article 5
Eligibility and Participation
All Employees are eligible for participation in the Plan. Actual
participation in the Plan shall be based upon recommendations by
the Chief Executive Officer of the Company, subject to approval
by the Committee. The Chief Executive Officer of the Company
shall automatically participate in the Plan.
Article 6
Award Determination
(a) Performance Measures and Performance Goals.
For each plan year, the Committee shall select performance
measures and shall establish performance goals for that plan
year. Except as provided in Article 8 herein, the
performance measures may be based on any combination of
corporate, segment, group, subsidiary, divisional,
and/or
individual goals.
For each plan year, the Committee shall establish ranges of
performance goals which will correspond to various levels of
Award Opportunities. Each performance goal range shall include a
level of performance at which one hundred percent (100%) of the
Target Incentive Award shall be earned. In addition, each range
shall include levels of performance above and below the one
hundred percent (100%) performance level.
After the performance goals are established, the Committee will
align the achievement of the performance goals with the Award
Opportunities (as described in Article 6(b) herein), such
that the level of achievement of the pre-established performance
goals at the end of the plan year will determine the Final
Awards. Except as provided in
B-2
APPENDIX
B
Article 8 herein, the Committee shall have the authority to
exercise subjective discretion in the determination of Final
Awards, and the authority to delegate the ability to exercise
subjective discretion in this respect.
(b) Award Opportunities.
For each plan year, the Committee shall establish, in writing,
Award Opportunities which correspond to various levels of
achievement of the pre-established performance goals. The
established Award Opportunities shall vary in relation to the
job classification of each Participant.
(c) Adjustment of Performance Goals and Award
Opportunities.
Once established, performance goals normally shall not be
changed during the plan year. However, except as provided in
Article 8 herein, if the Committee determines that external
changes or other unanticipated business conditions have
materially affected the fairness of the goals, then the
Committee may approve appropriate adjustments to the performance
goals (either up or down) during the plan year as such goals
apply to the Award Opportunities of specified Participants. In
addition, the Committee shall have the authority to reduce or
eliminate the Final Award determinations, based upon any
objective or subjective criteria it deems appropriate.
Notwithstanding any other provision of this Plan, in the event
of any change in Corporate capitalization, such as a stock
split, or a corporate transaction, such as any merger,
consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any
reorganization (whether or not such reorganization comes within
the definition of such term in Code Section 368), or any
partial or complete liquidation of the Company, an adjustment
shall be made in the Award Opportunities
and/or the
performance measures or performance goals related to
then-current performance periods, as may be determined to be
appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights;
provided, however, that subject to Article 8 herein, no
such adjustment shall be made to a Qualified Performance-Based
Award where such action would cause the award to no longer
qualify for the exception for qualified
performance-based compensation under Code
Section 162(m).
(d) Final Award Determinations.
At the end of each plan year, Final Awards shall be computed for
each Participant as determined by the Committee. Subject to the
terms of Article 8 herein, Final Award amounts may vary
above or below the Target Incentive Award, based on the level of
achievement of the pre-established corporate, segment, group,
divisional,
and/or
individual performance goals.
(e) Award Limit.
The Committee may establish guidelines governing the maximum
Final Awards that may be earned by Participants (either in the
aggregate, by Employee class, or among individual Participants)
in each plan year. The guidelines may be expressed as a
percentage of goals or financial measures, or such other
measures as the Committee shall from time to time determine;
provided, however, that the maximum payout with respect to a
Final Award payable to any one Participant in connection with
performance in any one plan year shall be three million dollars
($3,000,000).
(f) Threshold Levels of Performance.
The Committee may establish minimum levels of performance goal
achievement, below which no payouts of Final Awards shall be
made to any Participant.
Article 7
Payment of Awards
Each and every Final Award shall be payable in a lump sum no
later than the March 15 following the end of the Plan year
during which the award is earned, or as soon as administratively
practicable thereafter in the event payment is delayed due to
unforeseeable events.
B-3
APPENDIX
B
Article 8
Qualified Performance-Based Awards
(a) Applicability of Article 8.
The provisions of this Article 8 shall apply only to
Qualified Performance-Based Awards. Qualified Performance-Based
Awards include only those awards that are designated by the
Committee as Qualified Performance-Based Awards. In the event of
any inconsistencies between this Article 8 and the other
Plan provisions as they pertain to Qualified Performance-Based
Awards, the provisions of this Article 8 shall control.
(b) Establishment of Award Opportunities.
Except as provided for by the Committee at the time a Qualified
Performance Based Award is made, Qualified Performance-Based
Awards shall be established as a function of the Covered
Employees base Salary. As specified by the Committee at
the time the Qualified Performance-Based Award is made, base
Salary for this purpose may be stated as a percentage of the
base Salary of a Covered Employee at the time the performance
measures are established, at the time the Final Award is paid or
during the plan year. For each plan year, the Committee shall
establish, in writing, various levels of Final Awards which will
be paid with respect to specified levels of attainment of the
pre-established performance goals.
(c) Components of Award Opportunities.
Each Qualified Performance-Based Award shall be based on:
(a) the Covered Employees Target Incentive Award;
(b) the potential Final Awards corresponding to various
levels of achievement of the pre-established performance goals,
as established by the Committee; and (c) Company, segment,
group, subsidiary or division performance in relation to the
pre-established performance goals. Performance measures which
may serve as determinants of Qualified Performance-Based Awards
shall be limited to Cash Flow, Cash Flow Return on Capital, Cash
Flow Return on Assets, Cash Flow Return on Equity, Earnings Per
Share (basic or diluted), Net Income, Operating Income, Return
on Assets, Return on Capital, Return on Equity, Return on
Invested Capital, Safety, Share Price, Total and Relative
Shareholder Return and Economic Value Added. At the time the
performance measures are established, the Committee, in a manner
consistent with Code Section 162(m), may specify that such
performance measures shall be adjusted to exclude any negative
impact caused by research and development expenses, acquisition
costs, operating expenses from acquired businesses or corporate
transactions, changes in accounting principles and such other
unusual, nonrecurring or extraordinary items specified by the
Committee in its sole discretion. The Committee shall have the
right through discretionary downward adjustments to exclude the
positive impact of the aforementioned items and occurrences.
(d) No Adjustment of Performance Goals or Award
Opportunities.
In the case of Qualified Performance-Based Awards, each Covered
Employees Final Award shall be based exclusively on the
Award Opportunity levels established by the Committee at the
time the Qualified Performance-Based Award is made. In addition,
performance goals shall not be changed following their
establishment where such action would cause the award to no
longer qualify for the exception for qualified
performance-based compensation under Code
Section 162(m), and no payout shall be made when the
minimum performance goals are not met or exceeded. The
Committee, however, shall have the discretion to decrease or
eliminate the amount of the Final Award otherwise payable on
account of a Qualified Performance-Based Award. Notwithstanding
the above, in the event that changes in the tax law are made to
Code Section 162(m) to permit greater flexibility with
respect to any Qualified Performance-Based Award available under
the Plan, the Committee, subject to Article 11, may make
such adjustments it deems appropriate, provided that after such
adjustment the award would continue to satisfy the requirement
for qualified performance-based compensation
under Code Section 162(m).
Article 9
Limitations
(a) No person shall at any time have any right to a payment
hereunder for any fiscal year, and no person shall have
authority to enter into an agreement for the making of an Award
Opportunity or payment of a Final Award or to make any
representation or guarantee with respect thereto.
B-4
APPENDIX
B
(b) An employee receiving an Award Opportunity shall have
no rights in respect of such Award Opportunity, except the right
to receive payments, subject to the conditions herein, of such
Award Opportunity, which right may not be assigned or
transferred except by will or by the laws of descent and
distribution.
(c) Neither the action of the Company in establishing the
Plan, nor any action taken by the Committee under the Plan, nor
any provision of the Plan shall be construed as giving to any
person the right to be retained in the employ of the Company or
any of its Subsidiary or Affiliated Companies.
Article 10
Clawback Provisions
(a) For any Award Opportunity established under this Plan
on or after February 22, 2011, in the event that the
Company is required to prepare an accounting restatement due to
the material noncompliance of the Company with any financial
reporting requirement under the U.S. federal securities
laws as a result of fraud (a Restatement), the
Company will have the right to recover from each current or
former Participant who the Board reasonably determines knowingly
engaged in the fraud (the Subject Participant)
who earned a Final Award during the three-year period preceding
the date on which the Board or the Company, as applicable,
determines the Company is required to prepare the Restatement
(the Three-Year Period) the amount of such
Final Award in excess of what would have been earned by the
current or former Subject Participant under the Restatement.
(b) In the event a Restatement is required, the Board,
based upon a recommendation by the Committee, will
(1) review each current and former Subject
Participants Final Awards earned under this Plan (for
Award Opportunities established under this Plan on or after
February 22, 2011) during the Three-Year Period and
(2) in accordance with Article 10 hereof, with respect
to each current and former Subject Participant, will take
reasonable action to seek recovery of the amount of such Final
Awards in excess of what would have been earned by the current
or former Subject Participant under the Restatement (but in no
event more than the total amount of such Awards), as such excess
amount is reasonably determined by the Board, in compliance with
Section 409A of the Code. There shall be no duplication of
recovery under Article 10 hereof and any of 15 U.S.C.
Section 7243 (Section 304 of The Sarbanes-Oxley Act of
2002) and Section 10D of the Securities Exchange Act
of 1934 (the Exchange Act).
Article 11
Amendment, Suspension, Termination, or Alteration of the
Plan
The Board may, at any time or from time to time, amend, suspend,
terminate or alter the Plan, in whole or in part, but it may not
thereby affect adversely rights of Participants, their spouses,
children, and personal representative(s) with respect to Final
Awards previously made. Notwithstanding anything in this Plan to
the contrary, the Board may make any amendment to
Article 10 hereof that is deemed necessary or appropriate
by the Company to ensure compliance with the Dodd-Frank Wall
Street Reform and Consumer Protection Act or Section 10D of
the Exchange Act, or any rules or regulations promulgated
thereunder.
Article 12
Commencement of Awards
The Companys fiscal year ending December 31, 2010
shall be the first fiscal year with respect to which Award
Opportunities may be made under the Plan.
B-5
THE BABCOCK & WILCOX COMPANY 13024 BALLANTYNE CORPORATE PLACE, SUITE 700 CHARLOTTE, NORTH
CAROLINA 28277 VOTE BY INTERNET www.proxyvote.com Use the Internet to transmit your voting
instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on May 11,
2011 (May 9, 2011 for participants in B&Ws Thrift Plan). Have your proxy card in hand when you
access the web site and follow the instructions to obtain your records and to create an electronic
voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce
the costs incurred by our company in mailing proxy materials, you can consent to receiving all
future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet.
To sign up for electronic delivery, please follow the instructions above to vote using the Internet
and, when prompted, indicate that you agree to receive or access proxy materials electronically in
future years. VOTE BY PHONE 1-800-690-6903 Use any touch-tone telephone to transmit your voting
instructions up until 11:59 p.m. Eastern Time on May 11, 2011 (May 9, 2011 for participants in
B&Ws Thrift Plan). Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have
provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: M30619-P06253 KEEP THIS PORTION FOR YOUR
RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
THE BABCOCK & WILCOX COMPANY Vote on Directors The Board of Directors recommends you vote FOR the
nominees listed: 1. Election of Directors Nominees: 01) Brandon C. Bethards (Class I) 02) D.
Bradley McWilliams (Class I) 03) Anne R. Pramaggiore (Class I) 04) Larry L. Weyers (Class III) For
All Withhold All For All Except To withhold authority to vote for any individual nominee(s), mark
For AllExcept and write the number(s) of the nominee(s) for which you are withholding authority
on the line below. Vote on Proposals The Board of Directors recommends you vote FOR proposal 2. 2.
Advisory vote on executive compensation. For Against Abstain The Board of Directors recommends you
vote FOR proposals 4, 5 and 6. |
The Babcock & Wilcox Company Annual Meeting of Stockholders Thursday, May 12, 2011 at 9:30 a.m. The
Ballantyne Hotel The Ballantyne Ballroom 10000 Ballantyne Commons Parkway Charlotte, North Carolina
28277 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The
Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. IF YOU HAVE NOT
VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG PERFORATION, DETACH AND RETURN THE BOTTOM PORTION
IN THE ENCLOSED ENVELOPE M30620-P06253 THE BABCOCK & WILCOX COMPANY THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS ANNUAL MEETING OF STOCKHOLDERS Thursday, May 12, 2011 The
undersigned stockholder(s) hereby appoint(s) Brandon C. Bethards, James D. Canafax and Michael S.
Taff, or any of them, as proxies, each with the power to appoint his substitute, to represent and
to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of The
Babcock & Wilcox Company (B&W) that the stockholders(s) is/are entitled to vote at the Annual
Meeting of Stockholders to be held at 9:30 a.m. Eastern Time on May 12, 2011, at The Ballantyne
Hotel, The Ballantyne Ballroom, 10000 Ballantyne Commons Parkway, Charlotte, NC 28277, and any
adjournment or postponement thereof. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED
BY THE STOCKHOLDERS. IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
THE NOMINEES LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS, FOR PROPOSALS 2, 4, 5 AND 6 AND
VOTED FOR 1 YEAR ON PROPOSAL 3. ATTENTION PARTICIPANTS IN B&WS THRIFT PLAN: If you hold shares
of The Babcock & Wilcox Company common stock through The Thrift Plan for B&W Employees and
Participating Subsidiary and Affiliated Companies (the Thrift Plan), this proxy covers all shares
for which the undersigned has the right to give voting instructions to Vanguard Fiduciary Trust
Company (Vanguard), Trustee of the Thrift Plan. Your proxy must be received no later than 11:59
p.m. Eastern Time on May 9, 2011. Any shares of B&W common stock held in the Thrift Plan that are
not voted or for which Vanguard does not receive timely voting instructions, will be voted in the
same proportion as the shares for which Vanguard receives timely voting instructions for other
participants in the Thrift Plan. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING
THE ENCLOSED REPLY ENVELOPED Address Changes/Comments: (If you noted any Address Changes/Comments
above, please mark corresponding box on the reverse side.) CONTINUED AND TO BE SIGNED ON REVERSE
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