Exhibit 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT
(this “ Agreement ”) is entered into as
of the 20 th day of June,
2008 (the “ Effective Date ”) by and
between HERCULES OFFSHORE, INC., a Delaware corporation (the
“ Company ”) and John T. Rynd (the
“ Executive ”).
WHEREAS, the Company desires to
employ the Executive in the role of Chief Executive Officer of the
Company, and the Executive is willing to accept such role, all upon
the terms and conditions set forth herein;
WHEREAS, the Board of Directors of
the Company (the “ Board ”), upon the
recommendation of the Compensation Committee of the Board (the
“ Compensation Committee ”) , has
determined that it is advisable and in the best interests of the
Company and its stockholders to assure that the Company will have
the continued dedication of the Executive, and to provide the
Executive with compensation and benefits arrangements which are
competitive with those of other similarly situated
corporations;
WHEREAS, the Board also believes it
is imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control (hereinafter defined)
and to encourage the Executive’s full attention and
dedication to the Company currently and in the event of any
threatened or pending Change of Control;
WHEREAS, each of the Company and the
Executive desire that this Agreement shall supersede the Executive
Employment Agreement between Company and the Executive dated as of
November 3, 2006 and any amendments thereto and extensions
thereof;
NOW, THEREFORE, in consideration of
the premises, the terms and provisions set forth herein, the mutual
benefits to be gained by the performance thereof and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Certain Definitions
.
(a)
“ Affiliate ” shall have the meaning
ascribed to such term under Rule 12(b)-2 under the Securities
Exchange Act of 1934 (the “ Exchange Act
”).
(b)
“ Associate ” shall mean, with reference
to any Person, (i) any corporation, firm, partnership,
association, unincorporated organization or other entity (other
than the Company or a subsidiary of the Company) of which such
Person is an officer or general partner (or officer or general
partner of a general partner) or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity securities,
(ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves
as trustee or in a similar fiduciary capacity and (iii) any
relative or spouse of such Person, or any relative of such spouse,
who has the same home as such Person.
(c) The
“ Employment Period ” shall mean the
period commencing on the Effective Date and ending on
February 28, 2011, unless extended pursuant to this paragraph.
If neither party shall provide written notice of termination at
least one year prior to the scheduled expiration of the then
current term of this Agreement (each such date by which such notice
must be provided, a “ Renewal Date ”),
the Employment Period shall automatically be extended for two
additional years so as to expire three years from such Renewal
Date. Upon a Change of Control the Employment Period shall be
automatically extended to the third anniversary of the Change of
Control.
(d) The
term “ group ” is used as it is defined
for purposes of the Exchange Act.
(e)
“ Person ” means an individual, entity or
group.
(f)
“ Section 409A ” means
Section 409A of the Internal Revenue Code of 1986, as amended,
and the regulations and guidance promulgated thereunder.
(g)
“ Subsidiary ” shall mean (i) in the
case of a corporation, any corporation of which the Company
directly or indirectly owns shares representing 50% or more of the
combined voting power of the shares of all classes or series of
capital stock of such corporation that have the right to vote
generally on matters submitted to a vote of the stockholders of
such corporation and (ii) in the case of a partnership or
other business entity not organized as a corporation, any such
business entity of which the Company directly or indirectly owns
50% or more of the voting, capital or profits interests (whether in
the form of partnership interests, membership interests or
otherwise).
2. Change of Control .
For the purpose of this Agreement, a “ Change of
Control ” shall mean (i) the consummation of a
reorganization, merger, consolidation or other transaction, in any
case, with respect to which Persons who were stockholders (or
members) of the Company immediately prior to such reorganization,
merger or consolidation do not, immediately thereafter, own equity
interests representing at least 51% of the total combined voting
power of the Company or the resulting reorganized, merged or
consolidated entity, as applicable, (ii) the sale, lease,
transfer or other disposition of all or substantially all of the
assets of the Company and its Subsidiaries, taken as a whole (other
than to one or more Subsidiaries of the Company), or (iii) the
occurrence of (A) the consummation of a transaction or series
of related transactions in which the Company issues, as
consideration for the acquisition (through a merger,
reorganization, stock purchase, asset purchase or otherwise) of the
assets or capital stock of an unaffiliated third party, equity in
the Company representing more than 35% of the outstanding equity of
the Company calculated as of the consummation of such transaction
or transactions, in conjunction with (B) a change in the
composition of the Board, as a result of which fewer than 50% of
the incumbent directors are directors who had been directors of the
Company at the time of the approval by the Board of the issuance of
such equity in the Company.
3. Employment Agreement
. The Company hereby agrees to continue the Executive in its
employ, and Executive agrees to remain in the employ of the Company
in accordance with the terms and conditions of this Agreement, for
the Employment Period.
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4. Terms of Employment
.
(a)
Position and Duties .
(i)
During the Employment Period, the Executive shall serve as Chief
Executive Officer of the Company and the Executive shall have the
authority, duties and responsibilities customarily associated with
such position. Upon and after a Change of Control, the
Executive’s position shall be at least commensurate in all
respects (disregarding any change or changes that are in the
aggregate de minimis) with the most significant of those held,
exercised and assigned as of immediately preceding the Applicable
Date. During the Employment Period, the Executive’s services
shall be performed at the location where the Executive was employed
immediately preceding the Applicable Date or any office which is
the headquarters of the Company and is less than 50 miles from such
location. For purposes of this Agreement, “ Applicable
Date ” shall mean, at any time of determination, the
latest to have occurred of the Effective Date, the most recent
Renewal Date, or any date on which a Change of Control has
occurred.
(ii)
During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive
agrees to devote his full attention and time during normal business
hours to the business and affairs of the Company. During the
Employment Period it shall not be a violation of this Agreement for
the Executive to (A) serve on corporate, civic or charitable boards
or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions or (C) manage
personal investments, in each such case, so long as such activities
do not significantly interfere with the performance of the
Executive’s responsibilities as an employee of the Company in
accordance with this Agreement; provided, however, the Executive
may not serve on the board of a publicly traded for profit
corporation or similar body of a publicly traded for profit
business organized in other than corporate form without the consent
of the Compensation Committee. It is expressly understood and
agreed that to the extent that any such activities have been
conducted by the Executive prior to the Applicable Date, the
continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Applicable
Date shall not thereafter be deemed to interfere with the
performance of the Executive’s responsibilities to the
Company.
(b)
Compensation .
(i) Base Salary . During the Employment Period, the
Executive shall receive an annual base salary (“ Annual
Base Salary ”), which shall be paid on a monthly
basis, at least equal to twelve times the highest monthly base
salary paid or payable to the Executive by the Company and its
affiliated companies in respect of the twelve-month period
immediately preceding the month in which the Applicable Date
occurs; provided, further, that, in no event shall the Annual Base
Salary be less than $700,000 (such amount to be pro-rated in
respect of the year ending December 31, 2008). During the
Employment Period, the Annual Base Salary shall be reviewed at
least once in any fiscal year of the Company (but, unless otherwise
determined by the Company, not prior to January 1, 2010) and
may be increased at any time and from time to time as shall
be
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substantially
consistent with increases in base salary generally awarded in the
ordinary course of business to other executives of the Company and
its affiliated companies. As used in this Agreement, the term
“ affiliated companies ” shall include
any company controlled by, controlling or under common control with
the Company.
(ii) Annual Bonus . In addition to Annual Base Salary,
after the year ending December 31, 2008, the Executive shall be
awarded for any fiscal year ending during the Employment Period, a
bonus of up to 200% of Annual Base Salary (target of 100%)
depending upon meeting goals agreed upon with the Board. During the
Employment Period, the annual target bonus as a percentage of
Annual Base Salary may be increased, but not decreased, from time
to time by the Board.
(iii) Incentive, Savings and Retirement Plans . During
the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
executives of the Company and its affiliated companies. Such plans,
practices, policies and programs shall provide the Executive with
incentive opportunities (measured with respect to both regular and
special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, equal to such plans,
practices, policies and programs provided by the Company and its
affiliated companies for similarly situated senior executives of
the Company and its affiliated companies.
(iv) Welfare Benefit Plans . During the Employment
Period, the Executive and/or the Executive’s dependents, as
the case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and programs)
to the extent applicable generally to similarly situated senior
executives of the Company and its affiliated companies. Such plans,
practices, policies and programs shall provide the Executive with
benefits which are equal, in the aggregate, to such plans,
practices, policies and programs provided by the Company and its
affiliated companies for similarly situated senior executives of
the Company and its affiliate companies.
(v) Expenses . During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable and documented expenses incurred by the Executive in
accordance with the policies, practices and procedures of the
Company and its affiliated companies in effect for similarly
situated senior executives of the Company and its affiliated
companies. All reimbursable expenses shall be appropriately
documented in reasonable detail by the Executive upon submission of
any request for reimbursement and in a format and manner consistent
with the Company’s expense reporting policy.
(vi) Fringe Benefits . During the Employment Period,
the Executive shall be entitled to fringe benefits in accordance
with the plans, practices, programs and
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policies of the
Company and its affiliated companies in effect for similarly
situated senior executives of the Company and its affiliated
companies.
(vii) Vacation . During the Employment Period, the
Executive shall be entitled to five weeks paid vacation per year,
or such greater amount as is afforded to similarly situated senior
executives of the Company or its affiliated companies.
(viii) Equity Awards . In addition to Annual Base
Salary and annual bonus, the Executive may be awarded an equity
award at the discretion of the Company for any fiscal year ending
during the Employment Period.
5. Termination of
Employment .
(a)
Death or Disability . The Executive’s employment shall
terminate automatically upon the Executive’s death during the
Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth below),
it may give to the Executive written notice in accordance with
Section 17(c) of this Agreement of its intention to terminate the
Executive’s employment. In such event, the Executive’s
employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the “
Disability Effective Date ”), provided that,
within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive’s
duties. For purposes of this Agreement, “
Disability ” shall mean (x) the absence of
the Executive from the Executive’s duties with the Company on
a full-time basis for 120 consecutive calendar days, (y) the
Executive (i) is unable to engage in any substantial gainful
activity on behalf of the Company by reason of any medically
determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period
of not less than 12 months or (ii) is, by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a
continuous period of not less than 12 months, and (z) the
Executive is receiving income replacement benefits for a period of
not less than 3 months under an accident and health plan
covering employees of the Company. All determinations to be made
with respect to clauses (i) and (ii) above shall be made
by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive’s legal
representative (such agreement as to acceptability not to be
withheld unreasonably).
(b)
Cause . The Company may terminate the Executive’s
employment during the Employment Period for Cause. For purposes of
this Agreement, “ Cause ” shall mean
(i) a material violation by the Executive of the
Executive’s obligations under Section 4(a) of this Agreement
(other than as a result of incapacity due to physical or mental
illness) which is either willful and deliberate on the
Executive’s part or is committed in bad faith or without
reasonable belief that such violation is in the best interests of
the Company (ii) the Executive’s gross negligence in
performance, or intentional non-performance (continuing for
10 days after receipt of written notice of need to cure from
the Company), of any of the Executive’s duties and
responsibilities under this Agreement, or reasonable instructions
of the Board or the officer(s) of the Company to whom the Executive
reports within the scope of the Executive’s employment by the
Company, (iii) the Executive’s dishonesty, fraud or
misconduct with respect to the business or affairs of the Company,
(iv) the Executive’s violation of the Company’s
drug policy or anti-
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harassment policy (v) the Executive’s violation of the
Company’s ethics policy which is willful or deliberate on the
Executive’s part or is committed in bad faith or
(vi) the final and non-appealable conviction by a court of
competent jurisdiction of the Executive of a felony involving moral
turpitude or the entering of a guilty plea or a plea of nolo
contendere to such crime by the Executive.
(c)
Good Reason; Other Terminations . The Executive’s
employment may be terminated by the Executive (i) during the
Employment Period for Good Reason, or (ii) during the
Employment Period other than for Good Reason.
For
purposes of this Agreement, “ Good Reason
” shall mean:
(i) the
assignment to the Executive of any duties inconsistent with the
Executive’s position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or any other action
by the Company which results in a diminution in such position,
authority, duties or responsibilities excluding for this purpose an
immaterial, insubstantial or inadvertent action which is remedied
by the Company within 30 days after receipt of notice thereof
given by the Executive;
(ii)
any failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an immaterial,
insubstantial or inadvertent failure which is remedied by the
Company within 30 days after receipt of notice thereof given
by the Executive;
(iii)
the Company’s requiring the Executive to be based at any
office or location other than that described in
Section 4(a)(i)(B) hereof, other than a relocation that does
not increase the Executive’s one-way commute by more than 50
miles;
(iv)
any failure by the Company to comply with and satisfy Section 16(c)
of this Agreement; or
(v)
within a 24 month period following a Change of Control, any
failure to allow Executive to participate in any material bonus (in
cash and/or property) and equity compensation programs at a level
at least equal to the participation levels of similarly situated
senior executives of the Company and its affiliated
companies.
Notwithstanding anything herein to
the contrary, the interim assignment of Executive’s position,
authority, duties, or responsibilities to any Person while
Executive is absent from his duties during any of the 120 business
days set forth under the definition of Disability in Section 5(a)
shall not constitute a Good Reason for Executive to terminate his
employment with the Company.
An extension of the Employment Period
pursuant to Section 1(c) will not, in itself, impair or render
invalid or defective a Notice of Termination given in connection
with termination of employment for Good Reason based on whole or in
part on facts or circumstances occurring prior to the
extension.
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Notwithstanding anything to the
contrary above, the Executive’s termination of employment
shall not constitute Good Reason unless Executive notifies the
Company of the condition or event constituting Good Reason within
ninety days (90) days of the condition’s occurrence and
the Company fails to cure the conditions, to the extent curable,
specified in the notice within thirty (30) days following such
notification.
(d)
Notice of Termination . Any termination by the Company for
Cause, or by the Executive for any reason (including without
limitation Good Reason), shall be communicated by Notice of
Termination to the other party hereto given in accordance with
Section 17(c) of this Agreement. For purposes of this Agreement, a
“ Notice of Termination ” means a written
notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) to the extent applicable,
sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive’s
employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such
notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive
any right of the Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or circumstance
in enforcing the Executive’s or the Company’s right
hereunder.
(e)
Date of Termination . “ Date of
Termination ” means (i) if the Executive’s
employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein, as the case may
be, (ii) if the Executive’s employment is terminated by the
Company other than for Cause, the Date of Termination shall be the
date on which the Company notifies the Executive of such
termination, (iii) if the Executive’s employment is
terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be, (iv) if the
Executive’s employment is terminated by the Executive other
than for Good Reason, the date of the receipt of the Notice of
Termination or any later date specified therein, and (v) if
the Executive’s employment is terminated on account of the
death of the Executive or Executive’s Disability, the Date of
Termination shall be the date of such death or the Disability
Effective Date, respectively.
6. Obligations of the
Company upon Termination and Upon Change of Control .
(a)
Prior to a Change of Control: Good Reason or Other than for
Cause . If, during the Employment Period and prior to a Change
of Control, the Company shall terminate the Executive’s
employment other than for Cause, or the Executive shall terminate
employment for Good Reason:
(i) the
Company shall pay to the Executive, in a lump-sum in cash within
30 days after the Date of Termination (unless other payment
terms are specified in this Section 6(a)(i) and unless
otherwise set forth in Section 15), the aggregate of the
following amounts. In order to be eligible for the amounts set
forth in Sections 6(a)(i)(B) or Section 6(a)(ii) below,
the Executive must execute a full release of all claims
substantially in the form attached as Exhibit A hereto within
45 days following the Date
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of Termination
(the date on which the release becomes non-revocable, the “
Release Date ”):
A. the
sum of (1) the Executive’s Annual Base Salary through
the Date of Termination to the extent not theretofore paid,
(2) any compensation previously deferred by the Executive, to
the extent permitted by the plan under which such deferral was made
(together with any accrued interest or earnings thereon), and any
accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1) and
(2) shall be hereinafter referred to as the “
Accrued Obligations ”); and
B. the
amount (such amount shall be hereinafter referred to as the “
Severance Amount ”) equal to the sum of:
(1) two
times the amount of the Executive’s Annual Base Salary,
and
(2) two
times the bonus (as a percentage of Annual Base Salary) described
in Section 4(b)(ii) paid or payable in respect of the most
recently completed fiscal year of the Company or, if no such bonus
has been paid or is payable in respect of such year, any bonus
described in Section 4(b)(ii) paid or payable in respect of the
next preceding fiscal year.
The Severance
Amount shall be payable within 10 days following the Release
Date. The Severance Amount shall be reduced by the present value
(determined as provided in Section 280G(d)(4) of the Internal
Revenue Code of 1986, as amended (the “ Code
”)) of any other amount of severance relating to salary or
bonus continuation to be received by the Executive upon termination
of employment of the Executive under any severance plan, severance
policy or severance arrangement of the Company; and
C. a
separate sum equal to the amount of any earned but unpaid bonus
awarded to the Executive;
(ii)
subject to the provisions of Section 15, for a period of the
longer of 18 months from the Date of Termination or the
remaining term of the Employment Period, or such longer period as
any plan, program, practice or policy may provide, the Company
shall continue benefits to the Executive and/or the
Executive’s dependents at least equal to those which would
have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this
Agreement if the Executive’s employment had not been
terminated in accordance with the most favorable plans, practices,
programs or policies of the Company and its affiliated companies as
in effect and applicable generally to other executives and their
dependents during the 90-day period immediately preceding the
Applicable Date, provided, however, that if the Executive becomes
reemployed with another employer and is eligible to receive medical
or other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be
secondary to those provided
8
under such
other plan during such applicable period of eligibility; and
provided further, however, that with respect to health and medical
benefits, to the extent such coverage cannot be extended or
provided, the Company will pay during the period described above
the applicable premium under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended associated with such
benefits (such continuation of such benefits for the applicable
period herein set forth shall be hereinafter referred to as “
Welfare Benefit Continuation ”); and
(iii)
subject to the provisions of Section 15, to the extent not
theretofore paid or provided, the Company shall timely pay or
provide to the Executive and/or the Executive’s dependents
any other amounts or benefits required to be paid or provided or
which the Executive and/or the Executive’s dependents is
eligible to receive pursuant to this Agreement and under any plan,
program, policy or practice or contract or agreement of the Company
and its affiliated companies as in effect and applicable generally
to other executives and their dependents during the 90-day period
immediately preceding the Applicable Date (such other amounts and
benefits shall be hereinafter referred to as the “
Other Benefits ”).
(b)
Following a Change of Control: Good Reason or Other than for
Cause . If, during the Employment Period, the Company shall
terminate the Executive’s employment other than for Cause
following a Change of Control, or the Executive shall terminate
employment for Good Reason following a Change of Control, then the
Company shall pay or provide to the Executive all the amounts and
benefits set forth in Section 6(a) above; provided however,
that:
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