Exhibit 10.26
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT (this
“Agreement”) is made and entered into as of the 20th
day of January, 2006, between Willbros USA, Inc., a Delaware
corporation (the “Corporation”), and Robert R. Harl
(the “Executive”).
RECITALS
WHEREAS, the Executive has
substantial industry experience and has obtained a knowledge of the
business and affairs of the Corporation and Willbros Group, Inc., a
Republic of Panama corporation (“WGI”), through his
service as a consultant to the Corporation since August 1,
2005; and
WHEREAS, the Executive has agreed to
forego other business opportunities, to accept permanent and
full-time employment with the Corporation and WGI as President and
Chief Operating Officer of both the Corporation and WGI, and to
accept his election on January 20, 2006, to a position as a
director and member of the Board of Directors of WGI (the
“Board”); and
WHEREAS, it is anticipated that the
Executive will be elected to the positions of Chief Executive
Officer of the Corporation and WGI commencing January 1,
2007;
NOW THEREFORE, in consideration of
the mutual covenants and representations contained herein, and the
mutual benefits derived herefrom, the parties agree as
follows:
ARTICLE I
FULL-TIME EMPLOYMENT OF
EXECUTIVE
1.1 DUTIES AND
STATUS.
(a) The Corporation hereby engages
the Executive as a full-time executive employee for the period
specified in Section 4.1 below (the “Employment
Period”), and the Executive accepts such employment, on the
terms and conditions set forth in this Agreement.
(b) The Executive shall serve as the
President and Chief Operating Officer of the Corporation and WGI.
He shall report to the Board and to the Chief Executive Officer of
the Corporation and WGI, but to no other person or body. In the
event the Executive is elected to the positions as Chief Executive
Officer of the Corporation and WGI, he shall report only to the
Board and to no other person.
(c) In addition to the
Executive’s performance of his day to day executive and
operating responsibilities referred to in Section 1.1(b)
above, the Executive shall work diligently and closely with the
Chief Executive Officer and the Board during the Employment Period
to further develop, refine, and implement WGI’s strategic
plan consistent with the annual budget(s) and other objectives
approved by the Board.
(d) Throughout the Employment
Period, the Executive shall devote substantially all his full time
and efforts to the business of the Corporation and WGI and will not
engage in consulting work or any trade or business for his own
account or for or on behalf of any other person, firm or
corporation which competes, conflicts or interferes with the
performance of his duties under this Agreement in any
way.
(e) Except for reasonable business
travel, the Executive shall be required to perform the services and
duties provided for in this Section 1.1 only at the principal
offices of the Corporation in the Houston, Texas, metropolitan
area. Throughout the Employment Period, the Executive shall be
entitled to vacation and leave for illness or temporary disability
in accordance with the Corporation’s policies for its senior
executive officers.
1.2 COMPENSATION AND GENERAL
BENEFITS. In consideration of the Executive foregoing other
business opportunities and agreeing to stay on with the Corporation
and WGI to perform the services described in this Agreement, the
Executive shall be compensated as follows:
(a) Beginning January 20, 2006
through December 31, 2006, the Corporation shall pay the
Executive a base salary of five hundred thousand dollars ($500,000)
per year. Such base salary shall increase to $600,000 for the
period January 1, 2007 through December 31, 2007, and to
$700,000 for each calendar year beginning after December 31,
2007 through the end of the Employment Period. Such salary shall be
payable in periodic equal installments pursuant to the
Corporation’s executive payroll system.
(b) Throughout the Employment
Period, the Executive shall be entitled to participate in such
retirement, bonus, disability, life, sickness, accident, dental,
medical and health benefits and other employee benefit programs,
plans and arrangements of the Corporation which are in effect
immediately prior to the date of this Agreement, and in any
successor or additional employee benefit programs, plans or
arrangements which may be established by the Corporation, as and to
the extent any such employee benefit programs, plans and
arrangements are or may from time to time be in effect.
1.3 BONUS . The Executive
shall always remain eligible for bonus consideration annually at
the sole discretion of the Board. Also, in consideration of the
Executive foregoing other business opportunities and agreeing to
accept employment with the Corporation and WGI and to perform the
services described in this Agreement, and subject to Section 4.3
below, the Executive shall be entitled to a cash bonus for each
year during the Employment Period if the “Net Income Target
Performance Objectives” are achieved. For the purpose of this
Agreement, “Net Income Target Performance Objective”
shall be defined as the “line item” designated as such
in the Annual WGI Budget for the year 2006, 2007, 2008, 2009, and
2010, respectively, as approved by the Board of Directors for the
relevant year (with such modifications to such line item as the
Board may determine appropriate, prospectively or retroactively, to
permit for events or occurrences the Board believes should be
considered) before deducting any net income performance bonuses
payable to the Executive and/or
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otherwise to employees (the
“NITPO”). The maximum cash bonus the Executive shall be
entitled to receive for meeting the NITPO each year during the
Employment Period shall be:
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Maximum
Cash Bonus
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2006
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$
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500,000
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2007
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$
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750,000
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2008
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$
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1,050,000
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2009
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$
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1,050,000
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2010
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$
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1,050,000
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Except to the extent provided in the
next sentence, any cash bonus earned by the Executive for any year
shall be payable within thirty days following the day the Audit
Committee of the Board of Directors certifies to the Board its
acceptance of the financial statements of WGI for such year as
prepared by the independent public accountants for WGI.
1.4 RESTRICTED STOCK AWARD .
In consideration of the Executive foregoing other business
opportunities and agreeing to accept employment with the
Corporation and WGI and to perform the services described in this
Agreement, the Executive is hereby awarded and will be awarded the
number of shares of common stock, par value $.05 per share
(“common stock”), of WGI (“restricted stock
shares”) on the dates indicated below, subject to (i) all of
the terms and provisions of the WGI 1996 Stock Plan, (ii) the
Executive’s execution and delivery of Restricted Stock Award
Agreements substantially in the form of Exhibit A attached hereto,
and (iii) Section 4.3 below:
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Number of
Restricted
Stock Shares
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January 20, 2006
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100,000
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January 1, 2007
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50,000
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January 1, 2008
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50,000
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January 1, 2009
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50,000
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January 1, 2010
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50,000
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The Executive’s rights in
(i) the January 20, 2006 restricted stock shares shall
vest with respect to 20,000 shares on each of December 31,
2006, December 31, 2007, December 31, 2008,
December 31, 2009, and December 31, 2010, (ii) the
January 1, 2007 restricted stock shares shall vest with
respect to 12,500 shares on each of December 31,
2007, December 31, 2008, December 31, 2009, and
December 31, 2010, (iii) the January 1, 2008
restricted stock shares shall vest with respect to 16,667 shares on
each of December 31, 2008 and December 31, 2009, and with
respect to 16,666 shares on December 31, 2010,
(iv) the January 1, 2009 restricted stock shares shall
vest with respect to 25,000 shares on each of December 31,
2009, and December 31, 2010, and (v) the January 1,
2010 restricted stock shares shall vest with respect to 50,000
shares on December 31, 2010.
1.5 GRANT OF STOCK OPTIONS .
In consideration of the Executive foregoing other business
opportunities and agreeing to accept employment with the
Corporation and
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WGI and to perform the services described in
this Agreement, contemporaneously with the execution and delivery
of this Agreement the Executive will be granted an option to
purchase up to 100,000 shares of common stock subject to
(i) all of the terms and provisions of the WGI 1996 Stock
Plan, (ii) the Executive’s execution and delivery of a
Stock Option Agreement substantially in the form of Exhibit B
attached hereto, and (iii) Section 4.3 below. The
Executive’s right to exercise such stock option and purchase
the shares of common stock shall vest in five equal installments of
20,000 shares each on each of December 31,
2006, December 31, 2007, December 31,
2008, December 31, 2009, and December 31,
2010.
1.6 GROSS-UP PAYMENT .
Notwithstanding anything to the contrary in this Agreement, if any
of the payments or benefits which the Executive has the right to
receive from the Corporation (the “Payments”) are later
determined to be subject to the tax imposed by Section 409A of
the Code, or any interest or penalties with respect to such tax
(such tax, together with any such interest or penalties, are
hereinafter collectively referred to as the “409A
Tax”), the Corporation shall pay to the Executive an
additional payment (a “Gross-up Payment”) in an amount
such that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes),
including any income tax imposed on any Gross-up Payment, the
Executive retains an amount of the Gross-up Payment equal to
the 409A Tax imposed upon the Payments. The Compensation Committee
shall make an initial determination as to whether a Gross-up
Payment is required and the amount of any such Gross-up Payment.
The Executive shall notify the Corporation immediately in writing
of any claim by the Internal Revenue Service which, if successful,
would require the Corporation to make a Gross-up Payment (or a
Gross-up Payment in excess of that, if any, initially determined by
the Compensation Committee) within five days of the receipt of such
claim. The Corporation shall notify the Executive in writing at
least five days prior to the due date of any response required with
respect to such claim if it plans to contest the claim. If the
Corporation decides to contest such claim, then the Executive shall
cooperate fully with the Corporation in such action; provided,
however, the Corporation shall bear and pay all costs and expenses
(including additional interest and penalties) incurred in
connection with such action and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any 409A Tax or
income tax, including interest and penalties with respect thereto,
imposed as a result of the Corporation’s action. If, as a
result of the Corporation’s action with respect to a claim,
the Executive receives a refund of any amount paid by the
Corporation with respect to such claim, then the Executive shall
promptly pay such refund to the Corporation. If the Corporation
fails to timely notify the Executive whether it will contest such
claim or the Corporation determines not to contest such claim, then
the Corporation shall immediately pay to the Executive the portion
of such claim, if any, which it has not previously paid to the
Executive.
1.7 POST TERMINATION MEDICAL
COVERAGE. If the Executive’s employment with the
Corporation and its affiliates is terminated at the end of the
Employment Period and not by reason of an early termination event
described in Section 4.2 below, then upon termination of
Executive’s employment with the Corporation and its
affiliates the Corporation shall permit the Executive and his
eligible dependents the opportunity to elect, at the
Executive’s expense, to continue coverage under the
Corporation’s group medical and dental benefits plans as in
effect at such time (the “Medical Plan”). Such election
shall be made within thirty (30) days of the termination of
the Executive’s employment with the
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Corporation and its affiliates and, if it is not
made within such period, such election right shall be forever
forfeited. The cost of such post-employment coverage under the
Medical Plan to be charged to the Executive shall be the cost
charged to participants in the Medical Plan who have elected COBRA
Continuation Coverage under such plan. If the Executive and/or his
dependents elect to participate in the Medical Plan following the
termination of his employment, they shall be required to waive
their rights to obtain COBRA Continuation Coverage under the
Medical Plan. Notwithstanding the foregoing, when the Executive
subsequently becomes eligible to receive (a) medical benefits
under another employer’s benefit plans or (b) benefits
through Medicare, the Corporation’s obligations under this
Section 1.7 shall terminate as of the end of the month in
which such subsequent coverage first becomes available to the
Executive and the Executive shall promptly report such benefit
eligibility to the Corporation. Any dependent coverage provided to
the Executive’s dependents under the Medical Plan as of such
subsequent coverage eligibility shall also terminate at the same
time and any covered dependents shall be eligible to elect COBRA
Continuation Coverage under the Medical Plan at such time. As used
in this Section 1.7, “COBRA Continuation Coverage”
shall mean coverage under the Corporation’s Group Medical
Plan pursuant to Part 6 of Title I of the Employee Retirement
Income Security Act of 1974, as amended.
ARTICLE II
COMPETITION AND CONFIDENTIAL
INFORMATION
2.1 COMPETITION AND CONFIDENTIAL
INFORMATION. The Executive and the Corporation recognize that,
due to the nature of his prior association with the Corporation and
WGI and of his engagements hereunder, and the relationship of the
Executive to the Corporation and WGI, both in the past as an
executive and in the future hereunder, the Executive has had access
to and has acquired, will have access to and will acquire, and has
assisted in and may assist in developing, confidential and
proprietary information relating to the business and operations of
the Corporation, WGI, and their affiliates, including but not
limited to, information with respect to present and prospective
business plans, financing arrangements, marketing projections,
customer lists, contracts and proposals.
The Executive acknowledges that such
information has been and will continue to be of central importance
to the business of the Corporation, WGI, and their affiliates and
that disclosure or use by others could cause substantial loss to
the Corporation, WGI, and their affiliates. The Executive and the
Corporation also recognize that an important part of the
Executive’s duties will be to develop goodwill for the
Corporation, WGI, and their affiliates through his personal contact
with vendors, customers, subcontractors, and others sharing
business relationships with the Corporation, WGI, and their
affiliates, and that there is a danger that this goodwill, a
proprietary asset of the Corporation, WGI and their affiliates, may
follow the Executive if and when his employment relationship with
the Corporation is terminated.
The Executive accordingly agrees
that, during the Employment Period and for a period of one year
thereafter, the Executive will not either individually or as owner,
partner, agent,
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employee, or consultant engage in any activity
competitive with the onshore and offshore pipeline, engineering and
construction businesses of the Corporation, WGI, or any of their
affiliates or with any other lines of material business activity of
the Corporation, WGI, or any of their affiliates that commence
during the Employment Period, and will not directly or indirectly
solicit any employee to leave the employment of the Corporation,
WGI, or any of their affiliates.
Nothing in this Article II shall be
construed to prevent the Executive from owning, as an investment,
not more than one percent (1%) of a class of equity securities
issued by any issuer and publicly traded and registered under
Section 12 of the Securities Exchange Act of 1934.
This Section 2.1 shall survive
the termination of this Agreement for whatever reason.
2.2 NON-DISCLOSURE. At all
times after the date of this Agreement, the Executive will keep
confidential any confidential or proprietary information of the
Corporation, WGI, and their affiliates which is now known to him or
which hereafter may become known to him as a result of his
employment or association with the Corporation, WGI, and their
affiliates and shall not at any time directly or indirectly
disclose any such information to any person, firm or corporation,
or use the same in any way other than in connection with the
business of the Corporation, WGI, and their affiliates. For
purposes of this Agreement, “confidential or proprietary
information” means information unique to the Corporation,
WGI, and their affiliates which has a significant business purpose
and is not known or generally available from sources outside the
Corporation, WGI and their affiliates or typical of industry
practice. This Section 2.2 shall survive the termination of
this Agreement.
ARTICLE III
CORPORATION’S REMEDIES
FOR BREACH OF ARTICLE II
3.1 CORPORATION’S REMEDIES
FOR BREACH. It is recognized that damages in the event of a
breach of Article II above by the Executive would be difficult, if
not impossible, to ascertain, and it is therefore agreed that, if
such a breach occurs, the Corporation, in addition to and without
limiting any other remedy or right it may have, shall have the
right to an injunction or other equitable relief, in any court of
competent jurisdiction, enjoining any such breach, and the
Executive hereby waives any and all defenses he may have on the
ground of lack of jurisdiction or competence of the court to grant
such an injunction or other equitable relief. The existence of this
right shall not preclude any other rights and remedies at law or in
equity which the Corporation may have.
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ARTICLE IV
EMPLOYMENT
PERIOD
4.1 DURATION. The Employment
Period shall commence on January 20, 2006 and shall terminate
on December 31, 2010.
4.2 EARLY TERMINATION. This
Agreement shall be terminated prior to the end of the Employment
Period for the following reasons or upon the occurrence of the
following events:
(a) Termination of this Agreement by
the Corporation without cause or through constructive discharge, as
described in Section 4.4(a) below;
(b) Discharge of the Executive for
cause, as described in Section 4.4(b) below;
(c) Death of the
Executive;
(d) Total disability of the
Executive, as described in Section 4.4(c) below;
(e) Voluntary resignation of the
Executive; or
(f) “Change in Control”
as that term is defined in the Willbros Group, Inc. Severance Plan
as Amended and Restated Effective September 25, 2003, or as it
may be amended hereafter (the “Severance Plan”);
provided, however, that any event, transaction, or series of events
or transactions that would constitute a Change in Control under
such definition and which relates to, results from or constitutes a
part of the insolvency of, or a bankruptcy, bankruptcy
reorganization, or receivership of the Corporation or WGI shall not
constitute a Change in Control or otherwise operate to trigger the
obligation to pay amounts otherwise payable upon the early
termination of this Agreement.
4.3 COMPENSATION AND/OR BENEFITS
FOLLOWING EARLY TERMINATION.
(a) In the event of an early
termination of this Agreement during the calendar year 2006 due to
a Change in Control, the Corporation shall pay to the Executive and
provide him with the following:
(i) For the remainder of calendar
year 2006, the Corporation shall continue to pay the Executive his
base salary at the rate specified in Section 1.2(a)
above,
(ii) During the remainder of
calendar year 2006, the Executive shall, to the extent legally
permissible, continue to be entitled to all benefits and benefit
payment options under all of the employee benefit programs, plans
or arrangements of the Corporation described in Section 1.2(b)
above as if he were still employed until December 31, 2006,
under this Agreement,
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(iii) The vesting of all stock
options granted and restricted stock shares awarded to the
Executive on January 20, 2006, shall be accelerated to the
date of the termination of this Agreement, and
(iv) A cash bonus in an amount
determined as if the Corporation had exceeded the performance goals
set forth at Section 1.3 above necessary for the Executive to
receive the maximum cash bonus for the 2006 calendar year which
cash bonus shall be payable at the time(s) provided in
Section 1.3 above.
(b) In the event of an early
termination of this Agreement after December 31, 2006, due to
the Corporation’s involuntary termination of the
Executive’s employment without cause, or due to a
constructive discharge of the Executive, or due to a Change in
Control, the Corporation shall pay to the Executive and provide him
with the following:
(i) During the remainder of the
Employment Period, the Corporation shall continue to pay the
Executive his base salary at the rate specified in
Section 1.2(a) above,
(ii) During the remainder of the
Employment Period, the Executive shall, to the extent legally
permissible, continue to be entitled to all benefits and benefit
payment options under all of the employee benefit programs, plans
or arrangements of the Corporation described in Section 1.2(b)
above as if he were still employed during such period under this
Agreement, and which have accrued as of the time of the termination
of this Agreement under the WGI 1996 Stock Plan, and
(iii) A cash bonus in an amount
determined as if the Corporation had exceeded the performance goals
set forth at Section 1.3 above necessary for the Executive to
receive the maximum cash bonus for each of the uncompleted years
remaining in the Employment Period at the time of the termination
of this Agreement which cash bonus shall be payable at the time(s)
provided in Section 1.3 above.
(c) In the event of an early
termination of this Agreement because of the voluntary resignation
of the Executive or termination of the Executive’s employment
for cause, the Executive will receive his base salary through the
date of such voluntary resignation or termination of the
Executive’s employment for cause, the Executive shall receive
no cash bonuses under Section 1.3 above for any years
remaining in the Employment Period which have not ended as of the
date of such voluntary resignation or termination of the
Executive’s employment for cause even if the performance
goals set forth in Section 1.3 above for such years are met or
exceeded, and the Executive and his dependents and beneficiaries
will receive such benefits as they may be entitled under the terms
of the WGI 1996 Stock Plan and the employee benefit programs, plans
and arrangements of the Corporation descr