Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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(e) On March 16, 2020, the Compensation Committee of the Board of Directors (the “Committee”) of Tidewater Inc. (the “Company”) met to deliberate with its consultants regarding annual equity grants to the Company’s executive officers, including Quintin V. Kneen, the Company’s President and Chief Executive Officer.
At that time, substantial uncertainty was emerging in the offshore vessel industry due to the impacts of COVID-19 and the disagreement among the Organization of the Petroleum Exporting Countries and other large international producers on the merits of curtailing production to support a higher global price for oil. Because of this uncertainty, the Committee deferred action and instructed its consultants to re-envision long-term compensation, and for them to present potential program structures that appropriately incentivized management to embrace the significant challenges that now lay ahead of the industry while not unduly diluting existing stockholders.
On April 20, 2020 (the “Effective Date”), the Committee met again with its consultants to evaluate these new proposals for structuring annual equity grants.
After deliberation, the Committee determined that the previous day’s closing stock price of $5.32 was a short-term anomaly and inappropriate to use in the determination of long-term compensation. The Committee determined that the 60-trading day average of $10.99, which was 207% above the previous day’s closing price, was the best measure to use in the determination of long-term compensation. In addition, any stock options awarded would use an exercise price of 125% of the closing stock price on the date of grant (“Premium Priced Options”). Because the number of shares subject to these equity awards was calculated using a share price that was materially higher than the current trading value of the Company’s common stock, the accounting charge for these equity grants will be substantially lower than the target award value.
To determine the number of shares and options in Mr. Kneen’s award (his “2020 LTI Grant”), the Committee determined that his target award value of $2.5 million should be allocated 50% in the form of time-vested restricted stock units and 50% in the form of Premium Priced Options. As a result, 113,717 time-based restricted stock units were granted that will vest one-third per year over a three-year period, and 344,598 non-qualified Premium Priced Options were granted with an exercise price of $6.475 per share, which represents 125% of the closing price of a share of the Company’s common stock on the Effective Date ($5.18). These options, which have a ten-year term, also vest one-third per year over a three-year period.
The 2020 LTI Grant will be awarded under, and subject to all of the terms and conditions of, one of the Company’s existing equity plans and an award agreement (the “Agreement”). Vesting of any unvested portion of the 2020 LTI Grant will accelerate upon Mr. Kneen’s death or termination due to disability. In addition, as provided in Mr. Kneen’s change of control agreement, if his employment is terminated by the Company without “Cause” or by him with “Good Reason” within a two-year protected period following a “Change of Control” (as each of these three terms is defined in his change of control agreement), then the vesting of any unvested equity awards (including the 2020 LTI Grant) would accelerate.