COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE EMPLOYMENT AGREEMENTS
No current NEO has an employment agreement. In January 2018, we gave notice of non-renewal of the last remaining executive employment agreement to Mr. Doug Mills, our former Chief Accounting Officer. Mr. Mills exercised his right to terminate the agreement effective April 15, 2018. Benefits paid to Mr. Mills under his employment agreement are further described below and in the 2018 Summary Compensation Table on page 33.
In connection with the separation of Mr. Mills and in accordance with the terms of his employment agreement, the Company paid Mr. Mills accrued vacation of $17,367, a pro-rated 2018 bonus calculated at $41,673, and an additional amount of $700,000 (representing one times the sum of base salary plus annual bonus calculated at a target level), plus interest on certain deferred amounts estimated at $3,800. Further, in settlement of long-term equity-based incentive awards, Mr. Mills received a gross distribution of 120,693 of the Companys ordinary shares with respect to RSUs. At the election of Mr. Mills, shares were withheld to satisfy the minimum tax withholding requirements. All payments and benefits were paid pursuant to the terms of the historical employment agreement and equity award agreements of Mr. Mills. Additionally, he received a separate cash payment in the amount of $525,000 in exchange for a general release of claims.
CHANGE IN CONTROL AGREEMENT
Each of our current NEOs, Mr. McCollum, Mr. Bausch, Mrs. Ibrahim, Mr. Blanchard and Mr. Fraser, as used in this section, the executives, are party to a Change in Control Agreement (the CIC Agreement) with the Company. The benefits provided to the executives in the event of a change of control of the Company are designed to allow them to assess takeover bids objectively and focus solely on the best interests of shareholders. In general, a change of control will occur if (i) another person becomes owner of 30% or more of the combined voting power of our stock, (ii) there is a change in a majority of the members of the then- incumbent Board, or (iii) our shareholders approve a merger with another entity in which our shareholders fail to own more than 50% of the combine voting power of the surviving entity.
The CIC Agreement has a term of two years, subject to automatic renewal for successive two-year periods if a change of control has not occurred, unless the Company provides notice of its intent not to renew the CIC Agreement. Under the terms of the CIC Agreement, if, during the term of the CIC Agreement, employment is terminated by the Company or its successor within six months preceding or at any time following a change of control of the Company, other than for cause, or by the executive for good reason, as those terms are defined in the agreement, they are entitled to receive:
a lump sum cash payment equal to two or three times the sum of the highest base salary received in the preceding three years and the annual incentive cash compensation averaged over the preceding three years;
any accrued salary, target annual incentive cash compensation for the year of termination and vacation pay, pro-rated to the date of termination;
continuation for two or three years of all dental and health benefits, provided they remain responsible for the monthly employee contribution; and
reasonable outplacement services upon request for a period of up to six months beginning with the first full month after termination.
Pursuant to the CIC Agreement, the executives are subject to a customary non-solicitation covenant that lasts during the period of employment and for one year thereafter.
Upon a change of control, the executives equity awards will vest, any applicable forfeiture restrictions will lapse and the multiplier for the PSUs will be 2x. We have agreed to pay legal fees and expenses reasonably incurred by the executives in any disputes regarding the change of control, provided that they agree to reimburse for those fees and expenses if they act in bad faith in connection with any dispute. Benefits potentially payable to the executives under CIC Agreements are further described under Estimate of Potential Payments upon Termination or Change of Control beginning on page 38.
EXECUTIVE SEVERANCE GUIDELINES, SEVERANCE AND TERMINATION BENEFITS
The Committee has adopted a framework for severance arrangements for corporate officers, which we refer to as our executive severance guidelines. These guidelines are designed to set consistent parameters for corporate officers who are terminated for reasons other than performance or cause, and include payments as follows:
Cash Amount (Salary Based): 12 to 18 months of base salary.
Cash Amount (EICP/Bonus Based): If terminated in the first half of any fiscal year, none; if terminated in second half of any fiscal year, a pro-rata bonus based on actual achievement may be part of the severance package at the discretion of the CEO.
Equity Amount: RSUs vesting in the 12 months following termination may be accelerated or cash in lieu may be provided, each at the discretion of the CEO. No action will be taken with respect to PSUs, which will be forfeited.
The only exception to our executive severance guidelines is Mr. McCollum. In the event he is terminated by the Company without cause or he leaves for good reason, each as defined in the CIC Agreements (see above), in lieu of payments under the above severance guidelines, he will receive cash in an amount equal to two times base salary and his remaining RSU inducement award (consisting of 411,334 RSUs) will vest.
The potential payments that each of our current NEOs would have received if a termination of employment had occurred on December 31, 2018, under their respective agreements, arrangements and the executive severance guidelines are set forth under the section entitled Estimate of Potential Payments Upon Termination or Change of Control beginning on page 38.
28 Weatherford International plc 2019 Proxy Statement